Testimony for the record on behalf of the Council on Foundations submitted to the United States Senate Committee on Finance on “Examining Charitable Giving and Trends in the Nonprofit Sector”

Thursday, March 17, 2022
Washington, DC

Thank you for the opportunity to provide written testimony for the record on the subject of “Examining Charitable Giving and Trends in the Nonprofit Sector.” We commend the committee for holding this hearing during a pivotal moment for nonprofits and their philanthropic partners.

The Council on Foundations is a nonprofit leadership organization of more than 800 grantmaking foundations and corporations. We work to build trust in philanthropy, expand pathways to giving, engage broader perspectives, and help create solutions that will lead to a better future for all.

A robust charitable sector is a core component of American society. Each year, philanthropy invests tens of billions of dollars in community organizations throughout the United States and around the world to advance the greater good. In 2020, charitable giving by individuals totaled more than $324 billion—the highest amount to date—and giving by foundations reached a high of $88.5 billion, according to a GivingUSA report. In fact, total giving has grown consistently over the last forty years, and the World Giving Index recently namedthe U.S. the most generous country of the past decade. Our culture of giving has resulted in vital investments that support nonprofit organizations, fuel innovation, fund critical research and projects, supply needed resources when disasters strike, and much more.

Unfortunately, multiple crises are facing our communities here at home and abroad, and demand for support and vital services has reached record levels. At the same time, nonprofits are struggling to keep their doors open because of workforce shortages, declines in volunteers, funding shortfalls, and the rising costs of goods.

When crisis hits, philanthropy and our charitable partners have demonstrated an unwavering commitment to swiftly act to serve our communities. But our support alone isn’t enough.Foundations and their nonprofit partners need the government to enact policies that will enable them to provide the resources and support our communities so desperately need. Specifically, we encourage Congress to:

Expand and extend charitable giving incentives.

The Council urges Congress to strengthen giving tools available to all Americans. Additional incentives for charitable giving will continue to make a difference as nonprofits respond to the needs in their communities. COVID relief legislation included a temporary $300 charitable deduction for nonitemizers, which likely contributed to the 28 percent increase in gifts of $300 on December 31, 2020 reported by the Fundraising Effectiveness Project. With the share of non-wealthy Americans who donate shrinking, a universal charitable deduction is an incentive for all taxpayers, and not just the small number who itemize, to give. The Universal Giving Pandemic Response and Recovery Act (S.618) would expand the charitable deduction for those who do not itemize—approximately 90 percent of taxpayers—up to one-third the standard deduction. It would also recognize gifts to donor-advised funds (DAFs).

In addition, as part of COVID relief legislation, Congress increased the adjusted gross income (AGI) limitation for individual cash gifts to public charities as well as the amount of charitable donations corporations can deduct. Unfortunately, gifts to DAFs and supporting organizations were excluded, limiting donors’ flexibility just as charities need additional funding to keep their operations going. The Council urges Congress to extend the increased limits for individuals and corporations to ensure that all charitable vehicles, especially those that have long provided vital and flexible resources to their communities, are available to donors at this critical time.

The fallout from the pandemic is far from over, and as additional crises emerge, Congress must continue to incentivize giving to the charitable organizations doing the on-the-ground work of community, economic, and public health recovery. These incentives have the potential to unlock billions of dollars to flow to nonprofits and into communities that desperately need them.

Protect the long-term flexibility of donor-advised funds (DAFs).

DAFs are a crucial tool for the community foundations doing the day-to-day work of rebuilding. In times of crisis, DAFs have historically been the most resilient giving tool, continuing to make grants at relatively high levels even when recessions deflate other forms of charity. This flexibility has allowed community foundations and other DAF sponsors to step up in response to the COVID-19 crisis, with DAF grants to nonprofits surpassing $30 billion for the first time in 2020.

In addition, donor-advised funds play a vital role in democratizing philanthropy. They empower middle-income Americans to take control of their charitable giving, allowing them to plan out their philanthropy for the medium- and long-term while still giving sponsoring organizations the flexibility to respond to the emerging needs of their communities.

The pandemic has highlighted the ability of sponsoring organizations such as community foundations to respond to local crises as they emerge while continuing to address long-term needs. The Community Foundation for the Ohio Valley (CFOV), for example, has maintained its support for programs in rural Appalachia while also responding to new challenges related to the pandemic. In addition to continuing support for local nonprofits, providing personal protective equipment for volunteers and workers at children’s and homeless shelters, and raising and deploying $300,000 to help with COVID-related food insecurity and mental health issues, CFOV employed an emergency fund to support after school programs and gaps in broadband. Simultaneously, CFOV developed partnerships with local organizations to assess long-term community needs, including education, healthcare, and living-wage jobs.

In addition, we encourage Congress to ensure distributions from an individual retirement account (IRA) to donor-advised funds qualify as part of the IRA charitable rollover. Current law prohibits donors from contributing to a DAF even though DAFs are a flexible and efficient philanthropic tool to support community philanthropy. This provision would provide donors and grantmakers with an important option to maximize the value of IRA charitable donations and allow them to support communities in need with financial resources.

We urge Congress to support the continued flexibility of DAFs to address the emerging and long-term needs of communities across the country. We recommend that Congress seek to expand the overall philanthropic giving environment with the aim of delivering more to those in need—without damaging the charitable vehicles that allowed for record-breaking giving in 2020, just as Americans needed it most.

Strengthen support for the nonprofit sector.

Nonprofits are the backbone of our communities, and too many are struggling to find and maintain qualified staff, fulfill their missions, and meet the ongoing needs of their communities.

Foundations have stepped up to support nonprofit organizations. Some, such as the San Diego Foundation, created funds specifically for pandemic relief. The San Diego Foundation’s COVID-19 Community Response Fund, developed in partnership with local leaders from government, business, nonprofits, and schools, granted $64 million in 2020, including 387 grants to over 250 nonprofit organizations working on the frontlines of the pandemic. But foundations cannot do this important work alone. Congress has a duty to support nonprofits and ensure they can not only survive the pandemic but also thrive in its aftermath.

The Council strongly encourages Congress to prioritize legislation that will strengthen the nonprofit sector and provide resources to organizations and communities, including passing theWork Opportunities and Resources to Keep Nonprofit Organizations Well (WORK NOW) Act (S.740). The WORK NOW Act would provide nonprofits with the funds they need to continue to serve their communities in a time of uncertainty and upheaval.

The Council also urges Congress to pass the Legacy IRA Act (S.243). This legislation would enable retiring Americans to make tax-exempt contributions from their IRA accounts to charities through life-income plans. Empowering middle-income seniors with an additional option for their philanthropy would help encourage needed charitable dollars to flow to community organizations.

Last, the Council strongly supports the Workforce Development through Post-Graduation Scholarships Act (S.2191). This legislation would allow foundations to help address the student debt crisis head-on by ensuring post-graduation scholarships are treated the same as traditional scholarships. These scholarships would provide foundations with an additional tool to incentivize graduates to return to regions in need of their skills, creating the opportunity for business growth in regions that have been impacted by economic upheaval. This legislation is a win for graduates and for struggling communities.

The United States is the most charitable country in the world, and the nonprofit and charitable sectors play an essential role in our culture. We ask that Congress work to ensure this critical role is not eroded by the COVID-19 pandemic, disasters natural or manmade, or the associated economic crises by deploying every tool available to ensure nonprofit organizations can continue to respond to local needs.

Thank you again for this opportunity to include testimony on the record. We appreciate this committee’s leadership and its focus on the struggles that charitable organizations and the nonprofit sector face as economic and social upheaval continue. The Council on Foundations can provide any of the material cited in this testimony and stands ready to work with you to rebuild in the wake of crisis.

Respectfully submitted,

Kathleen Enright

Kathleen P. Enright

President and CEO

Council on Foundations