38
III
39 provide servjces and raise contributions as well as the use of philanthropic funds for employment in the charitable sector.
Burton A. Weisbrod and Stephen H. Long, "The Size of the Voluntary Nonprofit Sector:
Concepts and Measures" (1975), depicting the size of the voluntary nonprofit sector in terms of output and revenue from various sources.
3. For studies relating to the various philanthropic fields of interest, see:
Robert J. Blendon, "The Changing Role of Private Philanthropy in Health Affairs" (1975), reviewing past and present philanthropic activities in the areas of health and medical affairs and how the public sector's contribution has changed.
Blair T. Bower, "The Role of Private Philanthrophy in Relation to Environment/Pollution"
(1975), exploring recent philanthropic activities in areas of environmental concern and comparisons of public and private efforts in this area.
Earl F. Cheit and Theodore E. Lobman, HI, "Private Philanthropy and Higher Education:
History, Current Impact, and Public Policy Considerations" (1975), detailing the nine principal ways in which private philanthropy serves higher education as well as the importance of philanthropy to higher education in the future.
Bice CJemow, ed., "The Anatomy of Giving: Five American Cities" (1975), reporting on the results of organized visits to five American cities — Atlanta, Cleveland, Des Moines, San Francisco, and Hartford - and examines the anatomy of giving as represented by perceptions of various people involved in philanthropy in these cities.
Wilbur J. Cohen, "Some Aspects of Evolving Social Policy in Relation to Private Philanthropy" (1975), exploring the continuing and changing role of private philanthropy, particularly with respect to large foundations, in an age when government is assuming a greater number of the charitable functions once reserved to the private sector in the social services field.
Donald A. Erickson, "Philanthropy, Public Needs, and Nonpublic Schools" (1974), characterizing the public purposes of the nonpublic school, the decline in enrollments and number of nonpublic schools in the past 10 years.
Caryl P. Haskins, "The Role of Private Philanthropy and Public Support of Science in the United States" (1975), observing the varying characteristics and requirements, as well as roles of scientific activity and what goals we hope to achieve in supporting science.
Caroline Hightower, "A Report on the Arts" (1975), reporting on the growth and needs of the arts in the United States for financial support.
Hans H. Jenny and Mary Ann Allan, "Philanthropy in Higher Education: Its Magnitude, Its Nature, and Its Influence on College and University Finance" (1975), examining the dependence of colleges and universities upon philanthropic support and assessing proposals concerning the future of philanthropic endeavors.
Janet Koch and Thomas W. Richards, "The Role of Philanthropy in the Environmental Field: Preservation of Natural Lands and Historic Properties" (1975), discussing the merits of private as opposed to federal funding of the acquisition and protection of land and historical properties.
Robert L. Lamborn, Cary Potter, and Al H. Senske, "The Nonpubiic School and Private Philanthropy" (1974), surveying dimensions of nonpublic elementary and secondary education in the United States, the public purposes of nonpublic schools, and the dependence of the nonpublic schools on philanthropic support.
National Center for Voluntary Action, "A Report on Voluntary Activities and Leadership Opinion" (1975), surveying voluntarism at the local level.
United Way of America, "A Study of the Quantity of Volunteer Activity of United Way and Its Member Agencies" (1974), describing the magnitude of volunteer hours of United Way community service activity during 1973 in the fields of health, welfare, informal education, recreation and leisure, and contrasting these hours with the amount of paid hours for work by professionals in these fields.
Joseph L. Vigilante and Ruth Kantrow, "The Voluntary Social Agency Experiments, Innovates, Demonstrates, and Influences Public Social Policy: The Community Service Society of New York 1930-1970" (1974), reviewing the activities of one large metropolitan voluntary agency, the Community Service Society of New York.
40
Institute of Public Affairs, Inc., "A Philanthropic Profile of Four Cities: Atlanta, Cleveland, Des Moines, and Hartford," (1975), surveying the role of private philanthropy in meeting human needs in the cities of Atlanta, Cleveland, Des Moines, and Hartford.
A.M. Wiggins, Jr., and Bert W. Hunt, "Tax Policy Relating to Environmental Activities and Public Interest Litigation" (1975), examining the tax treatment of environmental activities and public interest litigation.
El'en Winston, "Some Aspects of Private Philanthropy in Relation to Social Welfare" (1975), explaining the increasing proportion of public funding of social welfare services and the necessity for private social agencies having a variety of funding sources so that they do not become largely dependent on federal funds.
4. For the year 1975, taxpayers were not required to append to Form 1040 any detailed information concerning charitable contributions made in cash for which the taxpayer has receipts or cancelled checks, other than the total amount of such contribution made. See Form 1040, Schedule A (1975).
5. See p. 15 et seq., infra.
6. Michael J. Boskin and Martin S. Feldstein, "Effects of the Charitable Deduction on Contributions By Low-Income and Middle-Income Households: Evidence From the National Survey of Philanthropy" (1975), analyzing the philanthropic activity of low-and middle-income households and the effects of inducements on their charitable giving pattern.
Martin S. Feldstein, "Estimating Separate Price Elasticities By Income Class" (1975), indicating the extent to which different income classes are affected by the deduction and the effect of the deduction on the giving patterns to various types of donee organizations.
Martin S. Feldstein and CharlesClotfelter,"Tax Incentives and Charitable Contributions in the United States: A Microeconometric Analysis" (1975), discussing the effects of the income tax treatment of deductions for charitable contributions as an inducement to giving.
7. Edmund C. Bennett, "Treatment of Volunteer Services and Related Expenses Under the Internal Revenue Code" (1975), commenting on the treatment of voluntary services and related expenses indicating that volunteer services would not be deductible but that expenses associated with them would be.
Gerard M. Brannon and James Strnad, "Alternative Approaches to Encouraging Philanthropic Activities" (1975), discussing a system of federal grants to the beneficiaries of philanthropy including programs such as tuition subsidy approach.
George F: Break, "Charitable Contributions Under the Federal Individual Income Tax:
Alternative Policy Options" (1975), depicting the effect upon charitable giving of alternative options under the federal individual income tax system, including the effect of elimination of the charitable contribution deduction and the substitution of a matching grant system.
Paul R. McDaniel, "Study of Federal Matching Grants For Charitable Contributions" (1975), exploring the effect upon giving in aggregate and giving by income classes of a program of federal matching grants for contributions.
Morgan, Dye, and Hybels, "Results From Two National Surveys of Philanthropic Activity,"
note 2, supra.
Aaron Wildavsky and David Good, "A Tax By Any Other Name: The Donor-Directed Automatic Percentage Contribution Bonus, A Budget Alternative For Financing Governmental Support of Charity" (1975), evaluating four alternatives for providing governmental support for charity — the existing tax write-off, a tax credit, a sliding matching grant and a percentage contribution bonus — in terms of their effects on the donors and recipients of charitable giving.
8. Dissents were filed disagreeing with the amplified, on the grounds that the tax credits would be preferable.
9. Gross income is used instead of adjusted gross income in order to simplify the computation.
Items such as exempt municipal bond interest could be added to gross income for purposes of computing these limits.
10. In lieu of a phase-in utilizing tables, consideration might be given to (1) a modified phase-in with larger steps (e.g., rounded to the nearest 5%) over a larger segment of gross income; (2) an
41
immediate change in the applicable percentage when gross income exceeds $15,000 or $30,000, with no phase-in; or (3) a formula reduction, e.g. a deduction equal to 200 percent of contributions, reduced by some percentage of income in excess of $15,000.
11. A stricter standard of proof may be required in the case of the amplified deduction in light of the opportunities for abuse. Experience with the provision may, of course, generate administrative mechanisms which would obviate this.
12. See p. 35 et seq., infra.
13. Although questions can be raised as to the. appropriateness of allowing the extended and amplified deductions for gifts to private foundations, circumstances can be envisioned which might make the allowance appropriate. For example, a museum may be classified as a private operating foundation but nevertheless may depend upon contributions as a source of support.
14. For discussions of the manner in which the charitable deduction functions, see:
Theodore A. Kurz and Barbara P. Robinson, "Explanation and Analysis of Split-Interest Gifts to Charity" (1974), describing the methods of making, and the tax treatment of, gifts in trust with charitable beneficiaries including the changes in those methods made by the Tax Reform Act of 1969.
John A. Wallace and Robert W. Fisher, "The Charitable Deduction Under Section 170 of the Internal Revenue Code" (1975), analyzing the operation of section 170 and describing its complexities.
15. "Foregone" revenues resulting from the charitable contributions were estimated at $4.62 billion out of $246.9 billion in revenues received during fiscal year 1974. *Office of Management and Budget, Special Analyses of the Budget of the United States Government for Fiscal Year 1976 (Washington, D.C.: Government Printing Office, 1975), Table F-1, p. 108.
16. See Public Law 94-455 (October 4, 1976).
17. See new Code section 57(b)(1), which was added by §301 (c) of the Tax Reform Act of 1976. "For purposes of paragraph (1) of subsection (a) [which adds to items of tax preference an amount equal to the 'excess itemized deductions' for the taxable year]the amount of excess itemized deductions for any taxable year is the amount by which the sum of the deductions for the taxable year other than —
(A) deductions allowable in arriving at adjusted gross income, (B) the standard deduction provided by section 141,
(C) the deduction for personal exemptions provided by section 151,
(D) the deduction for medical, dental, etc. expenses provided by section 213, and
(E) the deduction for casualty losses described in section 165(e)(3), exceeds 60 percent (but does not exceed 100 percent) of the taxpayer's adjusted gross income for the taxable year."
exceeds 70 percent (but does not exceed 100 percent) of the taxpayer's adjusted gross income for the taxable year."
18. In his statement before the Senate Finance Committee on March 17, 1976, Secretary William E. Simon expressed the Administration view respecting the minimum tax and the charitable contribution deduction as follows:
" . . .we have carefully structured our present MTI proposal to avoid completely all impact on charitable contributions. Under our proposal, charitable contributions, no matter how large, will not be an item of tax preference."
19. See the House-passed version of The Tax Reform Act of 1969 [H.R. 13270, 91st Cong., 1st Sess. §302 (1969)] which proposed that the deduction normally allowed for allocable expenses (e.g., charitable contributions, medical expenses, taxes, etc.) be disallowed to the extent of the lesser of (1) the sum of such expenses multiplied by a fraction the numerator of which is the allowable tax preference and the denominator of which is the sum of allowable tax preferences plus modified adjusted gross income or (2) the allowable tax preferences. "Allowable tax
42
preferences" were defined as the excess over $10,000 of the total of items of tax preference, and "modified adjusted gross income" as taxable income plus allocable expenses.
20. For a discussion of the history of the development of the charitable deduction for gifts .of appreciated property, see:
Harry K. Mansfield and Ronald L. Groves, "Legal Aspects of Charitable Contributions of Appreciated Property to Public Charities" (1975), characterizing the workings of the present allowance as well as the merits and problems of the allowance as it currently exists.
For consideration of an alternative to the present treatment of appreciated property, see:
Gerard M. Brannon, "A Pro-Charity Substitute For the Present Tax Law Treatment of Appreciated Property Contributed to Charity" (1975), suggesting an augmented deduction for gifts of appreciated property as a means of eliminating the benefits which the author finds are today concentrated among the very wealthy.
21. For a discussion of the need for-such a standard see: Mansfield and Groves, "Legal Aspects of Charitable Contributions of Appreciated Property to Public Charities," note 20, supra.
22. If more than one gift of appreciated property were involved, all such gifts would be aggregated for the purposes of this calculation.
23. The taxpayer's marginal tax bracket used in this computation would equal the tax rate applicable (ignoring the minimum tax on preference income) to the taxpayer's last $1 of income computed without regard to any reduction attributable to the charitable contribution.
24. The constructive sale computation would encompass both the capital gains and any additional tax generated by the minimum tax on preference income.
25. This assumes that the taxpayer was taxed at the maximum capital gains rate and was subject to tax on preference income.
26. For example, assume a taxpayer with a $20,000 contribution base contributes $2,000 in cash and $8,000 in appreciated property to a public charity and $2,000 to a private foundation.
The taxpayer receives a charitable contribution deduction of $10,000 with a $2,000 carryover since the appreciated property gift exceeded the 30% limit of section 170(b) (1) (D) by that amount However, the $2,000 gift to the private foundation is not deductible and cannot be carried over, even though it is within the 20% maximum limit of section 170(b) (1) (B) (i).
27. For empirical data respecting the effect of the charitable contribution deduction on bequests, see:
Michael J. Boskin, "Estate Taxation and Charitable Bequests" (1975), describing the
"efficiency" of the charitable bequests deduction by applying formulas to the top 7% of estates.
Martin S. Feldstein, "Charitable Bequests, Estate Taxation, and Intergenerational Wealth Transfers" (1975), assessing the strength of the incentive provided by the charitable bequest deduction.
28. For discussions of the merits of the present charitable bequest deduction and of various alternatives to the present approach, see:
John Holt Myers, "Estate Tax Deduction For Charitable Benefits: Proposed Limitations"
(1975), supporting a continuation of the present law.
Emil M. Sunley, Jr., "Dimensions of Charitable Giving Reported on Federal Estate, Gift, and Fiduciary Tax Returns" (1975), describing the amount of charitable gifts reported on federal, state and fiduciary returns for the period 1954 through 1970.
Richard E. Wagner, "Death, Taxes and Charitable Bequests: A Survey of Issues and Options" (1975), examining the tax treatment of charitable bequests and suggesting that charitable bequests are sacrifices of personal consumption justifying the charitable bequest deduction.
David Westfall, "Proposed Limitations on the Estate Tax Deduction For Charitable Transfers" (1974), recommending that a floor and ceiling be added to the present charitable bequest deduction.
29. Adam Yarmolinsky, "Philanthropic Activity in International Affairs" (1975), describing the role and range of private philanthropy in private foreign aid and international affairs, education,
43 and research, as well as the levels of private and public spending in these areas and the rationale for continued private spending.
30. See Rev. Rul. 69-80, 1969-1 C.B. 65, allowing a deduction for a contribution by a domestic commercial corporation to a domestic charitable corporation, even though the contribution is used in a foreign country.
31. R. Palmer Baker, Jr., and j . Edward Shillingburg, "Corporate Charitable Contributions"
(1975), describing the present tax rules regarding both direct corporate giving and giving through company foundations, the latter of which is increasingly being used by corporations.
James F. Harris and Anne Klepper, "Corporate Philanthropic Public Service Activities"
(1975), surveying the present scope of corporate philanthropic activity, the effect of tax changes upon such activity, and the opinions of company officials on the motivations prompting corporate gifts of money and time.
C. Lowell Harriss, "Corporate Giving: Rationale, Issues, and Opportunities" (1975), examining means of expanding corporate philanthropic activity through further tax incentives and greater social responsibility on the part of corporations.
Milton Moskowitz, "Corporate Charitable Contributions and Corporate Social Responsi- bility" (1975), discussing corporate philanthropic activity as an acknowledgement by corporate donors of social demands being imposed upon them.
Thomas Vasquez, "Corporate Giving Measurements" (1975), examining the amounts of corporate giving both in terms of the size of the corporate donor and the percentage of pretax incomes.
32. Harris and Klepper, "Corporate Philanthropic Public Service Activities," note 31, supra. This broader base of information would encompass data respecting: (1) the mechanisms involved in determining the manner in which a corporation calculates its total giving level; (2) the allocation of the total amount committed to charity among different categories of recipients; (3) the priorities and criteria it applied in selecting specific grantees; and (4) the circumstances which obtain in causing a business entity to commit significant resources to charity in light of responsibilities to distribute earnings to shareholders. See also pp. 20-21 et seq., infra.
33. For example, the amount of the deduction could be limited to a percentage of value in excess of cost with clear rules confining the term value to the wholesale price which the company would itself realize.
34. Arthur Andersen & Co., "Overview of Governmental Support and Financial Regulation of Philanthropic Organizations in Selected Nations" (1975), providing an overview of governmental support and financial regulation of philanthropic organizations in Australia, Canada, England, France, West Germany, Italy, Japan, and Sweden.
R.M. Bird and M.W. Bucovetsky, "Taxation and Philanthropy in Canada" (1975), exploring the taxation of philanthropy in Canada and asserting that recently enacted tax measures have resulted in a decrease in charitable bequests.
Arthur Jack Grimes, "The Fund-Raising Percent as a Quantitative Standard For Regulation of Public Charities, With Particular Emphasis on Voluntary Health and Welfare Organizations"
(1975), discussing fund-raising costs as a percent of total receipts of health and welfare organiza- tions to provide an indicator of agency efficiency in raising money.
Accounting Advisory Committee (Malvern J. Gross, Jr., R. Kirk Batzer, Delford W. Edens, and Timothy J. Racek), " A Study of the Inadequacies of Present Financial Reporting by Philanthropic Organizations" (1974), reporting the need f o r a uniform system of accounting for nonprofit corporations through development of a uniform set of accounting principles to be used by all nonprofit organizations and presenting a proposed standard accounting report.
Peter G. Meek, "Self-Regulation in Private Philanthropy" (1974), analyzing past experiences in self-regulation by nonprofit organizations and suggesting that self-regulation has proved an ineffective system for enforcing standards necessary to insure the appropriate use of tax-exempt funds.
Donald R. Spuehler, "The System For Regulation and Assistance of Charity in England and Wales With Recommendations as to Establishment of a National Commission on Philanthropy in the United States" (1975), describing procedures employed by the Charity Commission in the United Kingdom and regulatory practices in that country.
44
35. Special consideration might be given to the disclosure to be required from a corporation making all or most of its contributions to a "company foundation," provided a workable definition of this term can be formulated.
36. See Treas. Regs. §1.6033-2(g) (4) (1969).
37. Cf. Proposed Treas. Regs. §1.6033-2(g) (5), 41 Fed. Reg. 6073 (1976).
38. "Each report should include at least the following information: name, address, purpose and founding date of the organization; names of trustees or directors or other governing persons;
names and titles of paid officers; description of program and priorities, explanation of the criteria that are taken into account in accepting or rejecting requests for funds, products or services and, if the organization is a foundation, a list of grants made in the previous year, their recipients, purposes and amounts; financial information, including: a statement of income, i n c l u d i n g sources and amounts; a statement of expenditures including administrative expenditures; a balance sheet; a list of investments held; and opinion of independent auditors."
Commission on Private Philanthropy and Public Needs, Giving in America (1975), p. 165.
39. Conceivably, regulations under this provision could establish, with the cooperation of accounting profession, principles of uniformity in a context consistent with general accounting principles.
40. That an operating charity also maintains an endowment in direct support of its operations would not normally cause it to fall within the annual meeting rule, even though funds are expended for grants to individuals (for example, scholarships granted to students by a college).
On the other hand, an operating charity which maintains a grant-making program independent of its operating program would be included, but only with respect to its grant-making program.
41. Compare the penalties under section 6652(d) for failure of an exempt organization to file returns.
42. Council on Foundations, Inc., "Private Foundations and the 1969 Tax Reform Act"
(1975), describing, inter alia, the burdens upon beneficiaries of the 4% tax and suggesting action for foundations to guard against future punitive legislation and for government to accord foundations more equal treatment with other charities.
National Planning Association, "Foundations and the Federal Government: A Look at Spending Patterns," note 2, supra.
43. See David Ginsburg, Lee R. Marks, and Ronald P. Wertheim, "Federal Oversight of Private Philanthropy" (1975), considers the present relationships between the federal government and private philanthropy and concludes that the Internal Revenue Service should continue to determine what organizations are "charitable" and to audit such organizations.
44. To reach full effectiveness, this procedure should be sufficiently comprehensive and current so that organizations seeking exempt status will have knowledge, in advance, of guidelines with which they must comply. Further, the public would have the information respecting the manner in which the Service's ideological neutrality is applied in actual practice.
45. When it becomes possible to revise information on the return (or through separate survey), the Service could determine expenditures which benefit charities but which may be otherwise listed under some expense category such as public relations or promotion.
46. This information could be made available with respect to unincorporated businesses, as well, even though, in the case of partnerships, a contribution is actually deducted on the returns of the individual partners.
47. Council on Foundations, Inc., "Private Foundations and the 1969 Tax Reform Act," op.
c i t , describing the inhibiting effect of the expenditure responsibility provisions upon the making of grants by private foundations.
48. Thomas R. Asher, "Public Needs, Public Policy, and Philanthropy: An Analysis of the Basic Issues and Their Treatment by the Commission on Private Philanthropy and Public Needs,"
(1975), contending that the Commission has failed to address the question of how public needs are and should be defined, ranked in importance, and met by the public and private sectors.