So Much To Do, Too Little Inclination

By Rick Cohen

It’s a slow season on Capitol Hill for pending legislation aimed at nonprofits and foundations. Just about no one enters a voting booth to pull a lever because of a politician’s stance on nonprofit accountability or charitable tax deductions. There are pending issues and legislation in front of Congress, maybe not big enough to sway votes, but vitally important to small service-providing nonprofits and big institutional nonprofits.

At the Council on Foundations and the Association of Fundraising Professionals, the obligatory legislative target appears to be the extension or renewal of the IRA charitable rollover. For some nonprofits that are hardly ever likely to be within hailing distance of the charitable largesse from IRA rollovers, there are other legislative items to worry about.

Gas Lines

One issue is the reimbursement rates for volunteers’ and charities’ mileage. Charitable small change? Not if your organization is dependent on volunteers’ willingness to drive long distances to deliver core services. Try Meals on Wheels, whose Catawba County (NC) affiliate reports losing volunteer drivers because of high gas prices. Or the Retired Senior Volunteers Program in Pocatello, ID, where gas prices are hitting volunteers in their wallets. Or the Central Maryland Meals on Wheels, which reports having lost 100 volunteers, many to rising gas prices.

Recent government actions say a lot about the political prowess (or perhaps political priorities) of the nonprofit sector. The IRS just announced a change in the business mileage reimbursement rate, taking effect July 1st, up to 58.5 cents per mile, up from 50 cents a mile approved this past January. For medical and moving costs, the reimbursement rate was increased from 19 cents to 27 cents a mile.

But the rate for charitable mileage reimbursements? The IRS left that unchanged at a measly 14 cents a mile. An IRS spokesperson said that the approved deductions for business, moving, and medical mileage deductions were meant “to be fair to taxpayers” and “to better reflect the real cost of operating an automobile.” Volunteers for charitable organizations don’t seem to warrant the fair treatment. Note: Volunteers can deduct the actual costs incurred for charity-related driving expenses, but that means a lot of detailed record-keeping, which is why charities and volunteers alike prefer a standard mileage reimbursement rate.

In defense of the beleaguered IRS, apparently a change in the charitable mileage deduction rate requires federal legislation. Legislation to change the charitable deduction on mileage hasn’t moved in some years. In 2007, Sen. Russ Feingold (D-Wisc.) sponsored a bill, S. 403 introduced in January, 2007, with a companion House bill, H.R.1827, the Charitable Driving Tax Relief Act of 2007, proposed by Rep. Thomas Petri (R-Wisc.). The bills would have made the charitable mileage reimbursement equal to then applicable business mileage deduction. Rep. Todd Platts (R-Pa.) introduced H.R.2020 that would have done roughly the same. Nothing happened.

This year, Maryland’s two U.S. senators, Ben Cardin and Barbara Mikulski, introduced the Fair Deal for Volunteers Act of 2008, S.3246, which would give the IRS commissioner the ability to change the charitable mileage deduction rate without having to seek specific legislation. In other words, had the Cardin bill been enacted, the IRS commissioner could have announced gas price-related changes in the business, medical, moving, and charitable mileage rates.

In the House of Representatives, Rep. Kevin Brady (R-Texas) has proposed legislation, H.R.6368, to set the charitable mileage deduction equal to the medical and moving deduction. Rep. Chuck Schumer (D-NY) introduced his own formulation, the Reimbursing Our American Drivers (ROAD) Act of 2008, S.3032, which would legislatively set the charitable mileage deduction at 40 cents a mile. More recently, Schumer recruited Rep. John Ensign (R-Nev.) to co-sponsor S.3429, the ‘‘Giving Incentives to Volunteers Everywhere Act of 2008’’ which would set the charitable mileage reimbursement at 70 percent of the business mileage rate.
 
Nonprofits such as The National Council of Nonprofit Associations (NCNA) and its state affiliates have galvanized around the Schumer/Ensign bill. But with Congress counting the days to the November election, there isn’t much time on the clock for legislative action this year.

Why does the charitable mileage deduction issue get so little attention? Maybe it is because the issue is the out-of-favor arena of nonprofit service providers, what some people now criticize as outmoded “alms-givers.” Maybe it is because the nonprofits and clients most affected by mileage reimbursements aren’t typically high visibility, attractive story lines. Frequently, both the service recipients and the volunteer drivers are older people on fixed incomes, not tooling around in their BMWs, and often foregoing reimbursements because they are motivated by people in need.

Rollover for Charity

But what about restoring or even making permanent the IRA charitable rollover? It is a reasonably attractive charitable giving incentive that doesn’t whack the federal budget like other incentives do. But it is hardly a charitable incentive that helps nonprofits across the board.

Remember that when it was first enacted, big universities immediately rolled out well planned pitches to get a big share of the charitable loot? No surprise, but in actual practice, the big charities have been the big winners in the race for IRA rollover dollars.

The National Committee on Planned Giving (NCPG) has been running a survey of IRA distributions since the enactment of the Pension Protection Act in August of 2006. In its January 2008 tabulation, the NCPG survey reported 8,353 individual donations totaling more than $136 million, up from 1,468 distributions amounting to almost $30 million in the January 2007 count.

There must be some pretty hefty IRAs out there. As of January 2008, 6 percent of the charitable gifts were in amounts of $100,000 or more, amounting to 40 percent of the total dollar value of the IRA rollovers.

Forewarned is forearmed, and the universities demonstrated the value of that time honored cliché, collecting the bulk of IRA distributions as follows (by number as reported in the 2008 NCPG survey results, though probably even larger proportionally if measured in dollars):
* Public University 31.4%
* Private University 29.3%
* “Small College” 9.2%
* Religious Organization 6%
* Museum, Symphony, Arts/Cultural Organization 4.4%
* Hospital/Health Care Organization 4.2%
* Social Services Organization 3.2%
* Community Foundation 3.2%
* All others 7.6%

It’s good to know that universities, churches, and museums are benefiting from people who have excess IRA dollars to give. For many Americans trying to navigate the nation’s rapidly tanking economy, is forcing them to borrow from their employer-based (defined contribution) 401(k) accounts. In inflation-adjusted terms, loans against retirement plans have risen from $6 billion in 1989 to $31 billion in 2004, not for shopping sprees, but to help middle class and working families survive financial crises.

401(k) accounts are not IRAs, but one might imagine that, were it not for the prohibition against loans from IRAs, they too would be a source of gap money for families facing hard economic times. Too bad that not much of the IRA charitable rollover from affluent contributors seems to be addressing many things other than the economic travails affecting the nation’s reeling poor and working families. Let’s hope that some of the IRA rollovers reach Meals on Wheels and Retired Senior Volunteer Program affiliates so that they can pay for some of their volunteer-drivers’ spiraling gas costs.
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Rick Cohen is the former executive director of the National Committee For Responsive Philanthropy in Washington, D.C. His email address is cohenreport@npqmag.org and the Web site for the Cohen Report e-newsletter is http://www.nonprofitquarterly.org/cohenreport/