Grassley recovery plan includes charitable reform.

Buried in a 17-point plan for hurricane relief being discussed in the United States Senate are provisions for aspects of charitable reform which has been pushed by Sen. Charles Grassley, R-Iowa and Sen. Max Baucus, D.Mont. Elements of the CARE ACT, which has bounced around since 2003, have been tacked to the plan.

Grassley and Baucus unveiled the immediate-relief package as the first in a series of short and long term initiatives. Grassley described the package as one that will provide short-term aid to hurricane victims by encouraging food donations and the employment of displaced individuals, as well as help protect Katrina victims from undeserved trouble with the Internal Revenue Service.

Grassley made no mention of the of the proposed reforms to charitable organizations or of its apparent likeness to the 2003 tax legislation co-sponsored by Senators Rick Santorum, R-Penn, and Joe Lieberman, D-Conn, and endorsed by Grassley and Baucus.

The employment and housing assistance portion of the proposed bill, restricted to Gulf Region victims of Katrina, includes:

* To free hurricane victims from any tax liability for debts forgiven by creditors.

* To waive the 10 percent penalty tax for premature distribution from IRA's and qualified retirement plans, including 401(k) plans and 403(b) plans, for those individuals residing in a federally declared disaster zone.

* To extend the Work Opportunity Tax Credit (WOTC) to allow employers located in the disaster zone to claim a credit against wages paid to new workers that face barriers to employment; and to provide a 40% tax credit for those wages paid up to $6,000 between Aug. 28 and the end of this year.

* To provide those who house victims with a $500 per person tax deduction.

* To lift the first-time homeowner requirements and relax the purchase price and income limitations for homes in the areas damaged by Katrina for the next three years.

Further down the list are several provisions intended to enhance the transparency and accountability of the nonprofit sector, an objective Sen. Grassley and the Senate Finance Committee have pushed without much success in Congress many times prior.

The provisions affecting charitable organizations include:

* To provide an enhanced deduction to businesses for donations of food for those relying on assistance and books for schools and other educational programs, to last through Dec. 31,2005.

* To allow taxpayers 70 1/2 and older to rollover amounts from their IRA accounts directly to a qualified charitable organization; and taxpayers 59 1/2 and older to transfer IRA funds to a remainder trust and give a remainder interest in the trust tax-free.

* To increase the percentage limitation a corporation is allowed as a charitable deduction in any taxable year from 10 percent to 15 percent of the corporation's income, for one taxable year ending on or before Dec. 31,2006.

* To raise the permitted cash contribution level for individuals from fifty percent to sixty percent of adjusted gross income for tax years ending on or before Dec. 31, 2005.

* To allow the IRS to disclose to appropriate state officials information regarding organizations for which the IRS has denied or revoked tax-exempt status. If passed, this provision would be permanent.

* To set the charitable mileage rate (personal vehicle expenses associated with charitable work) at fifty percent of the standard business mileage rate that is periodically determined by the IRS.

"That the bill includes provisions for nonprofit accountability ... doesn't come as a shock," said Gary Bass, executive director of OMB Watch, a nonprofit government watchdog organization in Washington, D.C. "This is not new legislation in response to Katrina. It has come up before."

Added Rick Cohen, president of the National Committee for Responsive Philanthropy (NCRP) in Washington, D.C., "You have stuff in here that's really--including the IRA rollover, for example--that are really parts of the old CARE Act, in some form or another."

A proponent of Santorum's CARE Act, Paulette Maehara, CFRE, CAE, president and CEO of the Association of Fundraising Professionals (AFP), in Alexandria, Va., said that, "There are ways for Congress to help charities better respond to disasters like Katrina and ensure that they will be in a position to meet the needs of America's communities."

Maehara cited the IRS rollover, enhanced deductions for contributions of food, and accountability, all provisions of the CARE Act and included in the new plan But Cohen finds it disconcerting that while the proposed legislation claims to benefit "individuals affected by Hurricane Katrina," many of the provisions will not, in fact, do so. "I'm a little concerned that you have incentives in here that are not simply charitable giving incentives for people," said Cohen. "There's an unusual concept of 'Individuals' here, it's called, 'Corporations,'" be added. "One of the major things corporations did was to get themselves identified as individuals. Corporations, under the law, are considered individuals."

Said Bass, "The provisions that deal with nonprofits, they are of course beneficial. They are a stimulus for giving," said Bass. "They'll undoubtedly be helpful to organizations, but they don't really address the victims (of Katrina)." Although "positive steps to take," Bass would like to see other legislation come through that provides assistance to individuals, such as expanding Medicaid, increasing funding for housing and shelters.

Also troubling, said Cohen, is the inconsistency between one provision that will open up charities to increased governance and another that will expedite reviews of applications from new organizations seeking tax-exempt status.

"Part of the CARE Act that they put into this is to allow the IRS and the State (Attorney Generals) to (share information regarding charities)," said Cohen, who, along with NCRP, has sought this "since day zero." "But if you dig in there, I was stunned to see they're also talking about expediting reviews, which is basically, as occurred after 9/11, very little review at all."

If passed, the legislation would reduce federal revenues by roughly $7 billion over five years. Currently at $62.3 billion--and expected to top $100 billion by the end of this year--the cost of hurricane relief is easily a record as it has exceeded the cost of domestic disaster relief efforts to date.

Citing the IRA rollover provision, also part of the CARE Act, Maehara noted it "may increase giving by several billion dollars annually." Of the CARE Act provisions in general, Maehara added, "(they are) relatively inexpensive (and) could bring billions of dollars of needed disaster relief and ongoing support through donations to charities."