Care Act 2003 Update
CARE Act of 2003 Update

Congress is once again wrestling with the Charities Aid, Recovery and Empowerment (CARE) Act of 2003. The Senate of 107th Congress was unable to pass a bill due to failure to obtain support from key Senators to limit floor amendments and/or place the legislation on the Senate's unanimous consent calendar.

This year, the House passed H.R. 7 and the Senate passed S. 476. However, OMBWatch's OMBWatcher newsletter reports that the legislation is likely to become stalled in conference committee over differences between the two versions and the apparent decision of some Senators to make points regarding the handling of other, unrelated legislation.

The original legislation in 2001 included tax incentives for charitable giving, including: 1) the ability to itemize charitable deductions for non-itemizing individuals; 2) the ability to “rollover” IRA assets for charitable purposes without tax penalty; and 3) increasing the deductibility allowance for corporate philanthropy. It also included controversial aspects of President Bush's “charitable choice” “faith-based initiative” designed in part to make government grants and contracts available to both faith-based organizations and secular organizations. The “faith-based” provisions of the 2001-2002 bills were omitted from the 2003 legislation.

The nonprofit sector lobbies that worked so hard in support of CARE last year are now split in their support, and the grassroots lobbying efforts of 2001-2002 inspired by organizations like the National Committee on Planned Giving (NCPG), the Council on Foundations, the Association of Fundraising Professionals (AFP), and Independent Sector are absent from this year's debate.

One important reason for this is a provision in the 2003 House legislation that would have the effect of raising the percentage of assets a private foundation would be required to pay out in grants and services each year. Private foundations are required to pay out 5% of assets to avoid taxation. The question comes on whether to change the current law including overhead expenses such as staff and trustees' fees in the 5%, so that private foundations would have to disburse 5% over and above overhead and salary expenses.

Some foundations and their associations are in opposition, believing this will endanger the ability of foundations to conserve capital and sustain themselves in perpetuity as their founders intended. Supporters believe that vast sums of capital are “locked up” in foundation assets -- assets for which donors have already received tax deductions, and which could be used to address present societal needs. They argue that the increases are incremental and should not necessarily harm private foundation sustainability.

For more on this issue, check out the following resources:
NCPG Fact Page and Call to Action

AFP Fact Page and Call to Action

Charitable Giving Bills Headed to Conference Committee -- 9/22/2003

Passage of CARE Act Remains Uncertain -- 10/20/2003

Comparison of House and Senate legislation -- 5/19/2003