[Joint House and Senate Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 116-281
SUPPORTING CHARITABLE GIVING DURING THE COVID-19 CRISIS
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VIRTUAL HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
JUNE 9, 2020
__________
Printed for the use of the Joint Economic Committee
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
40-895 WASHINGTON : 2020
JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
SENATE HOUSE OF REPRESENTATIVES
Mike Lee, Utah, Chairman Donald Beyer, Jr., Virginia, Vice
Tom Cotton, Arkansas Chairman
Rob Portman, Ohio Carolyn Maloney, New York
Bill Cassidy, M.D., Louisiana Denny Heck, Washington
Ted Cruz, Texas David Trone, Maryland
Kelly Loeffler, Georgia Joyce Beatty, Ohio
Martin Heinrich, New Mexico Lois Frankel, Florida
Amy Klobuchar, Minnesota David Schweikert, Arizona
Gary C. Peters, Michigan Darin LaHood, Illinois
Margaret Wood Hassan, New Hampshire Kenny Marchant, Texas
Jaime Herrera Beutler, Washington
Scott Winship, Ph.D., Executive Director
Harry Gural, Democratic Staff Director
C O N T E N T S
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Opening Statements of Members
Hon. Mike Lee, Chairman, a U.S. Senator from Utah................ 1
Hon. Donald Beyer Jr., Vice Chair, a U.S. Representative from
Virginia....................................................... 3
Hon. Amy Klobuchar, a U.S. Senator from Minnesota................ 5
Witnesses
Panel I
Hon. James Lankford, a U.S. Senator from Oklahoma................ 7
Hon. Jeanne Shaheen, a U.S. Senator from New Hampshire........... 9
Panel II
Mr. Bill Crim, President and CEO, United Way of Salt Lake, Salt
Lake City, UT.................................................. 10
Dr. Una Osili, Associate Dean for Research and International
Programs at the Indiana University Lilly Family School of
Philanthropy, Indianapolis, IN................................. 12
Submissions for the Record
Prepared statement of Hon. Mike Lee, Chairman, a U.S. Senator
from Utah...................................................... 32
Prepared statement of Hon. Donald Beyer Jr., Vice Chair, a U.S.
Representative from Virginia................................... 33
Prepared statement of Hon. James Lankford, a U.S. Senator from
Oklahoma....................................................... 35
Prepared statement of Hon. Jeanne Shaheen, a U.S. Senator from
New Hampshire.................................................. 36
Prepared statement of Bill Crim, President and CEO, United Way of
Salt Lake, Salt Lake City, UT.................................. 36
Prepared statement of Dr. Una Osili, Associate Dean for Research
and International Programs at the Indiana University Lilly
Family School of Philanthropy, Indianapolis, IN................ 38
Response from Mr. Crim to Question for the Record Submitted by
Senator Klobuchar.............................................. 42
Response from Mr. Crim to Question for the Record Submitted by
Senator Hassan................................................. 44
Response from Dr. Osili to Question for the Record Submitted by
Senator Klobuchar.............................................. 45
Response from Dr. Osili to Question for the Record Submitted by
Representative Schweikert...................................... 45
SUPPORTING CHARITABLE GIVING DURING THE COVID-19 CRISIS
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TUESDAY, JUNE 9, 2020
United States Congress,
Joint Economic Committee,
Washington, DC.
The WebEx virtual hearing commenced, pursuant to notice, at
2:30 p.m., in Room 301, Russell Senate Office Building, Hon.
Mike Lee, Chairman, presiding.
Representatives present: Beyer, Herrera Beutler,
Schweikert, Trone, and LaHood.
Senators present: Lee, Klobuchar, and Hassan.
Staff present: Andres Arguello, Robert Bellafiore, Vanessa
Brown Calder, Barry Dexter, Harry Gural, Colleen Healy,
Christina King, Jim Whitney, and Scott Winship.
OPENING STATEMENT OF HON. MIKE LEE, CHAIRMAN, A U.S. SENATOR
FROM UTAH
Chairman Lee. Thank you for joining us today for today's
hearing of the Joint Economic Committee. Over the past few
months, following the spread of the novel coronavirus, and all
the devastation that has been brought about in its wake,
millions of Americans have been robbed of health, of financial
security, certainty of normalcy in their day-to-day lives, and
even of their sense of community and connection to others.
As it always has in response to our Nation's challenges,
our voluntary civil society in America, through its courage and
compassion, has striven to bring us together to address this
very significant, in many ways unprecedented, public health
crisis.
Nonprofits, churches, and other voluntary institutions of
civil society have for centuries played a uniquely important
role in American life, helping to provide for others' basic
needs, and ensuring the stability of community institutions,
and supplying goods such as education and the arts.
Key to the spirit is charitable giving. Without financial
donations, these organizations simply cannot undertake the good
works that they do in providing the indirect benefits,
including the provision of these indirect benefits, personal
connectedness, reciprocity, and trust, that are invaluable, and
that have become indispensable to community thriving, and the
thriving of the human condition.
Unfortunately, there have been worrisome trends in
charitable giving over recent years, and over the last few
decades. As the Joint Economic Committee staff research has
found, while total American charitable giving has increased in
most years over the last half century, the overall percentage
of Americans giving has actually decreased from 66 percent in
2000 to 56 percent in 2014, with a particularly pronounced drop
among lower income Americans, among those at the lower end of
the economic--of the income spectrum. The drop in giving since
then has dropped the most.
Additionally, the share of individual giving out of total
giving has dropped over time, decreasing from 83 percent in
1978 to 68 percent in 2018. In other words, giving now comes
increasingly from fewer, wealthier people and organizations. So
why does that matter? Why should we worry about it? Why are we
here today to discuss that?
Well first, it denies communities the necessary positive
spillover effects that flow from individual contributions and
widespread altruism.
And second, the very causes being supported are likely to
change as a result of these trends. While higher-income
Americans tend to give to education and the arts, less affluent
Americans tend to give towards service and assistance to the
poor.
In fact, those making $100,000 or less per year are
responsible for almost 49 percent of all giving in this area of
vital need. In other words, even though this segment of the
American population might not be donating in larger increments,
there are a lot of them donating. And a lot of them who have
donated historically. And those people are donating in
especially valuable areas, and the areas where the absence of
the giving might be felt especially strongly with especially
devastating consequences.
One contributor to this trend is the Federal Tax Code's
inequitable treatment of charitable giving. Because it is a
below-the-line deduction, only those who itemize--that is, to
say generally tax filers toward the upper end of the income
scale--can currently claim the charitable deduction.
Lower income families who don't itemize now receive no
incremental additional tax benefit specifically because of
their charitable contributions. That is to say, they do not get
anything beyond the standard deduction.
This is an unintended consequence of the long-standing
bipartisan effort to raise the standard deduction, which itself
provides tax relief to lower- and middle-income filers. And
that is a good thing. But it is an inequality just the same.
And it is an injustice for working families and to the local
charities who rely on them, especially those charities who do
some of the most important work, as we have just mentioned.
While the CARES Act passed earlier this year did add an
above-the-line deduction of $300 for non-itemizers, much more
could and I believe should be done.
I called this hearing to talk about how, especially in this
time of immense, unusual hardship, when charitable giving is so
essential, Congress could better address this disparity. In
recent weeks, I have been part of a bipartisan working group
that has developed legislation reforming this inequality. I am
grateful that three other Members of the group, including
Senator Lankford, and Senator Shaheen, and Senator Klobuchar,
are willing to be here to talk about it today.
Senator Klobuchar is a Member of the Joint Economic
Committee, and Senators Shaheen and Lankford who are joining us
specifically for this hearing today.
Especially as we reopen our businesses and our
institutions, leveraging charitable giving should be a top
priority for those of us tasked with reviewing economic
conditions in our country. In the coming months, those of us in
the House and the Senate are going to expend a lot of energy
trying to figure out which of the Federal programs on which we
have spent all these trillions of dollars have worked, and
which have not worked as well.
It is going to be a complicated and at times probably
controversial project for all of us. It is necessary,
nonetheless.
With the nonprofit sector, however, the vetting work has
already been done for us. Charitable organizations only exist,
and only attract donations, to the extent that they are already
believed to succeed. In fact, you cannot get donations. And if
you get donations once, you cannot get them again and again
unless you can present evidence to your donors that you are
actually doing something good with it.
So these organizations can serve as sort of the tip of the
spear in our national COVID response. Today's hearing will
focus on just that. We are going to hear not only from Senators
Lankford and Shaheen, and from Senator Klobuchar, who again is
a Member of the Committee, but from two additional witnesses
with valuable perspectives on philanthropy.
I look forward to hearing the contributions of our
panelists and our colleagues on this important topic. But
before we proceed, I want to say just a couple of words about
the hearing and about how our hearing has been modified from
its usual format in light of the spread of the coronavirus.
The hearing room has been configured to maintain the
recommended six-foot social distancing between Members and
other individuals in the room as necessary to operate the
hearing, which we have tried to keep to a minimum.
A number of Members and witnesses have chosen to use secure
video teleconference technology, which will allow them to
participate remotely. For those joining us remotely, once you
start speaking there will be a slight delay before you are
displayed on the screen. And so to minimize background noise,
we are asking those of us who are using video conference--the
video conference option to please click the mute button until
it is their turn to speak or to ask questions.
With that, we are now going to hear an opening statement
from Vice Chairman Beyer. Vice Chair Beyer, go ahead.
[Pause.]
Vice Chair Beyer, go ahead and unmute yourself. We cannot
hear you.
[The prepared statement of Chairman Lee appears in the
Submissions for the Record on page 32.]
OPENING STATEMENT OF HON. DONALD BEYER JR., VICE CHAIR, A U.S.
REPRESENTATIVE FROM VIRGINIA
Vice Chairman Beyer. Thank you, Senator Lee, very much.
Senator Lee, thank you so much for putting this together. Thank
you to our witnesses, Dr. Osili and Mr. Crim, for sharing your
expertise and perspective. And thank you to Senators Lankford
and Shaheen for joining the Committee this afternoon.
Charities are one of our most unique and precious
resources. They provide invaluable services and strengthen our
communities. Perhaps at no time in our history has this
important role been so visible as during this global pandemic
and the resulting economic crisis.
I volunteered at a local food bank recently, and as long as
I was there we never saw the end of the line. And they told us
that because half of their resources typically came from
restaurants, the restaurants were all closed, that they were in
really dire need.
Throughout this crisis, American charities have been
frontline responders. They provide communities with critically
needed housing. They provide emergency child care for first
responders, support for victims of domestic abuse, counseling,
and other critical services.
But as Chairman Lee said, unfortunately at a time when we
need nonprofits more than ever, they are facing a really
serious economic crisis. Three quarters of charities have seen
a decline in donations since the crisis began. Half expect to
absorb a hit of at least 20 percent.
They receive donations from a lot of different sources--
businesses, foundations, individuals--but individuals are key.
Seventy percent of all nonprofit gifts come from individuals.
Since 2000, the share of households donating to nonprofits
has fallen from two-thirds to 53 percent in 2016. To make that
concrete, that's 20 million fewer households actually giving.
And unfortunately the 2017 Republican tax cuts, the Tax
Cuts and Jobs Act, made things worse. It doubled the standard
deduction, so many people who used to be able to itemize could
not anymore. And it capped the state and local tax deductions,
raising the tax burden for so many people who used to give
money.
As a result, of course we saw that itemized deductions fell
precipitously. Before 26 percent of households itemized; after
the Tax Cut and Jobs Act, only 10 percent.
So for the nonprofit world, that hurt really badly. Fewer
itemizers means fewer givers. And it should not be a surprise
to anybody that individual donations fell in 2018. Despite the
fact that the economy was very strong, the unemployment rate
continued to come down, the stock market continued to go up,
charitable giving fell by 3 percent, inflation adjusted, and as
a percentage of GDP it actually fell by 6 percent.
And now with the current crisis, contributions are falling
even faster, as they have fewer donations and most charities
depend on one or two big events every year, and they have all
been canceled.
So this means less money will be available, when many more
nonprofit services are actually needed. As a result, 60 percent
of charities have cut services, and 13 percent of the small
ones have actually ceased operations. And this has an impact on
our employment, too, because literally 12 million Americans
work for nonprofits, 10 percent of the private sector
workforce.
So one in six nonprofits had to furlough workers. One in
eight had to lay off workers. So what do we do about it? We
will talk to Dr. Osili and Mr. Crim today, but I am really
excited about proposals to incentivize additional charitable
deductions, to expand that $300 addition that was included in
the CARES Act. This could really help offset the lost
contributions from the Tax Cuts and Jobs Act.
So we have done a lot in the meantime. Congress expanded
the PPP, the Paycheck Protection Program, which includes
nonprofits. And we have an employment retention tax credit in
the CARES Act. And the HEROES Act increases that from 50
percent to 80 percent.
But there are other ways to go forward. One path is to tap
the generosity of our senior citizens. I've introduced a bill
that would incent the charitable giving by extending the IRA
Charitable Rollover to allow people, starting at age 65, to
make tax-free IRA rollovers to charities, while providing a
guaranteed income for the senior citizen.
I know Senator Klobuchar has introduced legislation to
provide grants to nonprofits to help them retain employees, or
hire those who have become unemployed.
There are a lot of smart ways to address these challenges.
Some in Congress feel no sense of urgency, but I know that all
of us are hearing in our district everyday from nonprofits, big
and small, that a sense of urgency is exactly what is needed.
So I am grateful to Chairman Lee. This will be my first
hearing with Chairman Lee, focusing attention on what we can do
right now to support charities and help them weather the storm.
Again, I would like to thank our witnesses for coming,
inside and outside Congress, to help us move forward. With
that, Chairman Lee, I yield back.
[The prepared statement of Vice Chair Beyer appears in the
Submissions for the Record on page 33.]
Chairman Lee. Thank you so much, Vice Chairman Beyer, and
welcome aboard and congratulations on your selection as the
Vice Chair.
We are now going to hear a brief opening statement from
Senator Klobuchar before we proceed to our Member panel.
Senator Klobuchar, go ahead.
OPENING STATEMENT OF HON. AMY KLOBUCHAR, A U.S. SENATOR FROM
MINNESOTA
Senator Klobuchar. Well thank you so much, Chairman Lee,
and thank you to Vice Chair Beyer. Actually, Vice Chair, you
should know that Chairman Lee and I have co-chaired the
Antitrust Subcommittee in different roles, ranking and chair,
for, I do not know, like eight years together, and he is pretty
good to work with. So you should be in good hands.
I think what we see here is that the pandemic is squeezing
our nonprofits on both ends. The public need is soaring for
their help at a time when charitable giving and other revenue
streams have declined drastically as a result of the pandemic,
as my colleagues have noted.
And I was really struck by that when I went and visited one
of our food banks, and someone who was in the line said that
they had previously volunteered. They were at a job and they
volunteered, and now they were in line to get food.
So things are changing, and a lot of people are out of work
that had never even imagined they would be out of work. And a
lot of people are having trouble financially. And we all know
that one way to boost this up with help is our nonprofits. The
Vice Chair mentioned my WORK NOW bill, which would actually
connect some of the same concepts coming out of the Great
Depression when Franklin Roosevelt started the CCC and
basically took people who were unemployed and said here is
something really good work to do. Well, we can do that through
things like AmeriCorps, which I support. We can also do that by
plugging people into our existing nonprofits. So that is one
idea.
The second is what the Chairman has been referring to, and
that is the work that we are doing, and I am sure work is going
on in the House as well, but in the Senate with Senator Lee and
Coons and Lankford and Shaheen. Thank you for joining our
Committee. As well as Senator Scott in advocating for a
substantial above-the-line charitable deduction to help
nonprofits who are sorely in need of revenue.
I am glad that we were able to get a modest above-the-line
deduction into the CARES Act, and we need to build on this
success to greatly expand the deduction. Examples are Catholic
Charities in Minneapolis and St. Paul, are facing increased
costs totaling $1 million per month because of front-line
staff, additional cleaning, redesigning their services so they
can accommodate the horrible virus.
Jewish Federation is seeing very similar numbers. Humanity
forced many of the organizations to Minnesota to take deep
cuts, including significant layoffs.
These nonprofits are on the front line. I think the
smartest thing we can do right now is to keep them strong. And
thank you for holding this hearing, Chairman Lee.
Chairman Lee. Thanks so much, Senator Klobuchar.
I would now like to introduce our two distinguished
colleague witnesses. First we are going to hear from Senator
James Lankford who serves as a Senator from Oklahoma. Senator
Lankford is a member of the Senate Committee on Finance, the
Senator Committee on Appropriations, and the Senate Committee
on Indian Affairs. And he is the Chairman of the Senate
Homeland Security and Governmental Affairs Subcommittee on
Regulatory Affairs and Federal Management. I am sure that flows
easily when you say it.
He has been involved in previous efforts to reform the
charitable deduction. In fact, this has been a passion of
Senator Lankford's for a very long time, including the
introduction of the Universal Charitable Giving Act in 2019.
Welcome, Senator Lankford.
And after Senator Lankford, we are going to hear from
Senator Jeanne Shaheen, who serves as a Senator from New
Hampshire. Senator Shaheen is a member of the Senate Committee
on Foreign Relations, the Senate Committee on Armed Services,
the Senate Committee on Small Business and Entrepreneurship,
and she is the Ranking Member on the Senate Appropriations
Subcommittee on Commerce, Justice, Science, and Related
Agencies.
She has introduced her own legislation to promote
charitable giving, and is a long-time advocate of this issue.
Her legislation is the Supporting Charitable Institutions Act.
Welcome to Senator Shaheen.
So thanks for joining us today. Senator Lankford, you are
now recognized for your testimony.
STATEMENT OF HON. JAMES LANKFORD, A U.S. SENATOR FROM OKLAHOMA
Senator Lankford. Chairman Lee, thank you, and Vice
Chairman Beyer and other Members of the Committee. I appreciate
you having the hearing today, and to be able to talk about this
issue.
I am going to stray from my prepared remarks. I have
submitted some remarks for the record, though let me just make
a couple of comments on this.
I have served with nonprofits more than 20 years before I
came to Congress. I understand the nonprofit issues and what
they face both on finance, and the structure, and the staffing,
and the challenges of volunteers, and all the things that
happen when you work as a nonprofit.
One of the issues that we face now, though, that has
changed even from five, ten years ago, is the rise of the
GoFundMe Page where individuals that want to give small-dollar
donations will give dollars to individuals and to causes,
things they see on the news, or things they hear about, and
they will do a GoFundMe donation. That is a wonderful thing to
do if they can find legitimacy at the GoFundMe page and what
they are trying to be able to accomplish.
Nonprofits are different, though, than the GoFundMe.
Nonprofits do not exist just for a single event, a single
person rise and fall, and then they go away. They exist for all
people in the community. They are churches. They are
synagogues. They are mosques. They are feeding the homeless.
They are taking care of individuals' groceries. They are paying
utility bills. They are the Boys and Girls Clubs helping with
afternoon activities. They are Goodwill, providing jobs and
opportunity and resources to people that need help.
They are doing work all the time, every single day. And
individuals that work in those nonprofits, they understand full
well, but I fear some Americans do not; that we have three
safety nets in America:
The family is the first safety net. Nonprofits are a second
safety net. And government is our third. And we often look to
government to be able to solve the most difficult challenges of
our safety net, and of people in crisis.
But government is the last spot for that. The first two are
essential. And if the family collapses, nonprofits struggle to
keep up, and government struggles to keep up with that. If the
family collapses, and nonprofits collapse, it all falls on
government. And we are not structured to be able to help
maintain the needs in communities like families are, and like
nonprofits are.
Government is efficient at writing a check. Government is
efficient at developing a program to be able to facilitate
activities. Government cannot meet the human needs that are
there like a family can, and like a local nonprofit can.
So I think it is beneficial for us in our official policy
and what we choose to do in the Tax Code to be able to create a
tax code that is encouraging to families, and is encouraging to
nonprofits.
Now again, Americans have their own money they can choose
to do with what they want, and Americans are exceptionally
generous people. But when we incentivize it, and we encourage
it as we have with the CARES Act, we step up to say nonprofits
are going to struggle through this time so let us do a $300
above-the-line straight-off-the-top deduction for every
American that they can choose to use, we are incentivizing that
activity.
Now I can be frank with this Committee to know, and the
folks that are here know that I pushed for much more than just
a $300 deduction above the line during the CARES Act. Many of
us, if not all of us, did during that time period.
But I think that there is more that we can do and should do
in the days ahead. We have recommended a one-third of the
standard deduction that is $4,000 for the individual, $8,000
for the married filer, for them to be able to write off. That
is a significant encouragement.
That encourages individuals to be able to do more in their
local communities to be able to make sure that we sustain that
work, that essential safety net of not-for-profits all across
our communities.
So whether they are working in the arts, whether they are
working in the homeless community, whether they are working in
the faith community, they will still be there when this is said
and done and this pandemic is over. Quite frankly, it is good
policy no matter when we do it, whether it is pandemic or not
for us to be able to continue to tax less to encourage more
engagement.
By far, not-for-profits are more efficient in getting
resources and assistance to local communities than government
is. So the stronger we can have not-for-profits, we are getting
more efficient support to local communities. And I think that
is the right thing for us to continue to incentivize.
I do want to say thank you to Senator Shaheen, Senator
Coons, Senator Tim Scott, Senator Klobuchar, and certainly
Chairman Lee. We have all been very engaged in this
conversation, and it is good to have this as not a partisan
conversation. It is just a ``what can we do to be able to help
as many people as possible?'' conversation.
Congressman Walker in the House has been a tremendous
advocate for this for a very long time, as well. He also knows
full well what it means to be able to work around not-for-
profit institutions and understands the needs and the
operation.
So I am grateful to be able to have great partners in this
and look forward to actually getting this done in the days
ahead.
[The prepared statement of Senator Lankford appears in the
Submissions for the Record on page 35.]
Chairman Lee. Thanks so much, Senator Lankford.
Senator Shaheen.
STATEMENT OF HON. JEANNE SHAHEEN, A U.S. SENATOR FROM NEW
HAMPSHIRE
Senator Shaheen. Well thank you very much, Mr. Chairman. I
am really pleased to be able to join Senator Lankford in
talking about this critical effort, and really appreciate your
leadership and Vice Chairman Beyer and all of the Members of
this Committee in holding this hearing today. And I appreciate
your leadership of this bipartisan group to try and address the
charitable contribution, and hopefully in another package of
help that we are trying to provide to the people of this
country.
You know, my home State of New Hampshire has historically
very small government, and a very robust nonprofit sector. And
as Senator Lankford said so eloquently, the nonprofit sector
provides so many services in New Hampshire and a real safety
net for many of the people in our state.
We have organizations like area agencies that provide
programs for people with developmental disabilities and their
families. We have the New Hampshire Coalition Against Domestic
and Sexual Violence that provides crisis centers for people who
are victims of domestic violence.
And we have the New Hampshire Food Bank. You know, those
are just three examples of the organizations that right now are
working overtime to address the challenges as a result of this
pandemic.
Now what is interesting to me is that the New Hampshire
Food Bank, unlike the other two agencies that I mentioned,
accepts no public dollars. Many of our nonprofits get some
public dollars at the county, at the state, at the city level,
but many of them do not. And right now they are working
overtime because of this pandemic. The call for their services
has increased, and yet the contributions, their ability to
continue to provide those services, is very much at risk.
According to a recent poll survey that was conducted by the
New Hampshire Center for Nonprofits, 92 percent of responding
nonprofits have reported a drop in revenue by an average of 34
percent. And 45 percent of the respondents have had to furlough
some of their employees.
And at the same time, according to this same survey, 38
percent of organizations, including 45 percent of human service
organizations, reported an increase in demand for their
services. So this is a time where whatever we can do to try and
encourage private giving, which as you pointed out in your
statement has historically been higher than it is right now,
the more we can do to support that private giving to encourage
help for these organizations, the more we can help them survive
the current economic situation that we are in, and the better
they can continue to provide services whether it is in the
arts, or homelessness, or whatever it is.
And as Senator Lankford pointed out, what we are hoping to
do is get an above-the-line deduction of up to one-third of the
standard deduction, so $4,000 for individual or $8,000 for a
married couple filing jointly. And in addition to that, I have
proposed as part of what we are doing allowing the deduction
for charitable contributions made before the new tax filing
deadline of July 15th to be carried back to Tax Year 2019. So
we hope it would help stimulate giving for this year right now
when it is so desperately needed.
So thank you again, Mr. Chairman, for holding this hearing,
for your leadership in this effort. I am so pleased to be able
to join you and Senators Lankford and Scott, Senators Klobuchar
and Coons, and hope that we can be successful in getting
something into the bill in the Senate that we can then get
signed into law. Thank you.
[The prepared statement of Senator Shaheen appears in the
Submissions for the Record on page 36.]
Chairman Lee. Thank you so much. Your remarks, both of you,
have been terrific and have provided deep insight, backed up by
many years of toil in this area. So thanks so much for joining
us today. We are very grateful.
We are now going to transition over to our second panel.
Our second panel will be joining us remotely. I am going to
introduce each of our witnesses.
First we have Mr. Bill Crim, who is the President and CEO
of United Way of Salt Lake. He serves on United Way's Worldwide
National Professional Council, and the Governor's Education
Excellence Commission in Utah.
Previously Mr. Crim served on the Utah State Work Force
Investment Board, and he has been a research fellow for the
Coalition on Human Needs here in Washington, D.C. Welcome, Mr.
Crim.
Next we will have Dr. Una Osili, who is Professor of
Economics and Associate Dean for Research and International
Programs at the Indiana University Lilly Family School of
Philanthropy at IUPUI.
Dr. Osili oversees the research and publication of Giving
USA, an annual report on American philanthropy, as well as the
Index of Global Philanthropy and Remittances, and Index of
Philanthropic Freedom. Thank you for being here, Dr. Osili.
We appreciate you both joining us today. Mr. Crim, you are
now recognized for your testimony.
STATEMENT OF MR. BILL CRIM, PRESIDENT AND CEO, UNITED WAY OF
SALE LAKE, SALT LAKE CITY, UT
Mr. Crim. Thank you, Chairman Lee, Vice Chairman Beyer,
Members of the Committee.
I deeply appreciate the opportunity to come before you to
talk about the work of the charitable sector in our country,
our response to the COVID-19 crisis, and the role that tax
policy plays in driving private giving.
United Way of Salt Lake builds cross-sector partnerships
that work to solve our communities' most complex social and
economic problems. Within these partnerships, we hold ourselves
accountable to results that no single organization or sector
can achieve alone.
Our commitment to creating lasting change and helping all
kids and families succeed regardless of their circumstances,
holds especially true during this time. So we continue to
address the health and economic impacts of the pandemic. And as
we are all called to address the urgent need for racial justice
in our country, we know that the role of nonprofits, of faith
organizations, and of charitable giving is critical.
Over the past three months, hundreds of individual Utahns
have generously risen to the challenge of supporting our
community. In addition, key business partners like Goldman
Sachs, Mark Miller, Zions Bank, Savage, and many others have
contributed to this work.
This generosity has allowed us to respond to dramatic
increases in contacts through 2-1-1, which provides information
or referral to those in need, provides critical support to
dozens of our community partners meeting essential basic needs,
and to develop a comprehensive initiative to address the
dramatic earning loss experienced by so many students over the
past three months.
We know that the reasons for giving are highly personal,
but I can assure you from first-hand experience that people
give to charities for altruistic reasons. Sometimes this
selfless concern for others is driven by faith, or simply a
desire to give back to the community. Often, and in our case,
it is because people believe that by working together we can
solve our community's most complex problems.
But tax policy does influence people's behavior, from
business decisions, to buying a home. This does not mean that
every person is influenced by tax policy, but large numbers of
people are.
Charitable giving is the most discretionary financial
decision someone can make. Good tax policy might be the nudge
that someone needs to make their first donation. Or it might
prompt a long-time donor to give a little more.
Consider, for example, the person who gives $500 per year
to charity. If they pay taxes at a 20 percent rate, that means
they are paying $100 in taxes on that money that they are
giving away. Setting aside the fundamental unfairness of taxing
income that is being donated to help others, those taxes may
prompt a smaller donation from some people who are not in a
position to giving more.
Conversely, if Congress would have relieved tens of
millions of Americans from taxes on income they donate, it is
not hard to imagine the positive impact on charitable giving. I
am definitely not an economist or a tax policy expert, but I
know that studies have consistently found that good tax policy
will drive more giving. That includes increased giving by
people who make small donations.
United Way's basic needs charities, faith-based charities,
and disaster relief charities rely heavily on small donations
from large numbers of people. In our case, we raise about $15
million per year in Salt Lake, but our average individual
donation is $229 per year. Those small donations add up.
Nationally, United Ways raise over $1 billion per year from
small donors who give an average of $155 per year.
Of course in my view the ideal Federal tax policy would be
to permanently relieve all taxpayers from paying taxes on
income they donate to charity. That could happen through an
above-the-line exclusion or a non-itemizer charitable deduction
combined with the existing deduction.
But we understand that that may not be viable at this
moment. But a temporary non-itemizer deduction could be
instrumental in helping charities help our communities and
those impacted by the crises facing our country.
We understand Chairman Lee, Senator Klobuchar, and others
are supporting a temporary deduction modeled after Senator
Lankford's and Congressman Walker's legislation. We think that
legislation would provide a much-needed infusion of donations
directly to the charities that are leading the COVID-19
response and recovery efforts.
The recovery efforts by charities will go well beyond 2020.
So the longer this legislation is in effect, the better it will
help us support our communities and those who have been
affected by COVID-19.
As I close, I want to note that several Members of this
Committee have supported and personally donated to their local
United Way, and others have played a significant role in
raising donations for their local United Way.
On behalf of our entire network, I want to extend our
deepest thanks to each of you. Mr. Chairman, I am happy to
answer questions.
[The prepared statement of Mr. Crim appears in the
Submissions for the Record on page 36.]
Chairman Lee. Thank you. Thank you, very much, Mr. Crim.
Dr. Osili, we will go now to you for your opening
statement.
STATEMENT OF DR. UNA OSILI, PROFESSOR OF ECONOMICS AND
PHILANTHROPIC STUDIES AND ASSOCIATE DEAN FOR RESEARCH AND
INTERNATIONAL PROGRAMS, INDIANA UNIVERSITY LILLY FAMILY SCHOOL
OF PHILANTHROPY, IUPUI, INDIANAPOLIS, IN
Dr. Osili. Chairman Lee, Vice Chair Beyer, and
distinguished Members of the Joint Economic Committee.
Thank you for the opportunity to testify today. The Indiana
University Lilly Family School of Philanthropy has tracked
crises and disaster giving since September 11, 2001. I will
share initial evidence about philanthropy's response to the
COVID-19 pandemic.
Through good times, and during times of crisis, American
philanthropy, which includes donors at all income levels and
racial and ethnic backgrounds, has collaborated to fill gaps
where governments and markets face limitations and provide
capital for innovation and meet material and spiritual needs.
Philanthropy, defined as voluntary action for the public
good, is a core value, a central way for Americans to
contribute to the vitality and strength of their community. In
2018, Americans donated about $427 billion to charitable
organizations, of which 68 percent came from living
individuals. Four aspects of the philanthropic response deserve
close attention.
First, the COVID-19 pandemic has induced twin crises when
Americans are grappling with unprecedented health and economic
shocks. African American and Latino populations have been
disproportionately impacted, exposing deep racial and
structural inequities.
In response, we have witnessed tremendous individual giving
during the COVID-19 pandemic to charitable organizations, but
also mutual aid to neighbors and friends. Beyond individual
giving, U.S. foundations and corporations have contributed over
$11 billion to the COVID-19 response based on Candid's
estimates.
Second, philanthropy's innovative response has included
cash and in-kind donations from everyday citizens and donations
from wealthy donors. Crowd-funding campaigns, typically driven
by small donations, have expanded in their reach and impact.
One of the most extensive GoFundMe campaigns, ``America's Food
Fund,'' has raised over $26 million to combat food insecurity.
And the CDC Foundation has raised $50 million on Charidy.com.
Third, in the wake of the COVID-19 pandemic, we have also
seen philanthropy as a unique collaborator and facilitator of
collective action in local communities. A research initiative
led by Dr. Laurie Paarlberg at the Lilly Family School is
tracking philanthropy's facilitator role at the local level. As
of May 15th, her mapping project estimates that community funds
in cities and towns across America have raised $634 million and
distributed at least $376 million to address critical needs
created by the pandemic, including food insecurity, mental
health, and emergency financial assistance.
Finally, we have seen philanthropy tackle systemic issues
of inequality. In Michigan, and here in Indiana, the
collaboration of philanthropic organizations in each region
rapidly joined forces to supply computer tablets with high-
speed internet connectivity to address the digital divide for
K-12 students.
Initial response to COVID is unprecedented in its speed,
size, and scope. And nonprofits of all sizes have risen to the
challenge. However, the need for private philanthropy is rising
as many more people and communities need support, and at the
very time when the ability of many donors to give is
challenged.
Research has long established that charitable giving is
linked to national and regional economic trends. A concerning
trend is that the share of American households that give to
charitable organizations has declined significantly from 66
percent in 2000 to 53 percent in 2016. Declines in
participation rates among low- and middle-income Americans, as
well as younger Americans, have been evident since the Great
Recession.
This trend of declining participation has implications for
the strength and vibrancy of civil society. Over time, tax
policy has also provided less tax recognition of the giving by
all Americans, especially the giving of low- and middle-income
Americans. The charitable deduction is one of the oldest
tenants of the U.S. Tax Code and affirms the value society
places on voluntary giving.
The school has analyzed the impact of various policy
options. Our studies project that extending the non-itemizer
deduction could increase charitable giving available to
nonprofits by up to $26 billion, an increase of about 7.7
percent, and also increase the number of donor households by an
increase of 8.2 percent in 2021, enabling a fairer, more
inclusive, and a more engaged civil society.
To meet the complex challenges triggered by COVID-19,
creating tax incentives that encourage the generosity of all
Americans, including lower- and middle-income households, is a
vital step in the recovery, given the mounting needs of
families and communities.
Thank you for the opportunity to testify today. I would be
happy to respond to any questions.
[The prepared statement of Dr. Osili appears in the
Submissions for the Record on page 38.]
Chairman Lee. Thank you very much to both of you. We are
going to now start into five-minute rounds of questioning. I
will go first, and then we will go to Vice Chairman Beyer, and
then, alternate between Republicans and Democrats after that.
Mr. Crim, we will start with you today. The Social Capital
Project of the Joint Economic Committee has done extensive
writing and research about excessive government regulation and
its tendency to act as sort of a drag on nonprofit and
charitable activity, as well as government programs crowding
out various civil society activities by effectively assuming
civil society's functions.
In other words, when government steps in the room it tends
to consume so much of the oxygen that it tends to crowd out
others.
Mr. Crim, have you seen examples of either of those
phenomena occurring recently, in the recent coronavirus policy
response?
Mr. Crim. I would say in the recent months what I have seen
in Utah is a remarkable coming together of the private sector
led by businesses of the charitable sector and of government,
all I think staying in their lane. All listening to each other
and looking for ways to add value and to get results in this
moment.
I do think what you are describing can happen, and it
certainly does, but in the coronavirus response I have not seen
examples of government overstepping here in Salt Lake or in
Utah.
Chairman Lee. I am glad to hear that, and that is
heartening to hear. It sounds like you are acknowledging this
can happen. It is a phenomena that we have to be aware of and
we have to watch out for. But I am glad to hear that you are
not seeing it yet.
Mr. Crim, what do you think policymakers ought to do to
avoid crowding out charitable relief efforts, while also
ensuring that the needs of Americans are met? Are there some
guideposts that you point to for us as policymakers to help
make sure that we do not create this crowding out effect?
Mr. Crim. Absolutely. And I would want to answer that
question in part by observing that in our view none of the
problems that we have been talking about today, and that we all
care about, can be solved by one sector alone. Certainly not by
one organization or set of nonprofits or their programs.
Our view is that it requires deep partnerships of community
members and their voices leading the way of nonprofits, and
government, and private sector working in concert with one
another.
And I think the way to drive that and prevent what you are
describing I think is to incentivize partnership within
government funding. So if the policy that is being driven by
the Federal Government, or by a state government, acknowledges
that the problem it hopes to solve requires this kind of civil
society and engaged partnership, and highly effective
collaboration, and accountability for results, it seems to me
like we could incentivize that partnership or require it in
some cases as appropriate, so that programs do not--they do not
happen in a vacuum. They do not create that crowding-out effect
that you describe. Because there is a community-led, community-
based infrastructure set up to help everybody work together in
a way that allows each sector and each organization to play its
best role.
Chairman Lee. Thank you, Mr. Crim.
Dr. Osili, I wanted to ask you a question about an
interesting set of facts that we have that are somewhat unique
to our circumstance right now.
The 2019 tax year filing deadline has been moved back to
July 15th. In light of that fact, a lot of what we are going
through right now, it seems to me that we have got an
interesting opportunity. If we could enact legislation in the
next few weeks making a change to allow people to add to their
2019 tax liability, this function of what they donate this
year, and count that toward 2019, what effect would that have
on charitable contributions right now given the timing of when
charitable donations have been made in the past, and given this
unique circumstance of the coronavirus-related lockdowns, and
the extension of the filing deadline?
[Pause.]
Dr. Osili, I think you might be muted. We cannot hear you.
Dr. Osili. Okay, thank you, Chairman, for your question.
And I do agree that this is an important opportunity to
recognize the generosity of all Americans. The point that you
raise is a good one. Tax salience is a theory and actually has
been found to affect the behavior of Americans, and providing
that tax incentive now rather than later, could stimulate
additional giving.
In addition to the work that I cited in my testimony, we do
know from previous disasters that a large number of Americans
contribute to disasters. As an example, in the 2017 Hurricane
Harvey and 2018 series of natural disasters, 30 percent of
Americans gave. And the average contribution was about $300.
Given the scale of this pandemic and the fact that it cuts
across all communities, providing the tax recognition now, as
well as in the future, I think it will be important given the
timing of this crisis and the length and severity.
Chairman Lee. Thank you very much. My time has now expired.
So now we are going to go to Vice Chairman Beyer for his round
of questions.
Vice Chairman Beyer.
Vice Chairman Beyer. Mr. Chairman, thank you very--Chairman
Lee, thank you.
To our witnesses, the CARES Act that we passed, part of our
coronavirus response, expanded the charitable giving caps for
individuals and corporations. So individuals are now able to
deduct up to 100 percent of their adjusted gross income in
2020. It was 60 percent. And corporations saw their cap lifted
to 25 percent from 10 percent.
Dr. Osili, should we also be looking at foundations? Right
now, the minimum foundation distribution over the year is 5
percent----
Chairman Lee. Mr. Vice Chairman, apparently your video feed
is off. I just thought you should know that.
Vice Chairman Beyer. Oh, I did not----
Chairman Lee. That's ok, you are free to participate with
it off.
I just wanted to make sure that was deliberate and not
accidental. Go ahead.
Vice Chairman Beyer. Thank you, Senator. It was not,
actually--whatever. Dr. Osili, on foundation, 5 percent right
now. Should we consider doing a 10 percent distribution per
year? And what kind of impact would that have on the nonprofit
sector?
Dr. Osili. An excellent question. I think that the CARES
Act does go far in recognizing the generosity of corporate
America as well as individuals. And as I cited in my testimony,
we have seen significant response from corporations, especially
at that million dollar level.
We have also seen significant investment by foundations
across the country, and I think we have also seen from prior
research that foundations tend to give in a counter-cyclical
manner. In other words, during tough economic times foundations
tend to increase their giving. We saw that during the Great
Recession.
So certainly incentivizing all forms of generosity during
this time I think will certainly move in the right direction in
helping Americans cope with the scale and, as we said, severity
of this current crisis.
Vice Chairman Beyer. Thank you very much. When we make
changes to the Tax Code, we are trying to find ways to
incentivize changes at the margin. So we do not want to reward
people with a tax benefit for actions they are going to take
already, because it would cost the government money that we can
use for other things.
So when it comes to charitable deductions, some would argue
that we should give tax benefits only above levels at which we
would expect people would give. For example, there is some data
that suggest the average person who gives would give up to 2
percent of their AGI. This would reduce the cost of the benefit
a lot. How do you react to that notion, that we create tax
incentives beyond the 2 percent per year that they would be
expected to give?
Dr. Osili. I think those are all very important points, and
they have been very significant to date about the limitations
of the CARES Act. In other words, could it go further?
Some have argued that the limit currently is too low at
$300. Others have charged that the primary beneficiaries are
mostly higher-income households. It is important as we think
about other policy options to address a lot of the issues that
I think the Chairman already touched on, looking at the
fraction of Americans that donate, the size of the charitable
response, as well as some of the distributional consequences.
In other words, tax equity. We want to reward generosity
across all Americans, lower-income, middle-income, and wealthy
households, understanding that all Americans play a role.
To this end, the school has conducted a very detailed study
of all different sets of options. In fact, we considered five
different policy options. And these policies actually differ on
their impact on the number of donors. In other words, how many
people would actually participate; the amount that would be
raised; and the cost to Treasury.
The good news here is that all of the options that include
extending the deduction to non-itemizers would actually forego
less in tax revenue than it would bring in in charitable
dollars. In other words, a small impact on the Treasury, while
boosting overall charitable giving.
Just to give you--I think some of this was covered in my
testimony, but one of the examples that I cited, extending the
non-itemizer deduction, would bring in an increase of 7.7
percent in charitable dollars, would increase donors by 8
percent, and the Treasury revenue impact is relatively small,
reducing revenue by 0.6 percent.
So we have considered the various options and looked at the
impact on donation levels, participation rates which are very
important and we want to encourage tax recognition for all
Americans, and then finally the impact on Treasury as well.
So I think all of those have to be considered as you
investigate what the best set of policy options are. But one
principle that I think is important to keep in mind is that
Americans of all different backgrounds participate in
charitable giving. We want to pursue policies that actually
recognize that spirit of generosity across the income spectrum.
Vice Chairman Beyer. I am certainly excited about your
first ever institute for studying philanthropy. Obviously you
are bringing a lot of that to this, to us today already.
So, Mr. Chairman, I yield back.
Chairman Lee. Thank you very much, Vice Chairman Beyer. Up
next is Representative Herrera Beutler.
[No response.]
Representative Herrera Beutler, make sure you are not
muted, and make sure your audio and your video feeds are on.
[No response.]
Okay, Representative Herrera Beutler, we will come back to
you. Next we will go to Representative Schweikert.
Representative Schweikert. Hi there. Thank you, Mr.
Chairman.
It is an interesting subject. Having been someone who
actually worked on the Tax Reform and some of the data we were
seeing, Doctor, can I ask you to--you shared with us in your
opening testimony some of the information from, what was it,
2000 to 2016?
Dr. Osili. Correct. The data that I cited is based on the
Philanthropy Panel Study. It is a module on the Panel Study of
Income Dynamics of American Families, the longest and most
comprehensive study of philanthropy that has ever been
conducted on American families. And that data allows us to
study over time how American philanthropy is changing.
And because we are able--that's the beauty of longitudinal
data--we are able to assess over time the same group of
households. We have seen that declining rate in the
participation of American households.
Representative Schweikert. And you are actually coming to
exactly what I wanted to get my head around. Because this is--
prior to tax reform, we had had some presentations a couple of
years ago, of discussions that there were going to be changes.
There were changes being observed in participation. Somewhat
because of demographics. Somewhat because of income squeezes in
a couple of the lower-income quartiles.
When you talk about--and what was that? Close to a 10 point
drop over that study's time? How much of that--where does that
drop fall? Was that in people of more modest income? Where was
the drop coming from?
Dr. Osili. A very good question, and thank you for
following the research so closely. We have examined in great
detail where the drop came from, and about half of the drop can
be attributed to income--decreases in income and wealth. So we
found it mostly from lower-income and middle-income Americans.
But also among younger Americans, and individuals with less
education.
Now this trend was accelerated by the Great Recession. The
Great Recession did have the impact of reducing further the
participation rates of Americans. The overall trend, the way we
tend to describe it, is donors down, but dollars are up or
holding steady.
And so one of the challenges that we look at, all of the
factors that you have cited, demographic change, changes in our
social and economic life, and also changes in religious
attendance. We are seeing this declining rate, and the
challenge of course especially for younger Americans to make
sure that we can encourage that habit of charitable giving
which has been such a hallmark of American life for centuries.
Representative Schweikert. That is actually a very
interesting point. And, Mr. Chairman, for others who have an
interest in this area, some of us who have spent some time
looking at this, we were already seeing a trend, and it may
have been tied to lower quartiles income, their true purchasing
power, the squeeze that we were seeing in our society. And
there were many of us who had hoped as we saw income move up in
those populations, as we were seeing before the pandemic, it is
not a long enough time frame to see, was there a change in
those more modest incomes' participation in sort of a level of
personal philanthropy.
But as we work on policy, I think we have got to be very
careful to sort of see the world in the last three months, or
the last two years, and it might be much healthier to sort of
look at this over the last 20 years of what is the trend in
income distribution, and who is giving money to charity.
Also, some of the things we were seeing--and I wish I had
made some charts for this conversation, of demographics of how
much of our population was moving out of the workforce because
of getting older, and what sort of contributions of cash
instead of contributions of time and talent.
So this may be one, before we make some really big policy
approaches, we may need to much better understand the data.
Dr. Osili. Absolutely. I think you raise a very good point
about demographics, and that is one that here at the Lilly
Family School we have been watching very closely. For younger
Americans, one of the key issues is charitable giving tends to
be one of those habits. People who give, many of them give year
over year, or they may stop giving and then start up again. And
one challenge we have is for many younger Americans, they
entered the labor market around the Great Recession, many of
them faced economic challenges, and a lot more income
insecurity perhaps than generations before them.
And so for that cohort, one of the questions is: How do we
encourage charitable giving for that younger cohort?
Understanding that they will then start to promote giving,
become regular givers, and ultimately perhaps pass that on to
their children because giving is also something that we do see
closely linked across families. In other words, parents tend to
transmit generosity to their children.
Representative Schweikert. Doctor, one last question, and I
appreciate everyone's patience. Senator Lankford sort of
touched on this, and I see this in the world around me, that
many of the younger, my millennial relationships and
acquaintances, they do more direct type of contributions. The
GoFundMe type of pages, the much more community-centric.
Does that type of contribution hit your data points? And
are we seeing a societal trend that is different in how they
contribute on an individual basis instead of to larger
charitable organizations?
Dr. Osili. Those are both excellent observations. We are
seeing giving expanding, and even during the pandemic we have
seen giving of all forms, giving to nonprofits, but also giving
to crowd-funding campaigns.
What is interesting to note, however, is that even
traditional nonprofits are starting to use crowd-funding to
raise funds. And that is why I gave those two prominent
examples that have raised the most dollars on GoFundMe and are
actually nonprofits such as America's Food Fund, and similarly
the CDC Foundation, a well-established organization dating back
to 1994, the Foundation itself that has also launched a
crowdfunding strategy raising up to $50 million on a new
platform.
So we are seeing hybrids of both the new and old kind of
blending together during the pandemic.
Representative Schweikert. Doctor, the one thing I was
trying to chase down is: Do we see a difference in the age
group that will go and contribute through a GoFundMe? And as we
are saying we are seeing younger donors reducing their
charitable participation, is there a chance that some of the
charitable participation is just using different platforms?
Dr. Osili. I think that is a very good question, and one
that we are studying very closely. Initial evidence does
suggest that younger donors tend to use social media. And a lot
of those crowdfunding platforms are driven by social media.
Representative Schweikert. Doctor, thank you so very much.
And, Mr. Chairman, I yield back.
Chairman Lee. Thank you. Thank you very much. We will go
now to Representative Trone.
Representative Trone. Thank you, Mr. Chairman.
Dr. Osili, supporting charities and the people who depend
on them through the pandemic and beyond requires a
comprehensive approach. The CARES Act made charities eligible
for the PPP, and the Employee Retention Tax Credit.
The HEROES Act would dramatically increase the Employee
Retention Tax Credit from 50 to 80 percent, and increase the
wage cap. Beyond these immediate programs, do you have any
other recommendations additional for legislative support that
would be most beneficial to U.S. charities, whether they're
working here or even internationally?
Dr. Osili. One of the points I think my fellow panelists
mentioned is the importance of collaboration during this time.
And I do think as government looks at how to support the
nonprofit sector during this time, incentivizing collaboration
with partnerships could be another way of supporting
nonprofits.
I think the government already does a fair amount of that
in international relief, but looking at ways of doing that.
And, I would add, also incentivizing innovation. In other
words, nonprofits that are solving very complex problems having
the support of government funding to put some of those
breakthrough solutions in communities around the country.
Representative Trone. Okay, great. Down the road, should
the Legislative Branch consider permanent restoration of tax
deductions for charitable contributions, recognizing that these
come at a big cost in the reduction of tax revenue, or the more
effective and cost-efficient ways to support these
organizations and the important contributions to their
communities?
Dr. Osili. Being an economist by training, I do think it is
important to look at the cost of various policy options. When
it comes to the charitable deduction, we do have significant
evidence that when properly implemented the tax deduction
stimulates more in charity dollars, or at least as much,
relative to its cost to Treasury.
And as we have researched the impact of expanding the
charitable deduction, what we have seen is that encouraging the
generosity of Americans during this time, but certainly into
the future, is something that will help build our civil
society, and especially as we are seeing this declining
participation rate will encourage Americans of all backgrounds
to continue this tradition of civic generosity.
Representative Trone. That is good. Thank you.
What trends are you seeing in the data that you think we
should know about and factor into legislative action to support
charities, particularly during the pandemic? And where are we
not looking where we should be?
Dr. Osili. I think several of your colleagues have brought
up very important points. One advantage of philanthropy during
this time is the speed and the ability to respond to local
problems.
One area that I do think deserves close attention is the
work of community foundations and community funds. The scale
and scope with which they have acted already I think is worth
noting. Finding ways to partner at the community level,
especially in really affected regions, could be very beneficial
at this time.
Representative Trone. Okay, thank you, Doctor. I yield
back, Mr. Chairman.
Chairman Lee. Great. Thank you very much. We will turn now
to Representative LaHood.
[Pause.]
Representative LaHood, you are now recognized. And make
sure your mute button is off and your video feed is on.
Representative LaHood. Okay. Can you hear me, Mr. Chairman?
Chairman Lee. Yes, I can hear you fine. There you go. Go
ahead.
Representative LaHood. Alright, thank you, Chairman Lee,
for holding this important hearing, and to co-chair Beyer.
I want to thank the witnesses for your valuable testimony
today on this important topic. And I just will acknowledge the
important role that our charities and nonprofits play in our
communities all across our country.
They have particularly been highlighted during COVID, and
the reliance--and I think in my own community as I have been
traveling around my district in the central and western-central
Illinois area, the Midwest Food Bank, which has been helping
with food and nutrition programs throughout the country and in
my district, obviously the Salvation Army has been very engaged
in the Peoria Green Center in my community here helping with
shelter and clothing and the health needs of our community,
As was referenced earlier, when we think about the social
safety net of our country, obviously family is first and
foremost, but the nonprofits play a significant role. And
obviously government does, too.
But I think one thing we have learned in our response to
COVID on the Federal level is we are not going to spend our way
out of this from a government standpoint. And so when we look
at our charities and our nonprofits, how do we incentivize? How
do we stimulate? How do we assist, using the Tax Code, in a
proactive way to help those charities and those nonprofits?
And so having this hearing today and the valuable testimony
is a part of that moving forward. So thank you for having it,
Chairman Lee. It is very, very important.
And I would like to maybe ask the Doctor, what have we--in
terms of COVID and the impact that it has had on our country
over the last 10 or 11 weeks, what have we seen in terms of a
reduction in giving to COVID? And what are the projections in
terms of losses related to that moving forward?
Dr. Osili. So it is too early to tell at a comprehensive
level what the impact of COVID has been on fundraising revenues
so far. We did conduct an early survey in March to a national
sample of nonprofits and found that nearly 80 percent of them
had encountered some disruption in their plans around whether
it was canceled events, canceled fundraising programs. However,
what we have also seen in the data is that the impact is not
going to be uniformly felt across all nonprofits.
Some sectors will be affected to a greater extent than
others. As an example, arts organizations are particularly
vulnerable during an economic downturn. And in this crisis,
there are various streams of revenue for arts organizations
have been disproportionately impacted.
Event revenue may be down. Similarly, if you look across
the nonprofit span, there are over 1.3 million nonprofits in
the U.S., but we have seen that in an economic downturn some
nonprofits are more affected than others.
So I think it is too early to say exactly what the impact
will be on the charitable dollars, but it is already apparent
that some nonprofits are being hit harder than others.
Representative LaHood. Thank you for that. Just as a
follow-up, so obviously we have talked a little bit about tax
incentives and direct financial assistance. Are there other
Federal policy recommendations that we should focus on beyond
those two, Doctor?
Dr. Osili. Those are all very good points. Looking back at
periods of crisis and how nonprofits have fared, I think what
we have seen already is that putting together various types of
policies is very important, but also tailoring some of these
policies to specific sectors can be important.
For example, right now we know that health and human
service organizations are particularly affected. So looking at
the impact of those sectors can also be beneficial.
Representative LaHood. And lastly, maybe if you could
comment on how state or local governments play a role in
supporting our nonprofits and charities.
Dr. Osili. Very good. So across the country, that is a
great question. We know that states and local governments are
also at the front lines of this crisis. In our Tax Code, we
have a Federal tax policy, but we also have many communities
and states that have local and state level credits for
different types of contributions.
There have been a number of studies on this topic. One of
my economist colleagues, Dr. Nicholas Duquette at USC has an
academic paper that looks at the impact of these various
credits. And some of them have been effective in actually
stimulating charitable giving, more so than others.
And so I think that would be a place I would ask the
Committee to take a look at. So looking at specific policies
that have been more effective in various parts of the country,
Arizona being one. Michigan is another one. But taking a look
at some of those options, and how perhaps some of those can be
built upon.
Representative LaHood. Thank you, Doctor. Those are all my
questions. Chairman Lee, thank you for the hearing today, and
we look forward to working with you on coming up with policy
recommendations and potential legislation on this topic.
Chairman Lee. Thanks, Representative LaHood. We will turn
next to Senator Hassan.
Senator Hassan. Thank you, Mr. Chair. Just checking that
everybody can hear me?
Chairman Lee. Yes, we can hear and see you. Thank you.
Senator Hassan. Excellent. Thank you, Mr. Chair, and Vice
Chair Beyer, for holding this hearing today. And I would also
like to thank our witnesses, Dr. Osili and Mr. Crim, for
appearing before our Committee.
I also want to thank Senators Shaheen and Lankford for
their leadership in supporting nonprofits.
To Dr. Osili, you have spoken before about how the
nonprofit sector fills in gaps between services offered by
government and by the business community. That is exactly what
I have seen in New Hampshire throughout this crisis.
Nonprofits in my state have stepped up to meet new needs
for housing, health care, employment, and education services,
while also modifying existing services to limit the spread of
COVID-19.
Could you explain to the Committee how nonprofits are
uniquely positioned to use flexible and innovative services to
fill in these gaps, especially during the COVID-19 public
health and economic crisis?
Dr. Osili. That is an excellent question, and I appreciate
the opportunity to shed light on this. I mentioned in the
testimony, we have two very prominent examples nationally. When
public schools transitioned from bricks and mortar schools to
e-learning and virtual learning, it was quickly apparent that
many children, K-12 students across the country did not have
access to high-speed internet connectivity, or tablets or
computers in their homes.
And private philanthropy stepped up very quickly, within a
matter of weeks, to make sure that children affected by those
shutdowns, which took place very rapidly, had access to a
tablet or a computer and internet connectivity so that they
could resume their studies.
That was really something that made a difference during the
pandemic, and I think it speaks to philanthropy's flexibility
and ability to work in partnership with local governments,
because the philanthropists had to work with the school
districts, as well as the business sector that stepped forward.
This is a uniquely, as we said, a unique aspect of American
society. That is one example. We have also seen in the health
component where many companies, foundations, and individual
donors stepped up very quickly to provide PPE for health
workers, to provide and expand rapid testing, and in some cases
to actually fund research.
We saw that in California and in Seattle, in the Washington
area. Oregon is another good example. And then even here in my
home State of Indiana. Private donors worked very rapidly; that
would have taken longer for government to pass a bill to get
those funds, and the PPE in the hands of the health workers.
So I think this is an example where we see the strength of
philanthropy and the importance of the sector in the face of a
crisis.
Senator Hassan. Well thank you. And I also wanted to give
Mr. Crim an opportunity to answer the same question.
Mr. Crim, how in your experience are nonprofits filling
gaps in services during COVID-19?
Mr. Crim. Well, maybe not surprisingly I would echo many of
the same things that you just heard. I will not take up too
much time, but to say that what I have noticed is that the
speed with which a nonprofit, or a group of nonprofits can
rally around a problem is super important.
It is often the case that they cannot scale their solution
sufficiently. So we saw similar work going on in terms of
broadband access around distance learning. But we are still
quite certain that 50 percent of kids in our community, many of
our communities, did not have a reliable connection to their
school.
So I think to solve these problems we have to rely on the
speed and the nimbleness of nonprofits, and the scale and
capacity of government.
Senator Hassan. And that has been my experience in New
Hampshire, too. So thank you for that.
And then, Dr. Osili, I wanted to give you a chance to
expand a little bit on a topic that was just raised in our last
round. The testimony we have heard today underscores how
crucial it is that Congress assist nonprofits that are on the
front lines during COVID-19.
Although the Congressional response so far has ensured that
nonprofits have access to the same economic relief as
businesses, significantly more needs to be done to help these
nonprofits stay on firm financial footing. I would add, so that
they can continue to do the kind of work that both of you have
just described so well.
Several colleagues on this Committee, including Senator
Klobuchar, are leading important efforts to provide direct
financial assistance to struggling nonprofits. Given the
unfortunate delay in nonprofits getting access to the Federal
Reserve's Main Street loans, the need for this assistance is
all the more urgent.
Dr. Osili, between dramatic growth in need for nonprofit
services, and a significant decline in financial resources,
could you explain how the COVID-19 crisis is affecting
nonprofit operating budgets?
Dr. Osili. Thank you. We, as I mentioned earlier, conducted
a study early in the pandemic. So we know that this is a fast-
changing landscape. And with a national sample of nonprofits,
we found that 80 percent of them had encountered some sort of
disruption to their overall planning. Fifty percent had
canceled fundraising events that were a big part of their
projections. And as they looked ahead, some anticipated a
decline in their fundraising revenue, currently, but also in
the future.
So I think all of this data taken together suggests that
the shocks that our country has encountered have hit the
nonprofit sector as well. And as I mentioned, some have been
disproportionately impacted. I think there is not a one-size-
fits-all solution. When we talk about nonprofits, we have to
look by sector, and also regionally as well.
Senator Hassan. Well thank you. And, Mr. Chair, I see that
I am over time. Mr. Crim, my staff and I will follow up with
you, as well, just to make sure we get your input on that same
issue. Thank you.
Chairman Lee. Representative Herrera Beutler, you are up
next.
Representative Herrera Beutler. Alright, thank you. Can you
all hear me?
Chairman Lee. Yes, we hear and see you fine. Thank you.
Representative Herrera Beutler. Thank you. I had a sick kid
this morning, so I have been checking in and out of this, but
it is nice to be able to come in towards the end. And I
apologize if some of this has been covered, but for my benefit
these are things I have been talking about with nonprofits, and
not-for-profits here in Southwest Washington State and I wanted
to ask a few things.
You know, the last question. So obviously while businesses
have stepped up in amazing ways, and they have played roles
where traditional business or government could not step in, and
they were able to respond quickly, which is what we want and
need, which is why a lot of the relief available to Main
Street, available to nonprofits.
One of the questions that keeps coming up is: Do we feel,
or do you feel that we should be treating donations differently
from a policy standpoint based on the type of entity receiving
the funds? I know the devil is always in the details, but these
are the things we are being asked to figure out, and I would
love to hear your thoughts on that.
Dr. Osili. Thank you. And I am answering this question as a
Professor of Economics, as well as Philanthropic Studies at
Indiana University.
What to keep in mind about American philanthropy is that it
is really an expression of democracy. Several analysts and
commentators have noted American philanthropy starting with
Tocqueville, about the ability of Americans to form
associations, and the fact that they form these associations
across different sectors, different types of organizations, and
that plurality is one of the strengths of America's
philanthropic sector.
As we think about shifts in tax policy, I think that
creativity, innovation, and resilience that we have already
seen has actually been part of America--the fabric of America's
philanthropy.
So I'm not sure that we can have both. In other words,
encouraging that plurality, providing benefits that accrue to
different subsectors, does have benefit. At the same time, you
could also see some arguments that in this crisis there are
some organizations that are at the front lines of the
pandemic--health organizations, disaster relief--but then all
kind of nonprofits are involved in this crisis.
If you look at educational institutions, many of them are
having to grapple with new ways of providing their services.
Many religious congregations are standing up entire operations
around food insecurity or domestic violence.
So we do see that many organizations, many different types
of organizations, involved in pandemic relief, and the strength
of the sector has been in its plurality and expression of
democracy, you could say.
Representative Herrera Beutler. Mr. Crim, any comment?
Mr. Crim. I would agree with that observation. At this
point, from a personal level, one of the beautiful things about
philanthropy in the United States is the ability of someone to
express their values and their passions through their giving.
And I think that happens naturally, the way things are.
Representative Herrera Beutler. I think, you know, I was on
the phone with a local not-for-profit involved in the arts,
local theater and, you know, depending on the type of nonprofit
you are talking about, they were either, you know, pushed to
the forefront of our consciousness in our communities, or they
were, you know, kind of pushed to the back based on what is
happening.
You mentioned churches who are kind of doing wrap-around
services for frontline providers. Well, you know, there are
others who are I think have just as vital a role to play in our
communities, but obviously are not getting top of mind. And
trying to figure out how to protect and keep some of those
folks afloat in the middle of this has been a bit of a
challenge, at least in our communities.
And that just brings to mind another question that I have
had. I almost hesitate to bring it up because obviously we have
been talking about the vital role that not-for-profits play.
One of my first jobs was working for a nonprofit with regard to
young people, and I did development, and it is a thankless task
but you do it because of the cause. It is the most amazing
thing to be a part of.
But we do have some entities who are abusing their not-for-
profit status, who are laying off employees, right, despite
significant endowments in addition to tax-exempt status.
How can we support and encourage charitable giving while
ensuring that we are setting the stage to kind of call some of
those into accountability? It's not as fun of a question.
Dr. Osili. That is certainly a challenging set of
questions, and we see that across all sectors. I do not think
the nonprofit sector is unique in that respect. I think some of
the same standards and policies that have been applied in the
CARES Act for other types of entities could also be extended to
nonprofits. And, similarly, incentives to retain staff and
navigate the crisis could also be introduced.
So I do believe that the issue of perhaps fraud, or
accountability and transparency does cut across all sectors,
but particularly in the nonprofit sector trust is a really
important factor. That is the glue that holds the sector
together. And so as we think about incentives, keeping that
trust and accountability in mind, I think is important.
Representative Herrera Beutler. Thank you. And I see my
time is up, so I yield back. Thank you.
Chairman Lee. Thank you so much. We are now going to start
a second round. For any of you who would like to stay with us,
you are free to stay on. Feel free to drop off if you do not
have any interest in participating in a second round, but we
will go ahead and begin that now.
Mr. Crim, let us go back to you for a moment. I think all
Americans have been affected by the pandemic in some way or
another. But Americans who were disadvantaged economically and
otherwise prior to the pandemic are experiencing greater
hardship compared to those who are more educated, or have more
resources, or had more income prior to this issue surfacing.
What are some of the specific ways, Mr. Crim, that
charitable giving, and by extension charitable organizations,
have met the needs of low-income or less-educated Americans
during the pandemic?
Mr. Crim. Well I think what I have seen is that in much the
way I think Dr. Osili talked about, the research shows money in
a crisis flows to basic needs. It flows to the urgency that
people see. And we see that in our own experience, that
philanthropists and individual donors, and corporations, that
people rally when there is a need, and nonprofits provide a
vehicle to quickly get those resources to those with the
greatest needs--2-1-1, which is a national infrastructure
connecting people to the services that are available to them
statewide in Utah, and in most of the country, does a pretty
good job of in real time assessing what are the needs that
people are calling about, or searching for online.
I think there is more responsibility we all have, though,
to think about recovery in an inclusive way; to think about
creating structures, and systems, and filling gaps in the long
run that try to mitigate the problem that you just described so
well.
So that the next time there is a crisis, whether it is a
natural disaster or a health crisis, maybe we are a more
equitable society. Maybe people have a better capacity to
weather a storm. And so in our community, there is an overt
conversation going on about inclusive recovery, and how do we
create systems, whether they are education systems, or economic
systems, or health systems that think about the disadvantaged
and the inequity that existed before the pandemic, and try to
create something new going forward.
Chairman Lee. Thank you. And then on a related point, Mr.
Crim, we know that the pandemic has in many cases, and in
countless ways, increased the demands on churches, schools,
nonprofits, and other institutions of civil society. And we
know that, at the same time and for the same reasons, the same
underlying reasons, it is also reducing donations as people are
feeling more uncertain about their future and are less inclined
to give.
Do we know how much the pandemic may have affected
donations to charitable organizations?
Mr. Crim. I do not have data that is sector wide, or even
beyond our own organization. I can say anecdotally that, you
know, we have seen both a loss in donations, individual
donations, and overall planned revenue. We have seen unexpected
increases in some revenue directed towards pandemic relief. And
then we have seen, you know, some visionary philanthropist who
is really thinking, as I mentioned before, about inclusive
recovery. How do we change the system to make it more equitable
for kids, for example? Is there a way to tackle the broadband
issue that is not piece-by-piece in a family-by-family, but
that really thinks about the future of our economy and people's
ability to participate in that economy that starts with
equitable internet access, broadband access?
Chairman Lee. Do you have any idea of what types of
organizations might have been most affected by reductions in
charitable contributions? You say you have seen some revenue
loss, meaning donations overall I assume are down. Do not tell
me anything that is sensitive, but do you have any sense as to
who is getting hit the hardest in the charitable world?
Mr. Crim. My anecdotal sense, and I would defer to Dr.
Osili for hard data, is that it is organizations that are not
directly on the front lines of pandemic relief and/or really
small organizations that do not have the infrastructure to
sustain their fundraising efforts in a different kind of way.
Chairman Lee. Dr. Osili, what is your reaction to that
question? Do you have any sense as to what types of
organizations have been most affected by reductions in
charitable giving?
Dr. Osili. Yes. So we have some very strong evidence from
the Great Recession. During the Great Recession, we saw human
service organizations, charities, actually experience an
increase in their fundraising, in their charitable giving,
whereas other sectors, for example, arts and culture
organizations, in some cases environmental groups, actually saw
a decline.
So very similar to Mr. Crim's observations, organizations
that were serving basic needs at the front lines of this, in
this case it was an economic crisis, saw an increase in their
charitable giving, whereas organizations that were less
involved in responding to basic needs and emergencies saw a
decline.
Something, just a small piece of data that I shared
earlier, as I mentioned, 80 percent of the national sample that
we surveyed had already seen some disruption in their planning
for this year. And for many organizations, it was the
cancellation of fundraising events. And that was fairly
widespread, but tends to be concentrated in some sectors. And I
mentioned the arts, but other subsectors that rely heavily on
charitable events--walks, runs, all those types of fundraising
activities--that have been canceled.
Chairman Lee. Thank you. Vice Chairman Beyer, you are up to
bat next.
Vice Chairman Beyer. Mr. Chairman, thank you very much. Dr.
Osili, I cannot tell you how many Saturday nights back I have
now that all those fundraising events have been canceled on
Saturday nights.
I lived overseas for four years, and one of the great
surprises in Europe was that they do not have this tradition of
the nonprofits for the charitable giving that we do, you know,
that we are sort of raised with, the whole idea of raising the
barn, or all the community coming together to bring in the
crops. That just does not seem to exist over there.
And one of the things that I have enjoyed learning on this
Joint Economic Committee, with Chairman Lee's help, is the
incredible role of social capital in our American lives. I'm
constantly pushing my kids to be ever more involved in the
community. And, that we begin to think of measuring our own
wealth by virtue of the social capital that we have in the
community that we live in.
And at home I find that I am measuring the social capital
by the strength of the nonprofits, that the more robust they
are, the greater the sense of community and social capital that
we all have.
So I guess my question, both to Mr. Crim who has been doing
this for decades, and for Dr. Osili, how do we nurture this
commitment to nonprofits, and to building our social capital?
Mr. Crim. Well I will start by saying I think you mentioned
starting with your kids, engaging kids in volunteer work,
creating volunteer opportunities, bringing people together to
address challenges collectively, I think is one way to do that.
I think communities that try to build social capital not
only when there is a crisis, but that really look for ways to
overcome sometimes the inadvertent divisions that occur, and
sometimes the overt divisions that occur in communities, is
super important.
I am sure those of you who study this are well aware of the
different kinds of social capital, the bonding social capital
where we connect with people who look like us, and think like
us, and maybe are in our same income bracket. That is the type
of social capital that is relatively easy to create, but I do
not think that is what makes our country the strongest. What
makes our country the strongest I think is bridging social
capital. It is the social capital we build across differences,
and that allows us to come together and do hard things.
Vice Chairman Beyer. Thanks.
Dr. Osili.
Dr. Osili. I am glad you raised the point about
international differences. Here at the Lilly Family School we
have two large projects that look at differences across
countries in philanthropy. And certainly the sociocultural
fabric of our country has enabled the growth and the strength
of civil society.
But going forward, I think providing incentives that
encourage, as we talked about, charitable giving, and also
strengthen the sector, that infrastructure becomes very
important.
And at the household level, I would agree with Mr. Crim
that what we've also seen in the data is that families play a
very important role in transmitting generosity. Parents tend to
teach their children, in some cases grandparents are also
involved in establishing this tradition. And that goes for
giving, but also to volunteering.
We do see that volunteering has a twofold effect,
volunteering as a family, that increases not just the
children's volunteering but also their giving when they become
adults. So I think we need to look at all the different ways--
time, talent, treasure--and increasingly with the advent of
social media, testimony. Getting Americans to share their
stories about why they give, and the causes that matter the
most to them, and also be inspiring. And in this pandemic, I
think we have seen an explosion in the use of social media
around charitable giving.
Vice Chairman Beyer. Dr. Osili, one last question. In the
current crisis we have talked a lot about automatic stabilizers
for food stamps, for unemployment insurance. Have you thought
about any way to automatically use stabilizers for nonprofits
in times when people get in trouble, when the economy turns
down?
Dr. Osili. I think one way to do that is really having
strong anchors at the community level. And that can include, as
we have already seen, United Ways and community foundations,
but also national associations and state-level associations of
nonprofits can provide that type of support during times of
crisis.
We are seeing that happen in many communities around the
country with these community-level funds that we discussed.
Some states do have incentives for donations to community
foundations specifically, but really thinking about the
institutional fabric, or the infrastructure that so many
nonprofits lean on in times of crisis I think is important.
Vice Chairman Beyer. Thank you. I yield back. Thank you,
Mr. Chairman.
Chairman Lee. Representative Schweikert.
[No response.]
David, are you still there?
[No response.]
Okay, Representative Schweikert, if you're there, speak.
Speak up, or shoot me a text, or give me a call. Otherwise, I
think we are going to wrap up here in a moment.
I really want to thank our witnesses again for being here.
Dr. Osili and Mr. Crim, your testimony and your answers to our
questions have really been invaluable. And I am also grateful
to Senator Lankford and Senator Shaheen for their insight.
Should any Member of this Committee wish to submit
questions for the record, the hearing record will remain open
for three business days. For participants on WebEx, you will
hear the Senate Recording Studio announce that the public
lectern live statement has ended. Until that point, Members and
witnesses' microphones will still cause the video to shift to
them if you are left unmuted. So maybe you are still on. Just
be aware of that.
I also want to thank the staff of the Senate Recording
Studio, the Sargent-At-Arms for the Rules Committee, and the
Architect of the Capitol and the Capitol Police, and the Joint
Economic Committee staff, all of whom have made it possible for
us to hold this first-of-its-kind hybrid hearing of the Joint
Economic Committee.
The hearing now stands adjourned. Thank you.
[Whereupon, at 4:14 p.m., Tuesday, June 9, 2020, the
hearing of the U.S. Joint Economic Committee was adjourned.]
SUBMISSIONS FOR THE RECORD
Prepared Statement of Hon. Mike Lee, Chairman, Joint Economic Committee
Good afternoon, and thank you for joining us for this hearing of
the Joint Economic Committee.
Over the past few months, following the spread of the novel
coronavirus, millions of Americans have been robbed of health,
financial security, the certainty and normalcy of daily life, and even
of community and connection.
In response, our nation has come together, as we always have--
through government, of course, and also through the courage and
compassion of our voluntary civil society.
Nonprofits, churches, and other voluntary institutions have for
centuries played a uniquely important role in American life--helping to
provide for others' basic needs, ensuring the stability of community
institutions, and supplying goods such as education and the arts.
Key to this spirit is charitable giving. Without financial
donations, these organizations cannot undertake the good works that
they do--including providing the indirect benefits of personal
connectedness, reciprocity, and trust that are invaluable to community
thriving.
Unfortunately, there have been worrisome trends in charitable
giving over recent years.
As JEC staff research has found, while total American charitable
giving has increased in most years over the last half century, the
overall percentage of Americans giving has decreased--from 66 percent
in 2000 to 56 percent in 2014--with a particularly pronounced drop
among lower-income Americans.
Additionally, the share of individual giving out of total giving
has dropped over time, decreasing from 83 percent in 1978 to 68 percent
in 2018.
In other words, giving is now primarily from fewer, wealthier
people and organizations.
Why does this matter?
First, it denies communities the necessary, positive ``spillover''
effects that flow from individual contributions and widespread
altruism.
And second, the very causes being supported are likely to change as
a result of these trends. While higher-income Americans tend to give to
education and the arts, less affluent Americans tend to give towards
service and assistance to the poor. In fact, those making $100,000 or
less are responsible for 49% of all giving to this area of vital need.
One unintended contributor to this trend is the Federal tax code's
inequitable treatment of charitable giving. As a ``below-the-line''
deduction, only those who itemize--generally, tax filers toward the
upper end of the income scale--can currently claim the charitable
deduction. Lower-income families who don't itemize now receive no tax
benefit for their charitable contributions.
This is an unintended consequence of the longstanding, bipartisan
effort to raise the standard deduction, which provides tax relief to
lower- and middle-income filers. But it's an inequity just the same,
and an injustice to working families and the local charities who rely
on them.
While the CARES Act, passed earlier this year, did add an above-
the-line deduction of $300 for non-itemizers, much more could and--I
believe--should be done. I called this hearing to talk about how--
especially in this time of great hardship, when charitable giving is so
essential--Congress can better address this disparity.
In recent weeks, I have been part of a bipartisan working group to
develop legislation reforming this inequity. I am grateful that two
other Members of the group, Senators Lankford and Shaheen, could be
here to talk about it today. Especially in the wake of the COVID
emergency, leveraging charitable giving should be a top priority for
those of us tasked with reviving our economy.
In the coming months, those of us in the House and Senate are going
to expend a lot of energy trying to figure out which of the Federal
programs on which we have spent all these trillions of dollars have
worked . . . and which haven't. It's going to be a complicated, and at
times controversial, project for all of us.
With the nonprofit sector, however, the vetting work has already
been done for us. Charitable organizations only exist and attract
donations to the extent that they are already believed to succeed. They
can serve as the ``tip of the spear'' in our national COVID response
and help chart the course for government-financed relief at all levels.
Today's hearing will focus on just that, and we will hear not only
from Senators Lankford and Shaheen, but from two additional witnesses
with valuable perspectives on philanthropy. I look forward to hearing
the contributions of our panelists and colleagues on this important
topic.
Before we proceed, let me say a few words about how the hearing has
been modified from its usual format in light of the spread of the
coronavirus. The hearing room has been configured to maintain the
recommended 6-foot social distancing between Members and other
individuals in the room necessary to operate the hearing, which we have
kept to a minimum.
A number of Members and witnesses have chosen to use secure video
teleconference technology, which will allow them to participate
remotely. For those joining remotely, once you start speaking, there
will be a slight delay before you are displayed on screen. To minimize
background noise, we are asking those who are using the video
conference option to please click the mute button until it is their
turn to ask questions.
If there is a technology issue, we will move to the next Member
until it is resolved.
I would remind all Members and witnesses that the 5-minute timer
will be used. For those joining us remotely, you will notice a screen
labeled ``Timer'' that will show how much time is remaining.
I now recognize Vice Chair Beyer, for opening remarks.
__________
Prepared Statement of Hon. Donald Beyer Jr., Vice Chair, Joint Economic
Committee
Thank you Chairman Lee. Thank you to our witnesses Dr. Osili and
Mr. Crim for sharing your expertise and perspective with us here today.
And thank you Senators Shaheen and Lankford for joining the Committee
this afternoon.
I think everyone here agrees: charities are one of our nation's
precious resources.
They provide invaluable services and strengthen our communities.
Perhaps at no time in our history has this important role been so
visible as during this global pandemic and resulting economic crisis.
I volunteered at a food bank in my district recently--for as long
as I was there you could not see the end of the line--and they told me
that one of their biggest challenges is that they are no longer getting
the extra food from restaurants because restaurants are closed so they
are having to turn to their state and local governments to fund the
food they need to feed all of these people who do not have any income.
Throughout this crisis, America's charities have been frontline
responders, providing communities that have been critically impacted
with access to housing, emergency child care for first responders,
support for victims of domestic abuse, counseling, and other critical
services.
recent challenges
Unfortunately, at a time when we need nonprofits more than ever and
when more Americans are turning to them for support, they also are
facing serious economic challenges.
Nearly three-quarters of charities globally have seen a decline in
donations since the crisis began--half expect to absorb a hit of 20
percent.
They depend on a diverse set of resources. Foundations, businesses,
and individuals. But individual giving is key--making up nearly 70
percent of charitable contributions.
Since 2000, the share of households donating to nonprofits has
fallen from two-thirds to 53 percent in 2016. That translates to 20
million fewer households donating.
the effect of the 2017 republican tax cuts
Unfortunately, the 2017 Republican tax cuts, the ``Tax Cuts and
Jobs Act'' made things worse.
You are familiar with the broad contours of the story.
The law nearly doubled the standard deduction to $12,000 for single
taxpayers and for married couples filing separately, and to $24,000 for
married couples filing jointly.
It also capped the state and local tax deduction--SALT.
As a result, the law dramatically reduced incentives to itemize
deductions. And not surprisingly, the number of taxpayers who itemize
fell precipitously.
In 2017, before the law was enacted, 26 percent of households
itemized.
In 2018, after the law kicked in, the share plummeted to only 10
percent--substantially less than half of the percentage that had filed
the previous year. Less than half.
For the nonprofit world--that hurts. Badly.
Fewer itemizers means fewer givers. That result was widely
predicted even before the law was passed.
So it shouldn't have been a surprise to anyone that individual
donations fell in 2018.
Despite a strong economy, individual giving fell by more than 3
percent, after adjusting for inflation. As a percentage of GDP,
charitable contributions by individuals declined by 6 percent.
the pandemic makes things worse
Now, with the current crisis, contributions are likely falling
faster as charities confront both fewer donations and canceled
fundraising events.
This means less money will be available and spent on the necessary
services these organizations provide to our communities.
Already, 60 percent of charities have reduced services. A survey of
smaller nonprofits found that 13 percent had suspended all or most of
their operations.
macroeconomic effects
There are serious economic impacts as well.
In 2017, nonprofits employed more than 12 million people in the
United States--more than 10 percent of the private-sector workforce.
But as a result of the pandemic, nearly one-in-six nonprofits
around the world were forced to furlough employees. One-in-eight have
had to lay people off.
policy responses
We all agree that these are serious problems. The question is what
to do about it.
We'll hear today more about proposals to incentivize additional
charitable giving by expanding access to the charitable deduction
beyond the $300 universal deduction for this year included in the CARES
Act. Expanding the deduction further could help offset lost individual
contributions resulting from the TCJA.
I favor taking a broad look at a range of options available to
bolster the sector.
Supporting charities and the individuals who count on them for
critical services and jobs requires a comprehensive approach that
includes ensuring organizations can access the many supports in CARES
and other coronavirus relief legislation.
Congress intentionally made PPP loans available to nonprofits and
many have been able to utilize them to retain employees and sustain
operations.
Nonprofits are also benefiting from the Employee Retention Tax
Credit in the CARES Act. The HEROES Act would increase the tax credit
from 50 percent to 80 percent of qualifying wages and lift the wage
cap.
beyer charitable rollover bill
Another path is to tap the generosity of our senior citizens. I've
introduced a bill that would incent charitable giving by expanding the
IRA Charitable Rollover to allow people starting at age 65 to make tax-
free IRA rollovers to charities while providing a guaranteed income for
the senior citizen.
I know Senator Klobuchar has introduced legislation to provide
grants that would help nonprofits retain employees or hire those who
have recently become unemployed.
we need a sense of urgency
There are lots of smart ways to address these challenges.
What nonprofits need most is an injection of resources to get them
through this period. And they need it now.
Some in Congress feel no sense of urgency. But I hear every day
from people in my district, from nonprofits, big and small, that a
sense of urgency is exactly what's needed.
Thank you Chairman Lee for focusing attention on what we can do
right now to support charities and to help them weather this storm.
And again I'd like to thank our witnesses from inside and outside
Congress for sharing your perspectives today.
__________
Prepared Statement of Senator James Lankford
Chairman Lee, Vice Chair Beyer, Members of the Committee--I want to
thank you for holding this critically important hearing on ways we can
boost charitable giving during the middle of the COVID-19 pandemic.
This is an incredibly challenging time for individuals and families all
across our nation, and supporting members of our nonprofit community
will be essential to a speedy and full recovery.
Our churches, charities, and other nonprofits form a major pillar
in each of our communities. They help support our neighbors in need,
and lend a helping hand to those who are struggling. They provide a
vital access point to so many, whether it be a meal at your local soup
kitchen, groceries and supplies from a city food bank, or a warm coat
at a Main Street Goodwill. Housing/shelter, pro bono health care
services, job skills training . . . you name it. Our nonprofits deliver
an almost immeasurable range of services, and meet the needs of our
nation's most vulnerable every single day. It's this quiet dedication
and steadfast commitment to serving our neighbors and families in need
that weaves our safety net together. The safety net protects lives and
livelihoods, and works to prevent our struggling neighbors from
slipping through the cracks of society, while preserving human dignity
and worth.
Many of us have worked on the issue of charitable giving for a long
time. We've examined various ways to boost giving through the tax code,
and we've tried to remove regulatory burdens where we find them that
prevent our churches and charities from fulfilling their missions.
For years, many of our nonprofits have struggled to meet the needs
of their neighbors, and, unfortunately, the COVID-19 pandemic has only
exacerbated the situation further. With millions having lost their jobs
and livelihoods over the past weeks and months, we've heard from
thousands of nonprofits who have been hit exceptionally hard by the dip
in giving and fundraising. In many cases, they've been unable to make
their payrolls and make payments on their fixed monthly costs.
Initiatives like the Paycheck Protection Program were helpful, but we
can do more.
We must find creative ways to incentivize those who have the heart
and means to give, to give. Our country's nonprofits need their support
now more than ever.
That's why I've been working with five of my colleagues in the
Senate--including you Mr. Chairman--on a bipartisan way to boost giving
through the tax code. As most folks watching this hearing know, the
CARES Act included a new $300 above-the-line deduction that taxpayers
can claim for 2020 in addition to taking the standard deduction.
Although I advocated for a significantly higher amount--given the
financial pressures COVID has placed on our nonprofits--it was a
welcome policy addition, and I appreciated its inclusion. However, we
must go bigger if we are going to match the size of the need COVID has
brought upon us. If we don't, we risk creating a massive void in our
social safety net, meaning our most vulnerable will have critical needs
unmet during one of the most painful times in our nation's history. The
beauty and importance of what our churches and charities bring to
communities is underscored by the fact that they are not of the Federal
or state government, and thus they are not propped up by taxpayer
dollars. Rather, they are funded by the kindness and generosity of our
fellow citizens.
The approach we're offering is simple--let's build on the current
$300 deduction for cash gifts included in CARES, and increase the limit
to one-third of the standard deduction (that's $4,000 for individuals
or $8,000 for married filers). Let's also make it applicable to the
2019 tax year as well, so that those who gave last year can go back and
amend their 2019 returns to also take advantage. That was an idea from
my good friend and fellow panelist, Senator Shaheen, and one that we've
worked to include in the updated version.
This is a straightforward way to incentivize giving for taxpayers
who take the standard deduction. This would really help our middle- to
low-income taxpayers who want to give. This policy rewards that
generosity which ultimately benefits our churches and charities who
turn those gifts into met needs.
The challenge is clear--we need to support our nonprofits by
boosting giving. This is a great way to do that, and one that has
strong bipartisan support here in Congress. Moreover, we have
overwhelming support in the nonprofit community. We had over 6,000
nonprofits of all sizes and missions that became a part of our support
coalition during the debate on CARES, and they continue to help us
build momentum.
I want to give a special thanks to some of my colleagues who have
been real leaders in continuing to push this forward--Senators Shaheen,
Coons, Scott, Klobuchar, and certainly Chairman Lee. I'd also like to
thank our House-side partner, Congressman Walker, for his leadership
across the Capitol. We've worked on this issue together since 2017, and
the nonprofit sector has no better advocate in the House.
I sincerely thank the Committee for holding this important hearing,
and for allowing me the opportunity to speak. I look forward to working
with each of you to further enact policies that will lift up our
nation's nonprofits at a time when they are needed more than ever.
Thank you, Mr. Chairman.
__________
Prepared Statement of Senator Jeanne Shaheen
Chairman Lee, Vice Chairman Beyer, thank you for the opportunity to
share a few thoughts with you today on this very important subject.
New Hampshire has a historically dynamic and robust nonprofit
community, and charitable organizations provide critical services
throughout the Granite State.
From food banks to homeless shelters, arts organizations and faith-
based groups, these entities are part of the fabric of our society in
New Hampshire and around the country.
Particularly in New Hampshire, nonprofit organizations form part of
our social safety net to protect and support our citizens and
communities. For example:
Area Agencies in New Hampshire provide programs for
people with developmental disabilities and their families.
The New Hampshire Coalition against Domestic and Sexual
Violence, and the state's 13 crisis centers, provide critical services
for survivors of domestic and sexual violence.
And New Horizons helps homeless individuals and families
reach beyond the cycle of homelessness to lead healthy and successful
lives.
I have had multiple calls with these and other nonprofit groups in
my state to hear about the important work they are doing right now to
help lessen the impact of this pandemic.
However, many organizations in New Hampshire and around the country
are now struggling to fundraise due to their inability to conduct in-
person events, as well as the economic strain so many families are
experiencing.
According to a recent pulse survey conducted by the New Hampshire
Center for Nonprofits, 92 percent of responding nonprofits have
reported a drop in revenue by an average of 34 percent, while 45
percent of respondents have instituted layoffs.
At the same time, according to the same survey, 38 percent of
organizations, including 45 percent of human service organizations
reported an increase in demand for their services, and 44 percent of
all respondents have increased some operations to meet this surge in
demand.
Now more than ever, we should be doing everything we can to support
these organizations, and providing an incentive through the tax code is
a simple way for Congress to stand side-by-side with our nonprofits and
charitable organizations and faith-based groups during this challenging
time.
I'm very pleased to be working with a bipartisan group of Senators,
including Chairman Lee and Senator Lankford, as well as others, to
design a tax incentive that would allow a taxpayer to claim an above-
the-line deduction equal to up to 1/3 of the standard deduction, or
$8,000 for a married couple filing jointly, for charitable
contributions made in tax year 2020.
In addition, this legislation would include my proposal to allow a
deduction for charitable contributions made before the new tax filing
deadline of July 15, 2020, to be ``carried back'' to tax year 2019,
either through a current filing or, for those who have already filed
their 2019 returns, through an amended return.
Thank you again, Mr. Chairman, for inviting me to discuss the
legislation and I appreciate your partnership as we work to get this
bill across the threshold. As we all know, Congress must act now
because the need is great and the challenges that nonprofit and
charitable organizations are working to address are so acute.
__________
Prepared Statement of Bill Crim, President and CEO, United Way of Salt
Lake
Chairman Lee, Vice Chairman Beyer, Members of the Committee,
I deeply appreciate the opportunity to come before the committee to
talk about United Way of Salt Lake's work, our response to the COVID-19
crisis, and the role tax policy plays in driving private giving.
United Way of Salt Lake builds cross-sector partnerships that work
to solve our community's most complex social and economic problems.
Within these partnerships we hold ourselves accountable to results that
no single organization--or sector--can achieve alone. Together with
thousands of individual donors and volunteers--and with hundreds of
private, public, and social sector partners, we are working to make
sure that every child in our community has the opportunity to succeed
in school and in life. We do this by improving and expanding early
learning opportunities, strengthening literacy and math skills, and
supporting high school graduation and completion from postsecondary
education. Through 2-1-1 and our partnerships focused on the social
determinants of health, we are working to improve health outcomes by
changing the ways health systems interact with community-based
organizations and improving the ways that economically vulnerable
Utahns connect to the more than 10,000 services available in the
charitable and public sectors in Utah.
Our commitment to create lasting change and help all kids and
families succeed, regardless of their circumstances, holds especially
true during this time. As we continue to address the health and
economic impacts of the COVID-19 pandemic, and as we are all called to
address the urgent need for racial justice in our country, we know that
the role of nonprofits, and of charitable giving, is critical.
Over the past three months, hundreds of individual Utahns have
generously risen to the challenge of supporting our community. In
addition, key business partners like Goldman Sachs, Mark Miller, Zions
Bank, and Savage have contributed to our work. This generosity has
allowed us to respond to dramatic increases in contacts through 2-1-1,
to provide critical support to dozens of community partners meeting
essential basic needs, and to develop a comprehensive initiative to
address the dramatic learning loss experienced by so many students over
the past three months.
I am proud to be talking to you today from Utah, the most
charitable state in the United States--which is the most charitable
country in the world.
Reasons for giving are highly personal--but I can assure you from
firsthand experience that people give to charities for altruistic
reasons. Sometimes this selfless concern for others is driven by faith
or simply a desire to give back to the community in which they live.
Often, and in our case, it is because people believe that by working
together we can solve society's most complex problems.
But tax policy does influence people's behavior, from business
investment decisions to buying a home. This doesn't mean every person
is influenced by tax policy, but large numbers of people are.
Charitable giving is the most discretionary financial decision
someone can make. Good tax policy might be the nudge that someone needs
to make their first donation. Or it may prompt a long-time donor to
give a little more.
Consider, for example, a person who gives $500 per year to
charities. If they paid a 20% tax rate, that means they are paying $100
in taxes on that money they are giving away. Setting aside the
fundamental unfairness of taxing income that's being donated to help
others, those taxes may prompt a smaller donation from some people who
aren't in a position to give any more.
Conversely, if Congress were to relieve tens of millions of
Americans from taxes on income they donate, it's not hard to imagine
the positive impact on charitable giving.
I am not an economist or tax policy expert, but studies have
consistently found that good tax policy will drive more giving, that
includes increased giving by people who make small donations.
United Ways, basic needs charities, faith-based charities, and
disaster relief charities rely heavily on small donations from large
numbers of people. We raise about $15 million per year in Salt Lake
City. But our average individual donation is $229 per year. Those small
donations add up. Nationally, United Ways raise over $1 billion per
year from small donors who give on average $155 per year. (Note our
donor base is diverse, and we raise several billion more from corporate
partners and large donors.)
Of course, in my view the ideal Federal tax policy would be to
permanently relieve all taxpayers from paying taxes on income they
donate to charity. That could happen through an above the line
exclusion or a non-itemizer charitable deduction combined with the
existing deduction. Bills by Congressman Danny Davis (D-IL) or
Congressmen Chris Smith (R-NJ) and Henry Cuellar (D-TX) would do that.
We understand that that may not be viable at this moment in time.
But a temporary non-itemizer deduction could be instrumental in helping
charities help our communities and those impacted by crises facing our
country.
We understand Chairman Lee, Senator Klobuchar, and others are
supporting a temporary deduction modeled after Senator Lankford's and
Congressman Mark Walker's legislation. We think that legislation would
provide a much needed infusion of donations directly to the charities
that are leading the COVID-19 response and recovery efforts. The
recovery efforts by charities will go well beyond 2020, so the longer
this legislation is in effect, the better it will help us support our
communities and those who have been affected by COVID-19.
As I close, I want to note that several Members of this Committee
have supported and personally donated to their United Way (in at least
one case for decades) and others have played significant roles in
raising donations for their local United Ways. On behalf of United Way,
I want to extend our deepest thanks to each of you.
Mr. Chairman, I'm happy to answer any questions.
__________
Prepared Statement of Dr. Una Osili, Associate Dean for Research and
International Programs at the Indiana University Lilly Family School of
Philanthropy
Chairman Lee, Vice Chair Beyer, and other distinguished Members of
the Joint Economic Committee.
Thank you for the opportunity to testify today. I am the Associate
Dean for Research and International Programs at the Indiana University
Lilly Family School of Philanthropy--the world's first School dedicated
to the study and teaching of philanthropy. The School is in the
vanguard of philanthropy education, and research. I am also a Professor
of Economics and Philanthropic Studies.
The School's research initiatives have tracked crisis and disaster
giving since September 11, 2001.
My written testimony will focus on addressing three crucial
questions: 1) What are the current trends in charitable giving during
the COVID-19 pandemic 2) How should these trends be interpreted in
light of overall charitable giving patterns? 3) What are the policies
that can strengthen charitable giving by American households now and in
the future?
charitable giving during the covid-19 pandemic
For many American households, philanthropy is a core value.
Through good times, and during times of crisis and upheaval,
American philanthropy--which includes donors at all income levels and
all racial and ethnic backgrounds--has worked collaboratively to fill
gaps where governments or markets face limitations and provide capital
for innovation, and to meet basic needs.
Philanthropy defined ``as voluntary action for the public good'' is
a central way for Americans to contribute to civic and social life and
the vitality and strength of their communities. The philanthropic
sector role is evident in short-term emergencies as well as in
Americans' long-term commitment to religious congregations, food
pantries, homeless shelters, neighborhood associations, to the arts,
and to educational programs.
In 2018, Americans donated about $427.71 billion to charitable
organizations [1], of which about 68 percent came from living
individuals.
The COVID-19 pandemic has induced twin crises in communities across
the U.S. Americans of all backgrounds are grappling with unprecedented
health and economic shocks. Moreover, African-American and Latino
populations have been disproportionately impacted by the COVID-19
pandemic, exposing deep racial and structural inequities [2].
Four aspects of the philanthropic response to the COVID-19 pandemic
merit close attention.
First, we have witnessed tremendous generosity during the COVID-19
pandemic by American households of all backgrounds, not only the
immediate and generous monetary support to charitable organizations,
but also ``mutual aid'' to neighbors, friends, and community members.
To date, U.S. foundations and corporations have contributed over $11
billion to the novel coronavirus response, based on Candid's estimates
[3].
Research can provide critical insights for donor patterns and
better understand what we might be in store so we can strengthen
services and support recovery efforts ahead. Philanthropy has played an
important role during and following national and international crises.
From 9/11 to the disasters, such as Hurricane Harvey in 2017, we have
seen Americans of all ages, education, and income levels give
generously of their money, their goods, their time, and their talent,
as well as build networks during times of crisis.
In response to such crises, around 30 percent of U.S. households
made a disaster-related donation in 2017 and 2018, and the average
donation was about $300 [4]. The magnitude of a disaster was found in
our research to be the top factor encouraging Americans to contribute
to disaster aid efforts. Many Americans who donated after disasters did
so without reducing their giving to other charitable causes. Nearly 80
percent of households who donated to disaster-related activities in
2017 and 2018 did not change their giving to other causes, and 12
percent even increased their giving to other causes.
During the COVID-19 pandemic, philanthropy has continued to play a
critical role in addressing the immediate health impacts while
addressing the cascading effects of the crisis.
For 20 years, the School has tracked gifts of $1 million or more in
the United States through the Million Dollar List. In response to
COVID-19, there have been a significant number of contributions of $1
million or more made by individuals, including many donations by
celebrities and other wealthy individuals who have not previously
donated at the million-dollar level. To date, the largest publicly
announced donation is a pledge by Jack Dorsey, the CEO of Twitter and
Square, Inc. [5].
Initial evidence suggests that large gifts are fueling scientific
advances and serving as a catalyst for research in new areas in health,
and expanding health care capacity. Specifically, philanthropic support
has played a role in catalyzing innovation in developing health care
capacity, diagnostic testing, and funding vaccine research.
Second, during the crisis, new forms of philanthropy--such as
crowdfunding--have gained visibility. The crisis has inspired
innovation with the adoption of new fundraising and virtual engagement
technologies and demonstrating the role of individual donors in meeting
community challenges.
Crowdfunding campaigns, typically driven by small donations, have
expanded in their reach and impact. There are nearly 200 crowdfunding
campaigns in the United States on GoFundMe.com that have each raised
over $100,000. The largest--America's Food Fund--has raised over $26
million and focuses on addressing food insecurity during the pandemic.
Another significant crowdfunding campaign launched by the Center
for Disease Control (CDC) Foundation on Charidy.com has raised nearly
$50 million.
Numerous national and global fundraising campaigns have taken place
since the beginning of the pandemic. One of the largest, One World:
Together at Home, which took place on April 18, raised nearly $128
million [6], while over $503 million was donated online during
#GivingTuesdayNow on May 5 [7].
Third, in the wake of the COVID-19 pandemic, we have also seen
philanthropy as a unique collaborator, convener, and facilitator of
collective action in local communities.
A unique initiative led by Dr. Laurie Paarlberg, Endowed Chair in
Community Philanthropy at the Lilly Family School of Philanthropy, is
tracking philanthropy's response at the local level.
As of May 15, her Mapping Community Philanthropic Response to
COVID-19 project estimates that community funds in cities and towns
across America have raised more than $634 million and distributed at
least $376 million\1\ to financially vulnerable individuals and
nonprofits. As of May 15, the research team had identified 1020
organizations supporting COVID-19 funds, with 244 funds jointly
supported by United Way or community foundation. Many of these funds
have worked to address the critical needs created by the pandemic--
including food insecurity, mental health, and emergency financial
assistance.
---------------------------------------------------------------------------
\1\ Both numbers are an estimate and underreport the magnitude of
community philanthropy as only 60% of funds are currently publicly
reporting resource flows.
---------------------------------------------------------------------------
Finally, the COVID-19 pandemic has exposed harsh social and
economic disparities. Private funders and nonprofits are working to
address the needs of the most vulnerable who are most impacted by the
pandemic's economic fallout.
In Michigan, a collaboration of philanthropic organizations
(including the Kellogg Foundation) rapidly joined forces to supply
computer tablets with high-speed internet connectivity to Detroit
Public School students [8]. The $23 million fund, called Connected
Futures, addresses the digital divide for K-12 students. A national
fund, the Coronavirus Care Fund (CCF), provides emergency assistance
for qualifying domestic workers who are facing hardship, and over
100,000 people around the country have contributed to the fund [9].
Another national fund, the Families and Workers Fund, focuses on
workers and families who have been affected by job loss and school
shutdowns [10].
The initial philanthropic response to COVID-19 is unprecedented in
its speed, size, and scope--and many local food banks and human service
charities and nonprofits of all sizes have risen to the challenge.
Not all communities have a sustained capacity to raise much-needed
funds and respond to local needs. However, the economic and social
ripple effects of the pandemic are still unfolding. The need for
private philanthropy is rising, with many more people and communities
needing services and support when the ability of some donors to give is
challenged.
overall trends in charitable giving
Research has long established that charitable giving is linked with
national and regional economic trends. Several factors influence how
much Americans donate, including financial and economic conditions.
Before the Great Recession, the fraction of Americans who gave to
charitable causes was stable at about two-thirds of the population. In
2016 (the most recent year with available data), around 53 percent of
American households donated [11]. In general, donation participation
and amounts donated increase with education, wealth, and income [12-
14].
The Philanthropy Panel Study [15], a module of the Panel Study of
Income Dynamics [16], has tracked the share of American households who
donate to charity since 2000. Between 2000 and 2008, giving remained
steady (66.2 percent donated in 2000 and 65.4 donated in 2008). The
Great Recession (December 2007-June 2009) [17], in particular, exposed
how vulnerable household giving is to economic downturns. At the same
time, components of 21st-century life such as globalization,
demographic shifts, decreasing congregational affiliation and
attendance, and increasing use of technology continue to alter and
reshape future giving patterns.
In 2016, the average American donor contributed $2,763, or about
3.7 percent of income [11]. Participation rates and giving levels among
individuals with high education, wealth, and income have generally held
steady or increased [11]. However, among low- and middle-income
Americans, and Americans with less than a high school education
declines in participation rates in charitable giving are evident [11;
18] For now, this trend of ``dollars up, donors down'' has allowed
overall giving in the United States to continue to increase in most
years [1].
Today, low- and middle-income households represent a smaller share
of America's individual giving landscape with implications for the
strength and vibrancy of civil society.
tax policy and charitable giving
Beyond the impact of financial and economic conditions, one
important aspect of the giving landscape is the potential tax benefit
that U.S. households receive from their charitable contributions. Tax
policy can promote the growth of philanthropy and the development of a
thriving nonprofit sector.
The charitable deduction is one of the oldest tenets of the U.S.
tax code, dating to 1917. It effectively reduces the cost contributing
to qualified nonprofit organizations by an amount that depends on the
donor's marginal tax rate, subject to specific annual limits. It
affirms the value our society places on voluntary giving and the vital
role of philanthropic organizations in meeting individual and community
needs, and encourages the spirit of generosity that is an integral
component of American civic life.
Over time, U.S. Federal tax policy has become less progressive. It
lowered the tax burden on high-income households without providing the
same incentives for low- and middle-income households [19]. This has
the potential to reduce giving further by low- and middle-income
families.
When examining the impact of tax policies, policymakers have the
opportunity to consider how various policy options influence the level
of charitable giving dollars, the share of households that donate, and
the overall impact on tax revenues.
The Lilly Family School of Philanthropy recently analyzed the
impact of various policy options that would extend the non-itemizer
deduction. Expanding the non-itemizer deduction is estimated to
increase both participation rates in charitable giving and charitable
dollars raised. We projected that extending the non-itemizer deduction
could increase charitable giving dollars by up to $26.2 billion (an
increase of 7.7 percent), and increase the number of households who
donate by up to 7.3 million households (an increase of 8.2 percent) in
2021 [20]. The policy would reduce Treasury revenue by up to $21.6
billion (a decrease of 0.6 percent). Therefore, the plan would bring in
up to $4.6 billion more in charitable dollars than is lost in Treasury
revenue.
As the nation faces daunting and complex challenges, policy debates
have increasingly focused on strengthening the incentives for
charitable giving.
The importance of public policy that can support charitable giving
is critical. To meet the complex challenges of expanding community
needs triggered by COVID-19, we need to examine how individuals and
organizations across public, business, and nonprofit sectors can work
together effectively to address immediate and long-term challenges.
Expanding tax incentives for lower- and middle-income Americans can
be one vital step in fostering public involvement in this critical
effort.
Thank you for the opportunity to testify today. I would be happy to
respond to any questions you may have.
References:
1. Giving USA Foundation. (2019). Giving USA: The Annual Report
on Philanthropy for the year 2018. Retrieved from Chicago:
2. Noppert, G. A. (2020, April 9). COVID-19 is hitting black
and poor communities the hardest, underscoring fault lines in
access and care for those on the margins. The Conversation.
Retrieved from https://theconversation.com/covid-19-is-hitting-
black-and-poor-communities- the-hardest-underscoring-fault-
lines-in-access-and-care-for-those-on-margins-135615
3. Candid. (2020). Funding for coronavirus (COVID-19): Funding
summary. Retrieved from https://candid.org/explore-issues/
coronavirus
4. Indiana University Lilly Family School of Philanthropy,
Candid, & Center for Disaster Philanthropy. (2019). U.S.
Household Disaster Giving In 2017 and 2018. Retrieved from
http://hdl.handle.net/1805/19403
5. Dorsey, J. (2020). #startsmall tracker. Retrieved from
https://docs.google.com/spreadsheets/d/1-
eGxq2mMoEGwgSpNVL5j2sa6ToojZUZ- Zun8h2oBAR4/htmlview
6. Global Citizen. (2020). `One World: Together At Home' raised
almost $128 million in response to the COVID-19 crisis. Imact:
Health. Retrieved from https://www.globalcitizen.org/en/
content/one-world-together-at-home-impact/
7. Haynes, E. (2020, May 28). Donors gave $503 million online
on GivingTuesdayNow, early tally shows. The Chronicle of
Philanthropy. Retrieved from https://www.philanthropy.com/
article/Donors-Gave-503- Million/248881?utm--source=pt&utm--
medium=en&utm--source=Iterable&utm--medium=em ail&utm--
campaign=campaign--1253401&cid=pt&source=ams&sourceId=5171120
8. Ridella, A. (2020). Educating the youth: Investing $23
million in Detroit Public Schools. Retrieved from https://
empoweringmichigan.com/educating-the-youth-investing-23-
million- in-detroit-public-schools/
9. National Domestic Workers Alliance. (2020). Support for
Workers: Coronavirus Care Fund. Retrieved from https://
domesticworkers.org/coronavirus-care-fund
10. Candid. (2020). Foundations launch COVID-19 fund for low-
wage workers. Philanthropy News Digest. Retrieved from http://
philanthropynewsdigest.org/news/foundations-launch- covid-19-
fund-for-low-wage-workers
11. Clark, C., Han, X., & Osili, U. (2019). Changes to the
Giving Landscape. Retrieved from https://generosityforlife.org/
wp-content/uploads/2019/10/Changes-to-the-Giving- Landscape--
Vanguard-Charitable--2019-FINAL.pdf
12. Bekkers, R., & Wiepking, P. (2011). Who gives? A literature
review of predictors of charitable giving part one: religion,
education, age and socialisation. Voluntary Sector Review,
2(3), 337-365.
13. Wiepking, P., & Bekkers, R. (2012). Who gives? A literature
review of predictors of charitable giving. Part Two: Gender,
family composition and income. Voluntary Sector Review, 3(2),
217-245.
14. Wilhelm, M. O. (2006). New data on charitable giving in the
PSID. Economics Letters, 92(1), 26-31.
15. Philanthropy Panel Study [public use data]. (2019).
16. Panel Study of Income Dynamics [public use data]. (2019).
17. The National Bureau of Economic Research. (2010). U.S.
Business Cycle Expansions and Contractions. Retrieved from
https://www.nber.org/cycles/
18. Indiana University Lilly Family School of Philanthropy.
(2019). 16 Years of Charitable Giving Research. Retrieved from
https://generosityforlife.org/wp- content/uploads/2019/12/PPS-
Report-FINAL.pdf
19. Piketty, T. (2014). Capital in the twenty-first century:
Harvard University Press.
20. Indiana University Lilly Family School of Philanthropy.
(2019). Charitable giving and tax incentives: Estimating
changes in charitable dollars and number of donors resulting
from five policy proposals. Retrieved from http://
hdl.handle.net/1805/19515
__________
Response from Mr. Crim to Question for the Record Submitted by Senator
Klobuchar
The nonprofit sector employs one out of every three Americans, and
over 44 million Americans have lost their jobs since mid-March. An
infusion of Federal funding could help nonprofits keep their doors
open, scale their services, and provide opportunities for the newly
unemployed to return to work. I have introduced legislation to create a
major new grants program to help nonprofits meet needs that have
increased during the pandemic to retain their employees and hire new
ones.
How can connecting newly unemployed workers with
nonprofits who need new employees reduce poverty and help promote
economic recovery?
According to the Bureau of Labor Statistics, nonprofits in the U.S.
employ more than 12 million people (2017). Helping nonprofits retain
and hire employees during this pandemic is both a critical strategy for
promoting economic recovery--and is especially strategic in terms of
addressing the disproportional impact of the pandemic on Americans
living in poverty.
Nonprofits are on the front lines of our country's pandemic
response--providing support for basic needs like food and housing,
mobilizing volunteers, and supporting low-income students as schools
wrestle with the challenge of educating children in this environment.
In Utah, we've seen a steep increase in needs, while at the same
time many nonprofits are fighting to survive. According to a survey
conducted by the Utah Nonprofits Association ``nonprofits in Utah
report layoffs, lost revenue, canceled events, and curtailed services
in response to the COVID-19 pandemic. Reduced revenue from events,
combined with decreases in donations and the need for social distancing
have led 24% of nonprofits surveyed by UNA to temporarily suspend
services--creating gaps in the social fabric as the neediest among
society lose access to housing, food, and family support.
Nearly two thirds (61%) of nonprofits told UNA that in response to
social distancing, they had slowed, temporarily suspended, or decreased
services--even as the demand for their services increased. Fifty-two
nonprofits in Utah have canceled 1,493 events--eliminating $11,795,501
in revenue. Another $4,091,941 was spent to restructure events and move
them online. In a March UNA survey of nonprofits, 68% of respondents
believed that the COVID-19 would negatively impact finances. It is
clear from these numbers, that these predictions were accurate. The
decline in financial security may also be more rapid than anticipated.
In the March survey, 41% of nonprofits reported cash reserves equal to
or greater than six months of expenses. Six weeks later, only 32% of
those surveyed reported that same level of financial security.
Nonprofits have responded to the increased financial pressure by
seeking new sources of funding and looking for partnerships with
businesses and other nonprofits. Over half (52%) of nonprofits have
identified new revenue streams--but only 32% have actually secured new
funding.
Nonprofit sector job losses in response to the pandemic are
sobering. In the UNA survey, 14 employers reported laying off 102 full-
time employees and 185 part-time staff members. Layoffs will continue;
those surveyed anticipated furloughing another 18 full-time staff
members and 68 part-time employees. According to the U.S. Bureau of
Labor and Statistics, nonprofits employ 6.7% (78,235) of Utah's
workforce. Applying these numbers to Utah's over 10,000 nonprofit
organizations indicate that the organizations who serve our most needy
are, or could be in need themselves.''
Nationally, the picture is similar. The National Council of
Nonprofits estimates that ``1.6 million nonprofit jobs have been lost
through June (data source, page 14 [Johns Hopkins Center for Civil
Society Studies 2020 Nonprofit Employment Report]). It will take
several years to determine how many nonprofits have folded, and
nonprofits are in grave danger of having their budgets impacted now
more than ever. Beyond the initial wave from COVID-19, we are bracing
for another financial challenge as state budgets shift as they
individually respond to this economic crisis. Nonprofits receive a
third of their revenue from states and should that revenue stream
constrict, nonprofits will be left without critical resources to do
their work.''
Beyond addressing emergency needs, nonprofits in many communities
are leading the dialogue around building an inclusive and more
equitable recovery. It is in these community conversations where
Americans from all parties and all sectors can come together and really
solve problems. For one of the best descriptions of how this occurs,
please see the following article by David Brooks.
In summary--nonprofits in Utah, and throughout the country are
playing a critical role in helping our Nation respond to the pandemic
and create a more equitable and inclusive future--in both cases
strengthening and building the social capital in communities to heal
and be more resilient in times of crisis. The legislation introduced by
Senator Klobuchar would be a powerful and in many places necessary tool
for continuing this work. In addition to the essential resources
provided, it would be helpful in the long-term to build in more robust
and efficient data reporting for the nonprofit sector (currently The
Johns Hopkins Center for Civil Society Studies independently gathers
nonprofit employment data. As the third largest employer in the United
States, it would be ideal to streamline the collection and reporting of
nonprofit job-related data at the Federal level).
Opinion A Really Good Thing Happening in America--The New York Times
Sunday, December 16, 2018
2:57 PM
Clipped from: https://www.nytimes.com/2018/10/08/opinion/
collective-impact-community-civic-architecture.html
A strategy for community problem-solving does an extraordinary job
at restoring our social fabric.
Not long ago, in Spartanburg, S.C., I visited the offices of
something called the Spartanburg Academic Movement (SAM). The walls
were lined with charts measuring things like kindergarten readiness,
third-grade reading scores and postsecondary enrollment.
Around the table was just about anybody in town who might touch a
child's life. There were school superintendents and principals, but
there were also the heads of the Chamber of Commerce and the local
United Way, the police chief, a former mayor and the newspaper editor.
The people at SAM track everything they can measure about
Spartanburg's young people from cradle to career. They gather everybody
who might have any influence upon this data--parents, religious
leaders, doctors, nutrition experts, etc.
And then together, as a communitywide system, they ask questions:
Where are children falling off track? Why? What assets do we have in
our system that can be applied to this problem? How can we work
together to apply those assets?
There are a lot of things I love about this approach.
First, it understands that life is longitudinal. Sometimes social
policies are distorted by the tyranny of randomized controlled
experiments. Everybody is looking for the one magic intervention that
will have a measurable effect.
But life isn't like that. Our actual lives are influenced by
millions of events that interact in mysterious ways. And when life is
going well it's because dozens of influences are flowing together and
reinforcing one another. SAM tries to harness those dozens of
influences.
Second, SAM treats the whole person. ``The disease of modern
character is specialization,'' Wendell Berry once wrote. Sometimes
schools treat students as brains on a stick who come to be filled with
skills and information.
But children don't leave behind their emotions, their diet, their
traumas, their safety fears, their dental problems and so on when they
get to school. If you're going to help kids, you have to help the whole
kid all at once.
Third, and maybe most important, SAM embodies a new civic
architecture, which has become known as the ``collective impact''
approach. Americans feel alienated from and distrustful toward most
structures of authority these days, but this is one they can have faith
in.
SAM organizes the community of Spartanburg around a common project.
Then it creates an informal authority structure that transcends public-
sector/private-sector lines, that rallies cops and churches, the grass
roots and the grass tops. Members put data in the center and use it as
a tool not for competition but for collaboration. Like the best social
service organizations, it is high on empathy and high on engineering.
It is local, participatory and comprehensive.
SAM is not a lone case. Spartanburg is one of 70 communities around
the country that use what is called the StriveTogether method.
StriveTogether began in Cincinnati just over a decade ago. A few
leaders were trying to improve education in the city and thinking of
starting another program. But a Procter & Gamble executive observed,
``We're program-rich, but system-poor.'' In other words, Cincinnati had
plenty of programs. What it lacked was an effective system to
coordinate them.
A methodology was born: organize around the data, focus on the
assets of the community, not the deficits; realize there is no one
silver-bullet solution; create a ``backbone organization'' (like SAM)
that can bring all the players together; coordinate decision-making and
action; share accountability.
At one point the folks in Cincinnati noticed that their students
were not coming prepared for kindergarten. The data suggested that the
private pre-K programs were performing better than the public ones. So
the public school system allocated some of its money to support other,
private programs, making Cincinnati one of the first American cities to
offer near-universal preschool. That's a community working as one.
Collective impact structures got their name in 2011, when John
Kania and Mark Kramer wrote an influential essay for the Stanford
Social Innovation Review in which they cited StriveTogether and
provided the philosophical and theoretical basis for this kind of
approach.
Such structures are now being used to address homelessness, hunger,
river cleanup and many other social ills. Collective impact approaches
have had their critics over the years, in part for putting too much
emphasis on local elites and not enough on regular parents (which is
fair).
But a recent study led by Sarah Stachowiak and Jewlya Lynn of 25
collective impact initiatives found that these approaches do work, at
least most of the time. StriveTogether, which is now led by Jennifer
Blatz, is thriving. It's just received a significant financial infusion
from Connie and Steve Ballmer, of the Ballmer Group.
Frankly, I don't need studies about outcomes to believe that these
collective impact approaches are exciting and potentially
revolutionary. Trust is built and the social fabric is repaired when
people form local relationships around shared tasks.
Building working relationships across a community is an
intrinsically good thing. You do enough intrinsically good things and
lives will be improved in ways you can never plan or predict. This is
where our national renewal will come from.
__________
Response from Mr. Crim to Question for the Record Submitted by Senator
Hassan
The COVID-19 pandemic has simultaneously caused a dramatic growth
in the need for nonprofits' services and a significant decline in their
financial resources. While the Congressional response so far has
ensured that nonprofits have access to the same economic relief as
businesses, significantly more needs to be done to help these
nonprofits stay on firm financial footing. Could you comment on how the
COVID-19 crisis has affected nonprofits' financial standing?
In Utah, we've seen a steep increase in needs, while at the same
time many nonprofits are fighting to survive. According to a survey
conducted by the Utah Nonprofits Association ``nonprofits in Utah
report layoffs, lost revenue, canceled events, and curtailed services
in response to the COVID-19 pandemic. Reduced revenue from events,
combined with decreases in donations and the need for social distancing
have led 24% of nonprofits surveyed by UNA to temporarily suspend
services--creating gaps in the social fabric as the neediest among
society lose access to housing, food, and family support.
Nearly two thirds (61%) of nonprofits told UNA that in response to
social distancing, they had slowed, temporarily suspended, or decreased
services--even as the demand for their services increased. Fifty-two
nonprofits in Utah have canceled 1,493 events--eliminating $11,795,501
in revenue. Another $4,091,941 was spent to restructure events and move
them online. In a March UNA survey of nonprofits, 68% of respondents
believed that the COVID-19 would negatively impact finances. It is
clear from these numbers, that these predictions were accurate. The
decline in financial security may also be more rapid than anticipated.
In the March survey, 41% of nonprofits reported cash reserves equal to
or greater than six months of expenses. Six weeks later, only 32% of
those surveyed reported that same level of financial security.
Nonprofits have responded to the increased financial pressure by
seeking new sources of funding and looking for partnerships with
businesses and other nonprofits. Over half (52%) of nonprofits have
identified new revenue streams--but only 32% have actually secured new
funding.
Nonprofit sector job losses in response to the pandemic are
sobering. In the UNA survey, 14 employers reported laying off 102 full-
time employees and 185 part-time staff members. Layoffs will continue;
those surveyed anticipated furloughing another 18 full-time staff
members and 68 part-time employees. According to the U.S. Bureau of
Labor and Statistics, nonprofits employ 6.7% (78,235) of Utah's
workforce. Applying these numbers to Utah's over 10,000 nonprofit
organizations indicate that the organizations who serve our most needy
are, or could be in need themselves.''
Nationally, the picture is similar. The National Council of
Nonprofits estimates that ``1.6 million nonprofit jobs have been lost
through June. (data source, page 14 [Johns Hopkins Center for Civil
Society Studies 2020 Nonprofit Employment Report]). It will take
several years to determine how many nonprofits have folded, and
nonprofits are in grave danger of having their budgets impacted now
more than ever. Beyond the initial wave from COVID-19, we are bracing
for another financial challenge as state budgets shift as they
individually respond to this economic crisis. Nonprofits receive a
third of their revenue from states and should that revenue stream
constrict, nonprofits will be left without critical resources to do
their work.''
__________
Response from Dr. Osili to Question for the Record Submitted by Senator
Klobuchar
Research shows that wealthier Americans have contributed an ever-
increasing proportion of total charitable giving in recent years.
Meanwhile, many young Americans in their twenties and early thirties
have thus far chosen not to engage in charitable giving.
How could instituting a substantial universal deduction
for charitable giving encourage younger Americans to develop a habit of
charitable giving that will encourage continued giving as these men and
women advance in their careers?
Before the COVID-19 crisis, our research finds a majority of
Americans give to nonprofit organizations at some time. However, the
number of Americans who give in any single year declined by more than
ten percentage points from 2000 to 2016. The overall rate of Americans
who give declined from 66.22% of Americans in 2000 to 53.94% of
Americans in 2016. Volunteering has also fallen during this period.
Also, that decline is concentrated among younger adults--a worrying
sign about the future trends in giving.
A universal deduction for charitable giving provides tax
recognition of every American's gifts, both those who itemize and those
who do not.
Charitable giving tends to be habit-forming--when an individual
makes a charitable donation, that individual is more likely to continue
to give and to give more over time. We have also documented that
households that itemize have seen a far smaller decline in their
participation in charitable giving over time. A universal deduction
would be more likely to benefit younger people (who tend to be
nonitemizers). It can boost lifetime charitable involvement while
providing a potential opportunity to bolster participation in
charitable giving.
__________
Response from Dr. Osili to Question for the Record Submitted by
Representative Schweikert
To what extent is indirect, social media-driven giving unaccounted
for in the data of charitable giving?
Social media giving including crowdfunding is becoming an
increasingly important tool, especially for online fundraising. Giving
USA only takes into account crowdfunding donations that go to 501(c) 3
organizations. It does not include crowdfunding that represents
informal transfers between individuals (or person-to person transfers)
in its estimates.
While we have data on social media giving that is directed toward a
501c(3) charitable organization, through tax data reported by
charities, we have less information about giving to a tax-deductible
organization--giving to a business, a 501c(4), an individual. In
general, Giving USA only measures formal U.S. philanthropy, i.e.,
giving directed to tax-deductible charitable organizations.