Two leading nonprofit advocacy groups are stepping up their lobbying fight to persuade Congress to keep the estate tax. But charities are far from united on the issue. Some don’t want to clash with Republicans on a tax-change priority they have pursued doggedly for decades, while others don’t want to offend their rich donors by seeking to preserve the tax, say some nonprofit observers.
The lobbying offensive comes as the Trump White House and lawmakers aim to pass a comprehensive tax overhaul for the first time since 1986.
The National Committee for Responsive Philanthropy and its partner in the effort, Independent Sector, say that without the estate tax, donors who might have earmarked their riches for charity to lessen their heirs’ tax burden might instead decide to leave more of their assets to children and grandchildren.
“If the estate tax is repealed, it will have a hugely detrimental impact on charitable giving by the extremely wealthy,” said Aaron Dorfman, president of the National Committee for Responsive Philanthropy, one of the two groups leading the lobbying on the issue. “It’s especially going to hit transformative gifts of $1 million or more. We’re going to see fewer foundations created, and universities and hospitals will take a hit.”
Still, not all charity advocates see the repeal of the estate tax as a priority. Catholic Relief Services, which received $32 million in bequests in its most recent fiscal year, according to preliminary calculations, doesn’t have a position on the estate tax. Nor does the Jewish Federations of North America or United Way Worldwide.
In general, United Way looks to take positions on federal policy proposals that have bipartisan support, said Steve Taylor, a senior vice president. Part of the group’s policy-advocacy guidance for local United Ways is to “mind your elbows” and avoid taking public stances on issues where other United Ways might have an opposing view.
Jeff Hamond, a lobbyist who is working with Mr. Dorfman on the estate-tax push, says some organizations fear rattling wealthy contributors who would benefit financially if the levy were eliminated.
“You’ve got big national charities that of course don’t want the estate tax to be repealed,” he said. “But they’ve been very cautious about being public about it because they don’t want to offend their donors.”
Deploying Data
The National Committee for Responsive Philanthropy plans to spend more than $150,000 battling a repeal. In addition to holding more than two dozen meetings on Capitol Hill, the group has written opinion pieces and letters to the editor in several publications, including South Dakota’s The Argus Leader, The Baltimore Sun, and the Huffington Post.
What’s more, the National Committee for Responsive Philanthropy and Independent Sector have circulated to members of Congress state-specific data on major gifts in each lawmakers’ state and suggested those donations might not have happened if the estate tax hadn’t been in effect. The data, which they drew from The Chronicle’s reporting, shows, for instance, that since 2005 Colorado nonprofits have received $925 million in gifts of more than $1 million. Art institutions received $192 million of those large gifts, and more than half a billion dollars was steered toward colleges and universities.
The ultimate goal of the lobbying effort is to persuade Republican lawmakers that ditching a repeal of the estate tax could result in more support and make it easier to pass a broad tax bill.
“We’re not expecting any of them will no longer favor repeal of the estate tax,” Mr. Dorfman said. “But they’re becoming more aware of how a repeal would affect their state. If repeal is now third or fourth on their list of priorities for what must be in a final bill, after learning about its negative effects on giving, it will drop to fifth or sixth.”
The Very Rich
The power of the estate tax can be seen in the biggest gifts made to philanthropic causes. In the Philanthropy 50 rankings showing the most generous donors of 2015, for example, conservative businessman Richard Mellon Scaife’s $759 million bequest topped list. The No. 2 donor was John Santikos, head of a large Texas movie-theater chain who gave an estimated $605 million from his estate to the San Antonio Area Foundation.
Under current law, estates with values exceeding $5.45 million for individuals and $11 million for couples are taxed at a top rate of 40 percent. Only heirs of the very rich — about 0.2 percent of the more than 2.6 million Americans who die each year — are subject to the tax, according to a 2015 report from Congress’s Joint Committee on Taxation.
An analysis by the Center on Budget and Policy Priorities, a Washington think tank, found that just 50 small businesses and small farm estates will face the estate tax in 2017.
While the law as it exists touches very few taxpayers, doing away with it would cost the U.S. Treasury and nonprofits, research shows, particularly universities, hospitals, and other recipients of million-dollar-plus donations.
A 2004 Congressional Budget Office study found that eliminating the estate tax could result in a decline of charitable contributions of up to 12 percent. Meanwhile, getting rid of the estate tax would cost the U.S. Treasury nearly $270 billion in lost revenue over 10 years.
Not Priority No. 1
For some charitable groups, there are more pressing issues than the estate levy in the tax debate. The Council on Foundations, for instance, favors keeping the estate tax intact but has not emphasized it in its lobbying efforts, according to Hadar Susskind, the council’s vice president for government relations. The council and others are focused on a proposal that would let all taxpayers deduct charitable gifts from their taxable income, even if they don’t itemize their tax returns
A nine-page framework presented by Republicans last month calls for doubling the standard deduction people can take if they don’t itemize their taxes. The measure is designed to provide tax relief to middle-income Americans.
Doubling the standard deduction holds serious consequences for giving, according to some research. It would reduce charitable giving by an estimated $13.1 billion, according to a study by researchers at Indiana’s Lilly Family School of Philanthropy, because far fewer people would make charitable gifts to lower their tax burden.
An Opening
Rather than engage in a “scorched earth” effort to oppose parts of the GOP plan that seem to have deep support, like the estate-tax repeal and the higher standard deduction, Mr. Susskind said the Council on Foundations aims to find ways to mitigate the impact of those items on charitable giving.
By pushing a “universal deduction,” Mr. Susskind and other philanthropy advocates say, Congress can maintain a tax incentive for giving and still pass a tax bill that doubles the standard deduction.
Even Independent Sector, which commissioned the Indiana University study and has joined Mr. Dorfman’s group in meetings with lawmakers to discuss the estate tax, remains primarily focused on the charitable deduction.
The National Committee for Responsive Philanthropy is footing the entire bill for the estate-tax lobbying, it says. Independent Sector favors keeping the estate tax in place but views the lobbying effort as a way to open up discussion on a range of charity tax issues, including the universal deduction, according to Allison Grayson, director of policy development at Independent Sector.
“We want to make sure policy makers were actually understanding the full impact of tax-reform decisions across all income levels,” she said.
Staying on the Sidelines
The United Philanthropy Forum, a network of regional grantmaking associations, has joined the National Committee for Responsive Philanthropy and Independent Sector in distributing major-gift data supplied by the National Committee for Responsive Philanthropy to its members. But David Biemesderfer, the group’s president, said the forum has no position on the estate tax and is hoping simply to highlight the potential negative impact of all of the possible tax changes for the group’s members.
The Alliance for Charitable Reform also does not have a position on the estate tax. Brian Walsh, executive director of the Faith and Giving Coalition, a member of the alliance, said that his group only takes a position on issues where there is a strong consensus among members. He has not polled members on the estate tax, he said, but suspects that opinions on the issue vary.
The Caboose
In recent weeks, two GOP senators have indicated they are not wed to an estate-tax repeal. Those numbers could grow, Mr. Hamond says, by highlighting how the tax could spur major gifts in each district, For the most part, GOP lawmakers are driven by a desire to lower corporate tax rates and won’t let the estate tax get in the way if that goal is in sight, Mr. Hamond said.
“The estate tax is more the caboose than the engine,” he said.
Correction: An earlier version of this story stated incorrectly that United Philanthropy Forum representatives joined leaders from the National Committee for Responsive Philanthropy and Independent Sector in meeting with members of Congress to discuss the estate tax. United Philanthropy Forum representatives have met independently with lawmakers but are not lobbying directly on the estate tax. The story has also been updated to clarify that United Philanthropy Forum is a network of regional grantmaking associations.
