Independent Sector Says Now Is the Time to Increase Charitable Giving

Independent Sector Says Now Is the Time to Increase Charitable Giving

News story posted in Legislative on 20 October 2011| comments
audience: National Publication | last updated: 21 October 2011


In testimony at an October 18 Senate Finance Committee hearing, Independent Sector President Diana Aviv stated, "Now is the time to increase charitable giving, not inhibit the incentives that have helped strengthen our communities since 1917. Otherwise, millions of individuals and families who depend on our services and programs will suffer."

Full Text:


OCTOBER 18, 2011

Chairman Baucus, Ranking Member Hatch, and distinguished Members of the Committee, thank you for the opportunity to share with you the perspectives of the nonprofit and philanthropic community as the Committee examines alternatives to the tax treatment of charitable giving.

I serve as the president and chief executive officer of Independent Sector, a national coalition with nearly 600 member organizations, working to advance policies that ensure the ability of America's 1.5 million organizations to help people and improve communities across the country and around the world every day.

Importance of the Nonprofit Sector

Every day, U.S. nonprofits assist victims of disaster, provide educational and economic opportunities for families in need, alleviate poverty and suffering at home and abroad, and foster worldwide appreciation for the democratic values of justice and individual liberty.

The community benefits of nonprofit work are felt in every state. For example, Vital Ground, a member of the Land Trust Alliance, has worked with local partners and landowners to protect over 98,000 acres of crucial Montana wildlife terrain, including the Swan Valley and CabinetYaak areas, to conserve the habitats of grizzly bears and other wildlife. In Utah, the American Red Cross trains over 10,000 people each year in disaster preparedness through courses like first-aid trainings, CPR and workplace safety. They also provided humanitarian assistance, including shelter, food, and clothing, to over 1,570 Utahans affected by disaster last year.

But the nonprofit and philanthropic sector is even more than the community benefit that derives from our work. It often surprises people to learn that nearly one in 10 workers in the U.S. are employed by a nonprofit organization, and that with 13 million employees, we are larger than the finance and real estate sectors combined.

We collectively pay nearly $670 billion annually in wages and benefits salaries that support middle class families in communities across America. Additionally, nonprofit organizations inspired 63.4 million American adults to perform 8 billion hours of volunteer service in 2009, the equivalent of 4 million full-time jobs valued at approximately $169 billion.1

Clearly, nonprofits are a major part of the U.S. economy, generating annual economic activity of more than $1.3 trillion, which is roughly equivalent to 10 percent of our country's Gross Domestic Product. A vibrant and healthy nonprofit sector will be critical for the United States to regain its economic footing and recover from the current downturn.

Impact of Economic Downturn

Unfortunately, America's nonprofits have been particularly hard hit in recent years. The Nonprofit Finance Fund, a community development financial agency, surveyed over a thousand organizations in April 2010, and found only 12 percent operating above break-even.2 Sixty two percent of organizations had enough cash on hand to cover less than three months' worth of expenses, and half of those (31%) had only enough for less than one month.

Like our counterparts in other major sectors of the economy, many nonprofit employers have struggled to meet payroll during the past three years, and countless more have been unable to hire additional workers needed to keep pace with the increased demand for services. In 2009 alone, 38 percent of human services nonprofits reported laying off employees, 50 percent froze or reduced salaries, and 23 percent reduced employee benefits.3

These financial challenges have been exacerbated by a significant increase in demand for nonprofit services. Nonprofits are an important source of support for individuals and families who have lost their jobs, their health insurance, and often their homes, as well as a key resource for individuals seeking to find new opportunities through education and job training, solace and encouragement through counseling, and inspiration and expression through the arts.

Numerous studies have documented this increased demand for services. A study conducted by the NonProfit Research Collaborative noted that human services organizations experienced a 78 percent increase in demand for services between 2009 and 2010.4 An annual survey conducted by Catholic Charities found that its agencies had served 9,164,981 people in 2009, an increase of 7.5 percent over 2008, and a nearly 19 percent increase from 2007.5

Nonprofits have struggled to keep pace with this increased demand in part because revenue has declined during the economic downturn, as well. From 2007 through 2010, charitable giving declined by almost $24 billion6 as Americans struggled to navigate a difficult economy. Federal and state budget cuts have further overburdened and diminished the capacity of nonprofits, and have disproportionately affected those least able to help themselves.

The Incentive Effect of the Charitable Deduction

It is in this context of increased demand and declining revenue that the Committee's consideration of the charitable deduction takes place. Despite recent declines in giving, charitable donations remain a major source of revenue for nonprofits working in communities across the country.

For example, more than 95 percent of Feeding America's nearly $700 million in 2009 revenue came from charitable contributions. American Cancer Society, March of Dimes and Environmental Defense Fund which collectively received over $600 million in charitable contributions in 2009 -- each relied on the generosity of donors for more than 90 percent of their funding for programs and services in communities across America. The fact is that further reductions in charitable giving would have a potentially devastating impact on the families and individuals served by the nonprofit and philanthropic community. It is therefore crucial that the Committee reject any proposed alternatives to the charitable deduction that would result in decreased charitable giving.

Congress has, in fact, long recognized the connection between the tax code and giving to charitable organizations, dating to the inception of the charitable deduction in 1917. Since then, our tax system has strongly encouraged Americans to give back to their communities, and the broad concept of charity on which the deduction is based has given rise to a diverse and pluralistic set of organizations all dedicated to the public good. More recently, in the days following the devastating January 2010 earthquake in Haiti, legislation was enacted allowing taxpayers to claim a 2009 deduction for donations made to Haiti relief efforts between the date of the earthquake and March 1, 2010. Similar extensions were enacted following the Southeast Asia tsunami of 2004, Hurricane Katrina in 2005, and storms in the American Midwest in 2008.

Congress took these steps because it recognized that the deduction does, in fact, encourage people to give to charity. We know that more than 80 percent of the 46 million Americans who itemized their tax returns in 2009 claimed the charitable deduction. These individuals and families, who represent barely one quarter of all taxpayers, were responsible for more than 76 percent of individual contributions to charitable organizations.7

Moreover, the power of the incentive can be seen in the timing of charitable gifts. Between 2003 and 2009, charitable organizations in the U.S. received $281 million in online donations. Remarkably, more than 22 percent of those donations were made on December 30 and 31 each year, underscoring how much their giving is influenced by tax provisions.8

Fairness of the Charitable Deduction

The American people understand the positive impact of the charitable deduction on their communities. An April 2011 Gallup Poll found that 62 percent of Americans who do not claim the deduction support its preservation as an incentive for giving. The deduction likely enjoys such broad support because Americans recognize the deduction as a fair and equitable way to encourage giving to all types of charitable organizations.

While some advocates of changing the charitable deduction believe it disproportionately benefits high income taxpayers, this is not the case. The current tax code treats every taxpayer who claims the deduction equitably; regardless of the rate at which their income is taxed, people are not required to pay taxes on the portion of their earnings donated to charity. This is an appropriate treatment of charitable contributions in a progressive tax system.

It is also important to keep in mind the unique nature of the charitable deduction. Unlike incentives to save for retirement or purchase a home, for example, the charitable deduction encourages behavior for which a taxpayer receives no direct tangible benefit. The charitable deduction does not subsidize personal consumption or underwrite the accumulation of personal wealth. It simply and effectively encourages taxpayers to give away a portion of their income to benefit others.

But reducing the value of the charitable deduction for taxpayers earning over $200,000 will blunt the impact of services across the sector. Despite assumptions to the contrary about the giving of wealthy individuals, basic needs organizations are their number one benefactor. A 2010 study by the Center on Philanthropy at Indiana University found that 85 percent of high net worth households9 donated to basic needs charities in 2009, compared with 31 percent of other taxpayers10. The reality is that Americans in every income bracket give generously to all types of charitable organizations, and reducing incentives to give will hurt all charities and the people they serve.

Not only is the charitable deduction fair, it is an extremely efficient way for the federal government to spur investment in communities. When an individual in the highest tax bracket donates $1,000 to charity, the government foregoes $350 in tax revenue. However, communities benefit from the entire $1,000 gift. The government is unlikely to find another vehicle that can leverage private spending for community services on a nearly 3to1 ratio.


Independent Sector champions the effort to put America on a sustainable fiscal path and spur economic growth. Our workforce is a powerful engine to fuel recovery. But as you consider alternatives, it is not enough to just consider the effects on government revenue and which taxpayers would owe more or less. It is imperative that the Committee understand the impact of any proposed alternatives on charitable giving, and reject any change that would result in decreased contributions to America's nonprofits.

Now is the time to increase charitable giving, not inhibit the incentives that have helped strengthen our communities since 1917. Otherwise, millions of individuals and families who depend on our services and programs will suffer.


1 Urban Institute, "The Nonprofit Sector in Brief: Public Charities, Giving, and Volunteering, 2010," 2010 and Corporation for National and Community Service," "Volunteering in America 2010: National, State, and City Information," 2010.

2 Nonprofit Finance Fund, "2011 State of the Sector Survey," 2011

3 Elizabeth T. Boris, Erwin de Leon, Katie L. Roeger, and Ileana Nikolova, "Human Service Nonprofits and Government Collaboration: Findings from the 2010 National Survey of Nonprofit Government Contracting and Grants" (Urban Institute, October 2010).

4 The NonProfit Research Collaborative, November 2010 Fundraising Survey, 2010.

5 Catholic Charities USA, 2009 Annual Survey Final Report, 2009. Center for Applied Research in the Apostolate, Georgetown University, Washington, DC, July 2010. (

6 Giving USA 2011, The Annual Report on Philanthropy for the Year 2010

7 Source: IRS Statistics of Income data for 2008. Does not include bequests and estates.,

8 "Online Giving Study: Donations Driven by Donor Experience, Year End Gifts and Large Scale Disasters."Network for Good and True Sense Marketing, Dec. 2010, reported in Philanthropy News Digest, Dec.15, 2010.

9 Households with annual income greater than $200,000 and/or personal wealth of at least $1,000,000.

10 The 2010 Study of High Net Worth Philanthropy, Center on Philanthropy at Indiana University, November 2010


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