Congress Neglects Care Act

October 25, 2004
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GRAND RAPIDS — Congress is not likely to take action this year on the Care Act, and an accompanying IRA rollover provision, for the fourth straight legislative session.

And that is not the most charitable of news for area seniors or local foundations.

"The pending IRA Charitable Rollover proposal would be a great benefit to nonprofit organizations. It opens the IRA asset as an efficient source of charitable gifting and releases new dollars to support charitable programs," said Molly Parker, Grand Rapids Community Foundation's vice president of development.

"It also allows individuals to see the benefit of their charitable gifting during their lifetime and at the same time avoids income taxes on the required minimum distributions when that amount is transferred to a charitable organization," added Parker.

The bill would essentially give those at least 65 years old a dollar-for-dollar tax deduction when they donate money from their IRAs to a charity or foundation, even if they don't itemize deductions on their tax returns.

The giving could be planned gifts or outright ones, and their income level would not limit the amount they donate.

Current law restricts the size of a gift to 30 percent of a donor's income and doesn't let a taxpayer who doesn't itemize take the deduction.

The Care Act was introduced in the House of Representatives in February of 2001 as part of H.R.7, the faith-based charity bill. Changes were made to it and House members ratified it in 2003. The Senate passed its version last March.

Backers of the act thought the Senate was going to include the rollover provision as an amendment to the 10-year, $143 billion corporate tax bill the senior chamber approved a few weeks ago.

But that didn't happen.

"I don't think there is anything substantive, necessarily," said Diane Canova, interim director of government affairs and public policy for the Council on Foundations, as to why the bill has languished for so long in the nation's capitol.

"It had several strong proponents and supporters on Capitol Hill," she added.

"My own opinion is that because of the IRA Charitable Rollover provision and the non-itemizer deduction, it kind of got lost in the political wrangling of HR 7; the whole faith-based initiative played into alienating some members from actively supporting the whole package."

Congress overlooked the bill last year and Canova felt it got passed over again this year because both chambers were focused on what they considered to be bigger issues, such as the war in Iraq terrorism, homeland security and tax cuts.

"It was just hard to get a critical mass," said Canova.

The National Committee on Planned Giving recently told its members that it was highly unlikely Congress would deal with the act or the rollover provision in this session, the 108th.

"We will begin immediately to formulate our strategies for the 109th Congress, which begins in January 2005," wrote Craig Wruck, chairman of the NCPG Government Relations Taskforce, in a release.

The most recent study on personal giving done by Independent Sector — a coalition of 600 foundations and other nonprofit organizations — showed that 89 percent of households across the country made charitable contributions in 2000.

The average yearly donation then was $1,620, or roughly 3 percent of a household's income.

But the study also found that when heads of households were worried about the future because of current economic conditions, donations from those households were lower than from those who weren't worried.

Fifty-nine percent reported being worried that year and they gave an average of $1,201, while non-worried households gave an average of $2,207 in 2000.

The latest version of the act lowered the age of those who would be eligible to make IRA donations and claim the deduction from 70 to 65. But when the bill was first offered, those aged 59.5 were eligible. So, overall, the revisions have raised the age of an eligible giver.

Canova said that part of the concern lawmakers had with the rollover provision this year was that it would reduce tax revenue to the Treasury.

Even though Congress isn't operating under the "pay-as-you-go" rules anymore, she said a few members told her that they would have to find other offsets in order to pay for this taxpayer benefit.

When the bill was introduced nearly four years ago, the cost of it to the Treasury was estimated at $2.75 billion over 10 years.

"From conversations that we had over the years, members did understand what this could do," said Canova, "and how it could benefit not only charities and foundations, but that it also might be something good for their constituents."

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