Issue: "Reaping a whirlwind," Aug. 24, 2013

On the block

CHARITIES | Charitable tax deductions are no longer a certainty, and a nonprofit coalition gets ready to fight the change

By J.C. Derrick

MISSION: Students feed the homeless at the Rescue Mission in Tacoma, Wash.Enlarge Image
The Pioneer
MISSION: Students feed the homeless at the Rescue Mission in Tacoma, Wash.

WASHINGTON, D.C.—City Rescue Mission serves a homeless population in Saginaw, Mich., a midsized town 100 miles northwest of Detroit. Founded in 1905, the mission helped a record number of people last year—more than 1,900—with food, clothing, housing, and the hope of the gospel. 

But record numbers don’t mean record revenue: City Rescue Mission is running its three facilities at 2007 budget levels—despite a 37 percent client increase since then. Sixty percent of that revenue comes from individual private donors.

Dan Streeter, executive director of the mission, is worried those donors may soon have less reason to give: Tax-writing committees in the House and Senate are working behind the scenes on tax reform legislation, and some lawmakers want to cut, alter, or even eliminate deductions for charitable giving. 

“Any adjustment the government makes causes problems for us,” Streeter told me, citing 2006 regulations that caused vehicle donations to drop 95 percent. “I can’t do like the federal government and spend what I don’t have.”

City Rescue Mission is one of 275 members in the Association of Gospel Rescue Missions (AGRM), one of 23 groups banding together nationwide to form the new Faith & Giving Coalition—a group collectively educating lawmakers on the benefits of charitable organizations and the public on the brewing storm. Once a given in the U.S. tax code, deductions for gifts to charities are on the block as a way to increase federal revenue—and as a backdoor to regulating nonprofits more.

The coalition already boasts some of the largest Protestant, Catholic, and Jewish organizations in the country: The Salvation Army, Catholic Charities, World Vision, Focus on the Family, the National Association of Evangelicals, the Southern Baptist Convention, and the Jewish Federation of North America. Member groups are mobilizing during the August recess to write op-eds, call legislators, and attend town hall meetings with a clear message for lawmakers: Don’t touch charitable deductions. 

Lawmakers have been laying the groundwork for tax reform for years, but both houses are coordinating efforts to introduce legislation by year’s end—as early as October. That means staff members are writing laws now. Democratic Sen. Max Baucus, chairman of the Senate Finance Committee, and Republican Rep. Dave Camp, chairman of the House Ways and Means Committee, say they want their legacies to include tax reform, and both are stepping down at the end of 2014. 

Baucus and Republican Sen. Orrin Hatch, the Finance Committee’s ranking member, recently wrote a letter to senators announcing a blank slate approach to reform: All tax breaks are assumed out of the tax code unless members explain why it helps grow the economy, makes the tax code fairer, or promotes important objectives. In a July meeting with several committee members, the Faith & Giving Coalition contended charitable deductions meet all three criteria. 

Changes to charitable giving would disproportionately affect religious nonprofits, since they average less government funding than secular nonprofits. Even if lawmakers don’t limit deductions—as President Obama has suggested in every budget he’s submitted (at an annual cost of $9 billion to charities)—the biggest threat to religious groups may be in a proposed “public benefit” test. The test would supposedly weed out groups that don’t deserve deductions, but it’s a short leap to envision the government saying churches not actively engaged in feeding or clothing the poor aren’t providing public benefit—or that a faith-based nonprofit isn’t “diverse.”  

Worse still, in an industry that employs 1 in 10 Americans, the IRS would decide who is deserving: “A public benefit test would dramatically increase the power of the IRS,” said David Wills, the coalition’s co-founder and National Christian Foundation president. Wills said any change “would be like going to every charity in the country and asking them to contribute to the government’s bottom line. They’re saying, ‘We want you to receive less so the government can receive more.’”

ArrowMembers of the Faith & Giving Coalition:

National Christian Foundation 
Association of Gospel Rescue Missions 
Evangelical Council for Financial Accountability 
The Salvation Army 
Accord Network 
Catholic Charities USA 
World Vision 
U.S. Conference of Catholic Bishops 
Southern Baptist Convention 
Jewish Federations of North America 
Knoxville Leadership Foundation 
National Association of Evangelicals 
Association of Christian Schools International 
Christian Medical Association 
Union of Orthodox Jewish Congregations 
Lutheran Housing Support (Lutheran Church Missouri Synod) 
Convoy of Hope 
Institutional Religious Freedom Alliance 
Faith and Philanthropy Institute 
Focus on the Family 
Homeschool Legal Defense Association 
Lutheran Services in America 
Food for the Hungry

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