A Cost of Giving Adjustment?

Event Summary

In early May, Congressmen Roy Blunt (R-MO) and Harold Ford, Jr. (D-TN) introduced the Charitable Giving Act of 2003, or H. R. 7, in the U.S. House of Representatives—Section 105 of which calls for the elimination of administrative expenses from qualifying distributions to charity. A month and a half later, Bill Schambra had convinced the key proponents and opponents of the measure to appear together on a Bradley Center panel to discuss their views; Congressman Blunt joined the Council on Foundation’s Dorothy Ridings, Rick Cohen of the National Committee for Responsive Philanthropy, Harvard University’s Peter Frumkin, and a standing-room-only audience on June 17.

Panel Presentations

According to Congressman Blunt, the main purpose of the Charitable Giving Act is simply “to encourage people to give more money” – approximately $43 billion over ten years, if estimates are correct. About the most controversial provision, Section 105, Mr. Blunt commented that the bill “challenges foundations to maximize their efficiency while delivering more needed grants at the same high levels.”  As a conservative, he generally believes that “[it] is really none of the Congress’s business how we spend our money,” but that it is precisely Congress’s business to ensure that foundations operate efficiently because foundations “have the benefit of being …tax-exempt.”  Blunt finds it “imminently reasonable” to require foundations to hike their required giving to approximately 5.4 percent by excluding administrative expenses, as the provision would require.

Dorothy Ridings began the panel discussion by making the case for the enforcement of current laws, including stipulations for IRS oversight, rather than the passage of Section 105. “…[T]he law already disallows administrative expenses that are unreasonable and unnecessary, and that law, if enforced, …solves the problems that perhaps were part of what motivated some members of Congress to address this administrative expense issue,” she pointed out.

Rick Cohen agreed with Ms. Ridings that more oversight is necessary, but stood nonetheless behind Section 105. “I don’t think this is a matter of [questioning] whether administrative costs are legitimate…. The difference between foundations and nonprofits on administrative costs is that foundations have assets to draw on… A nonprofit can’t give itself a grant to pay for its operating costs.” In support of the provision, Cohen emphasized current economic conditions and the “substantial element of room” for large foundations to put more money into grantmaking.

From the audience, Independent Sector President Diana Aviv also participated in the event, along with Independent Sector’s Vice President for Public Affairs Patricia Read, Audrey Alvarado, executive director of the National Council of Nonprofit Associations, and her organization’s public policy analyst, Abby Levine. Both organizations had just voted to come out against Section 105 of the Charitable Giving Act. Patricia Read gave word of the Independent Sector’s stance during the question-and-answer session, and the National Council distributed its press release on Section 105, written just the day before. These and other positions were debated by an active audience; for details, please see the complete transcript.

The New York Times’ Stephanie Strom published a piece on the event, “Foundations Resist Measure To Increase Charity Money,” the day after the event (p. A19). Two later pieces appeared in The Chronicle of Philanthropy (“Two Groups Oppose Foundation Measure,” June 26, 2003, p. 36) and The Washington Post (“Foundations Anxious Over Bill on Giving,” July 8, 2003, p. A3), respectively.

For Further Information

 
To request further information on this event, the transcript, or the Bradley Center, please contact Hudson Institute at (202) 974-2424 or e-mail Kristen at kmcintyre@hudson.org.