Rural America suffered from high unemployment and poverty rates before the COVID-19 pandemic – and now the situation is even more dire. In Appalachian Kentucky, for example, the 47 counties are in the poorest 10 percent of the United States in terms of quantitative measures that include income, poverty rate, and unemployment. Dramatic changes in the energy sector and the pandemic have exacerbated the incredibly uneven economic recovery from the recession. These successive blows have left many people in communities across the country feeling left behind by policy makers and leaders.
This includes some of our country’s philanthropic leaders, who could do more to bring rural populations toward economic parity – by reducing the rural-urban divide and helping to heal cultural divisions. They could start by supporting legislation that unleashes the real philanthropic power currently being stored due to outdated laws that protect communities’ money.
When the pandemic struck in Hazard, Ky., The Foundation for Appalachian Kentucky provided more than $ 1 million in charitable donations to small businesses, family farmers and nonprofit partners who are taking the brunt of the fallout. economic and public health outcomes of the pandemic. This injection of charitable dollars has saved more than 900 jobs, 150 small businesses, 130 small family farms and has supported more than 20 non-profit organizations.
Simultaneously, the Colorado Telluride Foundation raised and distributed $ 1.6 million in COVID-19 emergency aid over 12 months. Even as the foundation responded to the crisis, it was pushing forward plans to build housing for local teachers – 120 new homes in four rural towns – and funding new broadband access.
This is how philanthropy should work: with today’s dollars being used to meet today’s challenges.
But the sad truth is, it doesn’t always work that way. Today, due to loopholes in our tax code, donors can place money in charitable intermediaries – private foundations or charitable investment accounts called “donor advised funds” – and claim the generous benefits. philanthropy tax without actually giving the money. That’s a problem: the tax cuts are meant to encourage giving, not hoarding.
The impacts of this situation are real. Americans are losing tax revenue that could otherwise be used to support public programs with no certainty that those dollars will be spent in a way that benefits them. Today in the United States there are far more funds in charitable savings accounts than is distributed to American charities. And the lion’s share of philanthropic work, especially in times of crisis, then goes to poor and underfunded communities.
The charitable giving tax code is essentially a contract between the federal government and the individual taxpayer, that is, “we will allow you to pay less tax if you make a charitable contribution that benefits others.” (And by the way, you can donate your money to any cause.)
This contract is broken. According to a report released in May by Boston College, individual charitable giving as a share of income has remained largely stable at around 2% over the past 40 years, while contributions to donor-advised funds and private foundations have almost quintupled, from 5% in 1991 to 28% in 2019. Currently, more than $ 1 trillion remains idle in private foundations and donor-advised funds combined.
This is even more concerning in light of the many problems facing rural America, where many of our most important organizations are already receiving unfair funding. Rural organizations, such as the ones our foundations serve, receive less than 7 percent of all private donations in this country. And yet, 78 percent of all very poor US counties are rural. The lack of donations to some of our most marginalized and poorest populations must be addressed. Closing the loopholes that slow down the distribution of charitable donations is the right place to start.
The good news is that bipartisan legislation has been introduced in the US Senate to implement expected reforms and put charity back at the center of charitable giving laws. The law on the acceleration of charitable efforts (ACE) introduced by Sens. King angusAngus KingAmazon, Facebook and other big companies would pay more under the proposed minimum tax, according to Warren’s office, senators look to the defense bill to move cybersecurity measures energy accuses the market of high fuel prices PLUS (I-Maine) and Chuck grassleyFormer Senator Bob Dole dies at 98 (R-Iowa) would create a reasonable time frame for distributing donor-advised funds to active charities – 15 years to 50 years. Additionally, the ACE Act ensures that the payment requirement for private foundations cannot be met by paying administrative expenses or making donations to donor-advised funds.
But, more importantly, the ACE Act recognizes the unique role of community foundations and includes protections that ultimately strengthen these pillars of our communities and ensure that the highly localized and extremely critical missions of these organizations can continue without regulatory burden. additional.
As we experienced in 2020, societal issues are increasingly complex, urgent and intersecting. Racial justice, poverty, hunger, climate change, child care and education, the digital divide and housing – among other issues – are systemic issues that communities face on a daily basis. Today’s urgency is felt across the country, and philanthropy must be encouraged to rise to the occasion.
Getting more money for active organizations faster is something all members of Congress and the philanthropic community should be supporting. As community foundation leaders representing rural communities, we know the ACE Act is a first step in the right direction.
Paul Major heads the Telluride Foundation in Colorado. Lora Smith is the Executive Director of the Appalachian Impact Fund at the Foundation for Appalachian Kentucky in Hazard, Ky.