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With Assets Declining, Foundations Look to Congress for Help

Resource type: News

Philanthropy News Digest |

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In a rare, direct push for legislative help, U.S. foundations have been lobbying for a piece of President-elect Obama’s $1 trillion economic stimulus package to help ease the pain of billions of dollars in recession-related investment losses, Roll Call reports.

According to Rasmuson Foundation vice president Jeff Clarke, many in the foundation community historically have avoided pushing legislation, both out of fear of violating federal lobbying restrictions and because of a culture unique to nonprofit groups. However, over the past year private foundations on average are estimated to have lost 30 percent of the value of their endowments — or more than $200 billion in total, said Council on Foundations president and CEO Steve Gunderson. Without a change in the tax laws for foundations, the sharp decline in foundation assets could mean that foundations will pay more in excise taxes in 2010 and beyond.

To make that case, some foundations are lining up behind Gunderson, who spent sixteen years on Capitol Hill as a GOP House member from Wisconsin. In late December, Gunderson sent Rep. John Lewis (D-GA), chairman of the Ways and Means Subcommittee on Oversight, a four-part stimulus wish list that included the extension and expansion of an IRA charitable rollover, the creation of “low-profit” limited liability companies, and a “flatter” excise tax on net foundation income.

By law, private foundations are required to pay out 5 percent of the value of their endowments each year and are also taxed on net income at a rate of 1 percent, based on a five-year average. The problem this year is that with endowment values down sharply because of declining stock portfolios, foundations will have to spend more than the five-year average amount next year in order to maintain a 1 percent excise tax rate.

“It would be a tragedy of public policy if we penalized the nation’s private foundations in 2010 with an excise tax rate increase for having made a huge effort in 2008 and 2009 to maintain support of their local grantees despite the downturn in the economy,” said Gunderson. “Let’s not have a penalty on foundations that are trying to do good….We’re not asking for a tax break here, we’re just saying let’s have a standard rate.”

Murray, Matthew. “Even Philanthropies Pitch Stimulus Plan.” Roll Call 1/12/09.

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