Federal tax reform may limit private donations to universities
The prospect of decreased benefits for private charitable donors has raised concerns among universities already strapped for cash.
The U.S. House of Representatives’ Ways and Means Committee invited multiple charitable institutions, including universities, to Capitol Hill recently for a hearing on potential changes to the charitable tax deduction.
Discussions are still in the early stages, said Bradley Ballou, director of federal government relations for the UNC system. But he said the situation is being monitored closely.
“Bottom line, after the fiscal cliff deal, colleges and universities came out pretty well,” Ballou said.
The system aims to emerge from federal tax reform — as well as millions in potential cuts to research and financial aid because of sequestration — unscathed, Ballou said.
But some officials are concerned that decreased benefits would deter some private donors.
Private donations are increasingly necessary in a time of declining state and federal aid, said Mark Huddleston, president of the University of New Hampshire, during committee testimony.
Ballou and Huddleston said charitable donations provide money for a wide range of university priorities.
The UNC system uses gifts to the endowment for scholarships and research, the core mission of the system’s universities, Ballou said.
“For every dollar a typical donor receives in tax relief for his or her gift, the public gains approximately three dollars of benefit,” Huddleston said.
Federal scrutiny of the charitable tax deduction comes as UNC-CH plans a large fundraising campaign.
The campaign aims to exceed the Carolina First campaign, the largest fundraising effort in the University’s history, that raised $2.38 billion during eight years.
The new campaign is in its early planning stages while the University searches for a new vice chancellor for university advancement.
The former vice chancellor, Matt Kupec, resigned last year after an audit revealed that he used UNC-CH foundation funds for personal travel.
The University received $287.4 million in gifts and $331.4 million in commitments in fiscal year 2012, continuing an upward trend in gifts that began in 2011, according to the 2012 Development Annual Report.
Nationally, colleges and universities received $31 billion in aid in 2012, a slight 0.2 percent inflation-adjusted increase from last year, according to a report from the Council for Aid to Education, a nonprofit that researches private donations to higher education.
That total still ranks below a historical high of $31.6 billion in 2008, as the economy continues to recover.
Potential tax changes could affect the timing of gifts, said Ann Kaplan, director of the survey.
Before the Tax Reform Act of 1986, which limited charitable deduction benefits, was implemented in 1987, donations to charities increased sharply.
“Tax treatments of gifts certainly has a timing effect,” she said. “But over time, charitable giving does tend to return to its level.”
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