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AFP Testifies Before Congress on Charitable Giving Act

(May 30, 2006) At a hearing of the Small Business Subcommittee on Rural Enterprises, Agriculture and Technology, AFP called on Congress to help charities by passing charitable giving incentives.

Paulette V. Maehara, CFRE, CAE, president and CEO of AFP, represented the association on Thursday, May 25, before the subcommittee chairman, Rep. Sam Graves (R-Mo.), who has expressed interest in many of the charitable giving provisions in H.R. 3908, the Charitable Giving Act. The legislation contains numerous tax incentives designed to encourage charitable giving, including the IRA (Individual Retirement Account) rollover provision that AFP has supported for many years.

During her comments, Maehara stressed that new charitable giving incentives are required because the services of charities are in increasing demand. “This demand is in addition to the services charities provided in response to natural disasters such as the Gulf Coast Hurricanes of 2005,” Maehara said. “If, as the National Oceanic and Atmospheric Administration predicts, 2006 is another active hurricane season, many charities in those areas will be pushed to the limit.”

Maehara also noted that charities can do more, but only if they are given the tools to do so. “The extra funding that these proposals would create would be instrumental in ensuring that charities can respond to needs in a timely and effective manner.”

IRA Rollover

Most of Maehara’s comments focused on the IRA rollover, which is estimated to generate billions of dollars in additional giving if it was signed into law.

Currently, an individual taxpayer may withdraw funds from an IRA without penalty after age 59½ , and must commence withdrawals by the April 1 following the year in which he or she attains age 70½ . IRA withdrawals are fully taxable as income to the individual in the years they occur. A donor who withdraws IRA funds for transfer to a charity will be subject to tax on the entire withdrawal, offset to varying extents by the charitable deduction.

If the IRA rollover proposal were enacted, a donor who had reached the defined age would be allowed to exclude any IRA funds withdrawn and transferred to a charity from his or her income when filing a tax return for that year. The donor would be eligible to claim a charitable deduction only to the extent that the IRA was funded with after-tax dollars.

It is estimated that there are more than $2.7 trillion in retirement funds such as IRAs.

H.R. 3908 was introduced by Rep. Roy Blunt (R-Mo.), who also testified at the hearing in support of the bill, and currently has 88 cosponsors.

“We’re very pleased with Chairman Graves’ interest in the bill, and of course we’re grateful for the leadership of Rep. Blunt, who has been a long-standing supporter of charitable giving incentives for several years,” Maehara said. “We continue with our educational efforts and hope to see some of the provisions in H.R. 3908 make their way through Congress this year.”

Ending Percentage-Based Compensation

Maehara also called on Congress to prohibit percentage-based compensation for the fundraising profession.

“One of the most important actions Congress can take to increase public confidence and crack down on unjustifiable fundraising costs is to prohibit—to explicitly outlaw—the use of percentage-based compensation schemes for fundraisers,” Maehara emphasized. “Doing so would inspire donor trust while ensuring that more dollars were provided for charities’ altruistic endeavors.”

A copy of Maehara’s comments is available in the Attachments section below.

A copy of H.R. 3908 is available on the Library of Congress THOMAS website. Click on the link and search on “hr 3908.”

For more information about this issue, contact Jason Lee, director, government relations, at


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