On February 5th the Senate Finance Committee passed a scaled back version of the Charity Aid, Relief and Empowerment Act of 2003 that has tax incentives for giving. However, Senators Rick Santorum (R-PA), Joseph Lieberman (D-CT) have filed another version of CARE, that also has the “equal treatment” provisions on federal grants. Summaries of both bills are below. Jump to Summary of S 272. Summary and Analysis of New Senate CARE Bill: S. 256 (Without “Equal Treatment” Provisions) Title: Charity Aid, Relief and Empowerment Act of 2003 Sponsors: Senators Grassley (R-IA), Baucus (D-MT), Santorum (R-PA) and Lieberman (D-CT) Charitable Giving Incentives: The bill includes the nonitemizer charitable deduction for amounts over $250 for individuals ($500 for couples), but not exceeding $500 ($1,000 for couples). It is only effective tax years 2003 and 2005. The Secretary of the Treasury is required to conduct a study to determine if it increases giving and to compare taxpayer compliance between itemizer and nonitemizers. The report must be submitted to Congress by the end of 2004. Note: Questions about the cost and effectiveness of the nonitemizer deduction arose last year in . Senator Jeff Bingamon (D-NM) raised questions on these issues in the Finance Committee hearing on February 5. It is by far the costliest item in the bill, with the Joint Committee on Taxation predicting losses to the Treasury of $204 million in 2003, $1.368 billion in 2004 and $1.218 billion in 2005. But studies by the Congressional Budget Office and Congressional Research Service found it would be unlikely to increase giving by more than 4%. The bill would eliminate several tax shelters that would offset these costs, but only if Congress allows the nonitemizer to sunset at the end of 2004. The other significant potential revenue raiser for charities is the provision allowing for tax-free contributions made from rollover of Individual Retirement Accounts by taxpayers age 70 ? and over, or by taxpayers age 59 ? for contributions to split-interest entities (i.e. a charitable remainder trust). It would also allow volunteers to deduct mileage reimbursements for travel on behalf of a charity. The bill also creates deductions for donations of food and book inventories, scientific property used for research, artistic or scholarly compositions and incentives for contributions of land for conservation purposes. Improved Oversight of Charitable Organizations Title II of the bill expands IRS public disclosure requirements to include written determinations and background materials relating to exempt status of groups exempt under 501(c) or (d) and Section 527. The IRS would also be required to notify the public that Forms 990 are publicly available and share information with state charity regulators prosecuting fraud. Nonprofits would be required to include their website address (if they have one) and any name used for operations on their annual information returns. Professional return preparers could be fined $250 for knowing omission or misrepresentations of information. The most significant change is a new requirement for groups with budgets under $25,000, who are exempt from filing Form 990, the annual information return, to file an annual statement giving their legal name, operating name (if different), mailing address, website address, taxpayer identification number, name and address of the principal officer and “evidence of the continuing basis for the organization’s exemption from the filing requirements under subsection (a)(1).” If the group dissolves, they must also notify the IRS. These statements will not be available to the public. Failure to file either a Form 990 or annual statement for three consecutive years would result in automatic revocation of exempt status. An organization could not appeal revocation through a declaratory judgment action in court, but would have to re-apply for exempt status (presumably paying a user fee). If, in the application, the group can show reasonable cause for failure to file the Form 990 or annual statement, tax-exempt status can be retroactively reinstated. The IRS can publish a list of groups whose exempt status has been revoked under this section. Note: This new process raises several questions that should be examined before passage. For example, why is the information from these returns not being made public? Donors to small organizations have a stake in verifying and updating their information. Why are religious organizations (who are also exempt from filing Form 990) not included? How does this requirement overlap with state charity regulation, and does it create duplicative reporting? What proof of continuing eligibility for exemption would be required? And finally, it appears to apply to organizations with budgets under $5,000, who are not required to file for recognition of exempt status in the first place. Is this necessary? Other Provisions of Note S. 256 also contains the following:

• Elimination of the distinction between direct and grassroots lobbying, for 501(c)(3) organizations using the expenditure test to determine their lobbying limit. While the overall limits on lobbying would remain the same, the current limitation on grassroots lobbying (25% of total allowed lobbying amount) would be lifted, and charities could engage in either direct or grassroots lobbying up to their limit, without the necessity of tracking which is which. This simplification of the rules was proposed by the Joint Committee on Taxation in 2000 and is supported by a coalition of nonprofits including OMB Watch, Charity Lobbying in the Public Interest and the Alliance for Justice.
• Expedited determination of tax exempt status and waiver of user fees for 501(c)(3) organizations applying for government grants to provide social services. To qualify, a group must be organized and operated primarily for the purpose of providing social services, be seeking a grant that requires exempt status and attach a copy of its grant application to its exempt status application. The IRS is authorized to require “other criteria it deems appropriate for expedited consideration”.
• Individual Development Accounts. A new program which is added to the bill as a separate title called Savings for Working Families Act of 2003 to encourage saving by low income households by giving financial institutions tax incentives to match qualified deposits.
• Restores $1.97 billion to the Social Service Block Grant (SSBG) in 2003 and $2.8 billion in 2004 and allows states to transfer up to 10% of funds from the Temporary Assistance to Needy Families (TANF) program to SSBG.
• Authorizes appropriation of $80 million of IRS administration of exempt organization laws, and $3 million to implement last year’s amendment to the Stealth PAC law of 2000, requiring posting of PAC disclosure forms on the Internet in a searchable format.
• Provides for automatic revocation of exempt status for organizations deemed to have terrorist ties by the Executive Branch. No appeal is allowed, and contributions would cease to be tax deductible.

Summary and Analysis of New Senate CARE Bill: S. 272 (Including “Equal Treatment” Provisions) Title: Charity Aid, Relief and Empowerment Act of 2003 Sponsors: Senators Santorum (R-PA), Lieberman (D-CT), Grassley (R-IA), Bayh (D-IN), Hatch (R-UT), Landrieu (D-LA), Smith (R-OR), Nelson (D-FL), Talent ((R-MO), Lugar (R-IN), Frist (R-TN) and Miller (D-GA) Titles I-VI: Same as S. 256 Title VII: Compassion Capital Fund The bill authorizes $150 million in FY 2003 for technical assistance and capacity building grants for “community based organizations”, as follows:

• Health and Human Services: $85 million
• Corporation for National and Community Service: $15 million
• Department of Justice: $35 million
• Department of Housing and Urban Development: $15 million

For FY 2004 the bill authorizes “such sums as may be necessary”. The money can be used for grants or cooperative agreements with nongovernmental organizations to provide assistance to community based organizations with:

• Technical assistance, including grant writing, legal assistance with incorporation or tax exempt status or referrals to other groups with expertise in these areas;
• Capacity building information
• Information on best practices for assisting people and communities in need;
• Information on using regional intermediary organizations to increase capacity;
• Assistance with replicating social service programs that have demonstrated effectiveness;
• Research on best practices for social service organizations.

A community based organization is defined as a nonprofit with no more than six full time equivalent employees providing social services and a current annual budget of less than $450,000. The agencies are required to coordinate their efforts so that funds are distributed equitably and duplication is avoided. In addition, no agency can award more than one grant to the same group for the same purpose. Title VII: Equal Treatment The bill prohibits discrimination against nongovernmental organizations (NGOs) applying for federal grants for social service programs on the basis of:

• Prior grant experience
• Religious criteria for membership on board of directors
• Presence of religious symbols and art or religious references in the organization's name
• Mission statements that contain religious language.

It authorizes agencies to award grants to intermediary organizations, which would provide subgrants to social service programs and manage the grants. Subgrantees and subcontractors would also have to abide by the same rules and direct grantees. The bill applies to federal social service programs which are defined as "services directed at helping people in need, reducing poverty, improving outcomes of low-income children, revitalizing low-income communities, and empowering low-income families and low-income individuals to become self-sufficient." The bill lists a broad range of services, such as transportation, child care, job training, delivery of meals, health support, juvenile delinquency and substance abuse, housing assistance, and literacy programs. It specifically excludes assistance under the Elementary and Secondary Education Act and the Higher Education Act. The law would allow grant applicants that feel their rights under this bill are violated to sue the federal agency or state or local government administering a grant for injunctive relief. The draft does not specify what would happen to programs (and people that need services) if a court froze funds while a suit is pending. It also does not provide a right of action for beneficiaries whose rights may be violated under the act. Grants may also be given to states and local governments for seed money to establish centers for faith-based and community organizations. The agencies are authorized to provide states with technical assistance with administering provisions of the CARE Act. Note: Since the President’s December 2002 Executive Order on Equal Protection of the Laws for Faith-Based and Community Organizations several federal agencies have issued proposed regulations or new guidance with broad interpretation of what the order allows. (See OMB Watch article for details.) This makes the coming Congressional debate over religious discrimination in hiring for government funded positions and separation of worship activities from government services all the more important. Title IX Maternity Group Homes The bill authorizes uses of funds under the Runaway and Homeless Youth Act for grants to maternity group homes and requires periodic evaluations to be submitted to Congress.