March 01,2005

Grassley Pledges to Link Charitable Giving Tax Incentives With Reforms

Statement of Sen. Chuck Grassley
News Conference with the Panel on the Nonprofit Sector
Tuesday, March 1, 2005

Charities have always been a vital part of the fabric of this country. The ties of charities --of neighbor helping neighbor, improving the local community and reaching out to those in need –are a bedrock of our nation. Since the founding, observers have commented about this unique American character of supporting charities and associations. But if we are going to maintain the nonprofit sector as a pillar of our society, we must do so with our eyes open. While the light of charities has done much to brighten our world, it has also attracted those who want to bend or break the favorable tax rules that encourage charitable giving and the formation of charities.

The IRS commissioner reported yesterday the annual “Dirty Dozen” – the worst tax scams.

Two of those were abuses of charitable organizations and deductions. That must stop. Just as I havefought, and continue to fight, corporate tax shelters and corporate tax cheats, we must similarly address problems in the area of charitable giving and governance. The President has proposed theCARE Act, which proposes billions in new tax cuts to encourage charitable donations. I support thePresident’s efforts in this area. However, I’m pleased that his budget also begins to recognize thatthere is need for reform as well in the nonprofit sector. I see this issue as similar to my fight toreform defense spending in the mid-80s. I opposed increases in defense spending, and successfullyfroze the defense budget, because we were not getting enough “bang for our buck.” The same is truehere with billions proposed to encourage charitable giving. Those proposals must be accompaniedwith serious reforms in both charitable governance and giving.

When a husband and wife stretch their budget to write a check to help someone who is ineven greater need, they have a right to have confidence that the money is going to be spent wiselyand effectively. As chairman of the Finance Committee, I recognize that the charities are differentand that we must keep in mind particularly the burden placed on small charities. That is why I’vefelt it important to reach out broadly and benefit from the views of interested parties.

Certainly, the Panel on the Nonprofit Sector is critical to this effort. The interim report todayand the final report will weigh on the thinking of the Finance Committee. The Finance Committeehas also benefitted from the recent thoughtful analysis of the nonpartisan Joint Committee onTaxation and has asked for the views of both the IRS as well as state officials. All these will be of great benefit as we look at drafting the CARE Act and the accompanying reforms of charitable governance and donations. My hope is to have a hearing on this matter this spring and to move the CARE Act this spring as well.

Let me close by saying a few words directly about the work of the Panel on the NonprofitSector convened by the Independent Sector. First, let me say how appreciative I am of thetremendous amount of time and energy put forward by the charitable sector in response to theFinance Committee’s request for response to proposals for reform. The number and quality ofparticipants of the panel is humbling, including several of my former colleagues here in theCongress. As the leaders of the panel are here, I want to personally thank Diana Aviv, Paul Brestand Cass Wheeler and to please pass on my thanks to the many, many others.

I know that Senator Baucus joins me in his thanks and appreciation, and I’m sorry he cannotbe with us here today. However, this remains – as it always has been -- a strong bipartisan effort in the Senate Finance Committee to bring reform to charitable governance and charitable giving. I’m very pleased that the interim report brings agreement from leaders of the charitable community thatthere is a need for such reform. From working and doing oversight and reform for years in Washington, I’ve found that often the toughest part is just getting people to agree that there is a problem. Once you have agreement on the problem, it is easier to work within a common framework for solutions. I look forward to working with you all in the days ahead on this important effort.

The interim report is posted at