March 1, 2001 Malcolm Kline
Faith-based nonprofits across the country may soon find themselves with a conflicting choice – take federal money and risk restrictions, or turn the money down and see the organization across the street take the cash.
The other issue is how to suggest that a tax cut, especially eliminating the estate tax, is not the best thing for nonprofits without alienating donors.
Although details are still very sketchy, there are four main points to President George W. Bush’s nonprofit and faith-based initiative: allowing non-itemizers to take a tax deduction for donations, allowing donations from tax-deferred retirement savings without penalty, increasing tax deductions from 10 to 15 percent; and the opening of the White House Office of Faith-Based and Community Initiatives.
The repeal of the estate tax would be gradually phased in through 2009, under the Bush plan.
The application for funds and terms and conditions for transfer have not yet been released. Details are expected within six months, Bush has said.
Many nonprofits warn that the Bush administration’s plan to fund faith-based institutions poses a danger to both the church and the state. The American Civil Liberties Union (ACLU) explained part of the problem.
"Provided that they use their own funds, religious organizations are exempt from many civil rights laws and courts have allowed them to discriminate on the basis of their religious beliefs and teachings about race, religion, sexual orientation, gender and pregnancy," according to a statement released by the ACLU. "But that equation must change once religions begin to use tax dollars."
Conversely, many nonprofits support the Bush administration’s plan to allow taxpayers who do not itemize to deduct charitable contributions.
In a survey of 30 nonprofit leaders, Washington, D.C.-based OMB Watch found that many organizations shared this view on the tax change.
Independent Sector, also in Washington, D.C., commissioned a study on the tax change from the accounting firm PriceWaterhouseCoopers LLP, which found that the deduction could net charities an additional $14 billion a year. (See related story, page 4).
Fr. Robert Siricco, who heads the Acton Institute in Grand Rapids, Mich., visibly met with President Bush when the latter sought feedback on his plan. The Catholic priest has long criticized religious groups, particularly those that share his faith, who depend on federal funding. But, now he supports the exemption for non-itemizers.
"I think the tax dimension of the proposal holds great promise for enabling these private, often religiously inspired charities to assume a normative role in society for meeting the needs of the poor," Fr. Siricco said.
"When combined with overall tax relief, we would have the possibility of a philanthropic renaissance, because philanthropic giving rises with the increase of disposable income," he said.
While Fr. Siricco and the Acton Institute champion broad-based tax cuts as more of a boon to charities than federal spending, many other nonprofits do not.
A look at charitable contributions during the past two decades compiled by the AAFRC Trust for Philanthropy in its publication Giving USA shows a clear trend. Increased giving follows a tax cut, compared to the slower pace of donations that follow an increase in federal levies.
Charitable contributions doubled during the 1980s. In the 1990s, charitable contributions grew by 50 percent.
No government agency has calculated the cost of the Bush program, which establishes a new office to work with faith-based charities. In addition to the White House office, the Bush proposal pushes grant applications through five separate agencies.
First, given the scope of the plan, at least half a dozen congressional committees will look at it. On top of all this attention, at least a dozen members of Congress have projects they want to help. For example, Rep. Mark Souder (R-Ind.) has several ministries in his home state that need assistance, as does Sen. Sam Brownback (R-Kan.).
The federal government permitted religious groups access to federal funds for social services in the Welfare Reform Act President Clinton signed in 1995, pending state approval. Most states, 40 in all, do not grant such approval, making the provision little-used, said Kenneth Wolfe, a staffer with the House Republican Conference.
Because of this scarce use, Wolfe said, the provision has had little effect on federal, state and local welfare spending.
When President Bush unveiled his faith-based initiative, nonprofit groups expressed concern that the program would compromise the missions of both secular and religious charities.
"Under this program, you can have worship services at lunchtime and the close of business," argued Mark Rosenman of the Union Institute in Washington, D.C. At the other end of the ideological divide, Michael Tanner, a policy analyst with the libertarian Cato Institute, also in Washington, D.C., worried that "Officials of these charities may end up spending more time reading the Federal Register than the Bible."
The chairman of the House Republican Conference dismissed the concern regarding the separation of church and state. "I’m amazed that this never comes up when we give federal funds to Baptist hospitals and Catholic colleges," said Rep. J. C. Watts, (R-Okla.). "It’s only when we try to help the needy in inner cities that I hear it."
Rosenman pointed out that religious groups have received federal funding for years. The Bush plan, he said, opens federal funding to local congregations whose religious orientation may sway them to discriminate in employment of social workers, as well as in the services provided.
Other critics such as Tanner, see more of a secular influence on federally funded congregational efforts than they do the reverse bias. "Many of our largest charities, such as Catholic Charities, Lutheran Social Services and the Jewish Federations, already receive more money from the government than from private donations," Tanner wrote in a policy analysis paper.
At a press conference promoting the President’s initiative, Joanne Negstad, president of Lutheran Social Services pointed out that her group already has "a seat at the table." What Lutheran Social Services was concerned about, she said, was that government spending on social services would go down as a result of the initiative.
When asked if funding would make religious charities arms of federal agencies and its workers de facto government employees, Rosenman said, "No more than the secular nonprofits."
Malcolm A. Kline is editor at the National Journalism Center in Washington, D.C.