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Note #9041 from PCUSA NEWS to PRESBYNEWS:

05646
Dec. 5, 2005

Hurricane tax-relief package
includes windfall for wealthy donors 

Some givers may be able to deduct 100 percent of gross incomes

by Stephanie Strom
The New York Times
Reprinted by permission

NEW YORK, Oct. 27 - A little-noted provision in the tax relief package to aid
victims of Hurricane Katrina is shaping up as a windfall for charity and a
drain on government coffers.

	It allows donors who make cash gifts to almost any charity by the end
of 2005 to deduct an amount equal to virtually 100 percent of their adjusted
gross incomes - double the normal limit of 50 percent. The tantalizing
prospect has set off a financial scramble among some wealthy donors and
charities vying for their dollars.

	"I just keep thinking there's got to be a catch, they can't really be
doing this," said C. Kemmons Wilson Jr., a Memphis businessman whose father
founded Holiday Inns Inc.

	Mr. Wilson said he and his siblings give away several million dollars
a year, and that amount could double this year because of the new tax
provision. "How many sales does the government have?" he said. "This is a big
sale, and you bet I'm going to go."

	Fund-raisers say many wealthy Americans are pressing financial
planners to increase their giving this year and reduce their tax bills. Some
institutions, primarily universities, are encouraging big donors to take
advantage of the favorable tax treatment and make sizable gifts or fulfill
previous pledges. Some donors may shift into 2005 gifts that would have been
made in future years.
 
	Because of the strong interest, experts say, the government may forgo
more tax revenue than Congress anticipated when it passed the legislation.
Based on information from 2002 tax returns, Robert F. Sharpe Jr., a
fund-raising consultant whose clients include the American Heart Association
and the University of California, Los Angeles, estimates that the provision
will spur $4 billion to $10 billion in additional giving this year. Giving
for 2005 was already expected to exceed last year's total of $248 billion. 

	Mr. Sharpe said that much additional giving would result in $1
billion to $3.5 billion in lost revenue for the Treasury - more than the $819
million Congress anticipated.

	Moreover, some donors may be able to use the provision to take
deductions this year for gifts made in past years. When taxpayers have more
charitable deductions that they can use in a given year, they may carry them
forward to future tax years. This may further lower tax revenue.

	"Congress intended this, but I'm not sure they understood how big the
tab is going to be,"said Mr. Sharpe, who has become a national "town crier"
on the issue. "There are just so many ways a donor can use this bill to
maximize their charitable giving."

	Congress was willing to give up some revenue because of fears that
Americans had given so generously to charities for tsunami and hurricane
disaster victims that they would cut back on contributions to other
organizations, including cultural institutions and schools.
 
	Sen. Charles E. Grassley (R-IA), the chairman of the Senate Finance
Committee, did not express concern about the potential cost of the provision
in an email response to questions. If it is spurring a surge of giving, he
said, it is working as intended.

	"After 9/11, there was an outpouring of giving to charities involved
in responding to that tragedy, but unfortunately, many other charities saw a
significant downturn in donations," Mr. Grassley said. "My hope in passing
this provision is that Americans' generosity for those harmed by Hurricane
Katrina won't mean a tradeoff for other important charitable work in this
country."
However, fund-raising experts have long said that the decline in charitable
giving after the Sept. 11 terrorist attacks was smaller than non-profit
groups had led the public to believe.

	"After 9/11, 65 percent of our members were raising the same or more,
and the following year, the numbers went up again," said Paulette V. Maehara,
president of the Association of Fundraising Professionals. "There wasn't the
sky-is-falling impact that a lot of people thought there would be, and there
won't be now, either, unless the economy does a nosedive."

	Universities, long known as the non-profit world's savviest
fund-raisers, have been the biggest promoters of the provision. "We're trying
to get the word out to as many as we can," said Jack Murphy, senior trust
officer at Cornell University.

	Not all charities are rushing to take advantage of the provision.
"You don't want to appear to be greedy or inappropriate," said Arthur J.
Ochoa, senior vice president for community relations at Cedars-Sinai Medical
Center in Los Angeles. "The legislative intent was drawn more broadly, but if
you asked members of Congress what they were voting for, they would say
relief for the Katrina victims. We don't want to appear to be trading on
that."

	Cedars-Sinai has done no explicit marketing of the provision, Mr.
Ochoa said, but is in discussions with one donor who may accelerate a gift
because of it.
 
	Many other charities, particularly smaller ones, have been slow to
understand the provision, fund-raisers say. "The thing that has surprised me
is that I have not heard yet from any of the non-profits I have supported
over the years, and time is running out," said Frank P. Wendt, who built
Nuveen Investments into a Wall Street powerhouse and is now retired. "A lot
of them don't seem to know about it."

	Mr. Wendt was alerted to the potential tax benefit by his tax adviser
at U. S. Trust. He said he did not yet know how he would use it. "I'm
certainly going to take advantage of it to the maximum amount I'm able to,"
he said.

	He said he was uncertain how much additional money he could give,
however, because he had not fully deducted for gifts in years past.

	Charities are focusing largely on wealthy older individuals like Mr.
Wendt, whose incomes may be small relative to their assets. This week, for
example, the AARP Foundation will send a brochure explaining the provision to
25,000 of its biggest donors - a tiny slice of the AARP's membership of 35
million.

	"The reality is that this is targeted to the high-net-worth audience,
for all intents and purposes," said Monica Estabrooke, the foundation's
gift-planning officer. 

	Financial advisers who work with wealthy people are trying to help
their clients understand how to take advantage of the provision. 

	"I talked to two people just yesterday about that topic," said Vaughn
Henry, an estate planner in Springfield, Ill. "It's not for everybody, but
there are some people who are sure kicking it around."

	Because fund-raisers never know where the next gift might come from,
AARP also will inform its entire membership of the provision in the December
issue of its magazine.

	"I heard from an elderly gentleman who is going to get $500,000, and
doesn't want to pay taxes on it," Ms. Estabrooke said. "His income isn't so
high, so normally he would have to carry the deduction forward for a number
of years, but this changes things for him."

	Ms. Estabrooke and other experts say there are several caveats for
donors. Gifts to private foundations and other concerns controlled by donors
do not qualify for the additional deduction. And wealthy individuals could
incur a 1 percent to 2 percent tax liability for charitable gifts financed by
withdrawals from individual retirement accounts. 

	"We have some concerns about mass-marketing this to the
rank-and-file," said Ed John, vice president of planned giving at the United
Way of America. "For some middle- to lower-income donors, taking money out of
an IRA to donate more could increase their taxable income and tax rate."

	Christopher R. Hoyt, a professor of tax law at the University of
Missouri-Kansas City, said donors also need to consider their state tax
liability, because some states do not allow charitable deductions allowed at
the federal level.

	"I suspect this will produce relatively few additional gifts," Mr.
Hoyt said, "but of much bigger dollars."

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