Katrina Tax Break a Boon to Charities

Through year's end, individuals can donate up to 100 percent of their income and deduct it. The temporary tax break aimed to boost Katrina relief donations. But it has helped charities of all kinds, from aid organizations to symphonies.

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DEBBIE ELLIOTT, host:

These last days of the year are always a busy time for non-profit organizations as they scramble to land just a few more donations. This year, because of Hurricane Katrina, charities may be receiving even bigger gifts than usual. NPR's Martin Kaste explains.

MARTIN KASTE reporting:

In the aftermath of Katrina, Congress temporarily raised the limit on how much of your charitable giving is tax-deductible. Until December 31st you can give up to 100 percent of your income and deduct it all from your taxes. That means bigger tax-deductible donations for food banks in Biloxi, homeless shelters in Baton Rouge...

(Soundbite of music)

KASTE: ...or, if you prefer, the symphony orchestra in Seattle.

(Soundbite of music)

KASTE: Yes, the Katrina Emergency Tax Relief Act, or KETRA, also allows bigger tax-deductible donations to arts organizations, something the Seattle Symphony eagerly pointed out to its supporters in a recent fund-raising e-mail. In fact, KETRA applies to just about every non-profit in the country, no matter how far removed from the Gulf Coast. And many of them, PETA, public radio stations, my wife's alma mater, are scrambling to cash in. Philanthropy consultants say the extra tax deductions are working, attracting big gifts, sometimes in the millions of dollars, to non-profits of all kinds.

Representative CHARLIE MELANCON (Democrat, Louisiana): That wasn't the spirit, nor the intent of the law.

KASTE: Congressman Charlie Melancon was a co-sponsor of the tax-deductible charity legislation in the House. On a cell phone from southern Louisiana's storm-ravaged 3rd District, he says he wishes the bill had been written more narrowly.

Rep. MELANCON: But loopholes are loopholes I guess, and ain't a whole lot I can do about that--at least not right now.

KASTE: Another House sponsor of KETRA agrees. On his way home to New Orleans, Congressman William Jefferson says he hopes those donation appeals don't end up in the mailboxes of his constituents.

Representative WILLIAM JEFFERSON (Democrat, Louisiana): It's be very upsetting and disappointing because the help is needed down in the Gulf region and others are taking advantage of the situation which isn't what was intended.

KASTE: But some argue that the legislation was intended to help all non-profits, even arts organizations in faraway states. Robert Sharpe is president of a company that gives fund-raising advice. He says the bill's sponsors in the Senate made it clear that they also wanted to give a boost to charities that might have lost potential donations to the fund-raising for Katrina.

Mr. ROBERT SHARPE (Fund-raising Consultant): They felt that there was such an extraordinary need for private funding between all the disasters and all the regular non-profits that this year they'd take the cap off and let rich people give more than they could normally give. And that was social policy in action.

KASTE: But there are some tax experts who say it's not very good social policy. Linda Beale is a tax specialist at the University of Illinois College of Law. She says it's important to remember that charitable deductions like this one make it possible for wealthy people to take their money out of the government's hands and to give it to their pet causes.

Ms. LINDA BEALE (University of Illinois College of Law): That means that the things that those taxpayers select are the things that are being supported through the tax system, and a wealthy taxpayer might be more likely to support a symphony or an art museum, whereas what may need support, if we were doing a deliberative policy determination, is--in the case of Katrina, it might be simple housing and food needs.

KASTE: There are perils for non-profits that try to raise money under the Katrina law. A development officer at the Seattle Symphony says several supporters have responded negatively. She says they thought the symphony was trying to leverage Katrina. It's an impression she wants to dispel, but she declined to go on tape, as did other non-profits contacted by NPR. These organizations are pursuing the extra donations, but they're treading gingerly. Martin Kaste, NPR News, Seattle.

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