Statement of Leo J. O’Donovan, President, Georgetown University

CHAIRMEN HERGER AND McCRERY. Please allow me to thank you and the Committee for convening this hearing as the Congress considers H. R. 7, the Community Solutions Act of 2001, and related legislation. Your consideration of legislative proposals designed to encourage charitable giving is very important at this particular juncture. I know that the Congress is working to achieve a balance between direct government support and reliance on non-governmental organizations, including universities like Georgetown, to meet compelling societal needs. Inclusion of the provisions of H. R. 774, the Crane-Neal Charitable IRA Rollover Act, in the next piece of tax legislation to be reported by the Ways and Means Committee is a key component in reaching the right balance. This legislation is very important to Georgetown University and other institutions of higher education because it will assist us in securing maximum private support to sustain educational excellence and accessibility.

Current tax law discourages prospective donors from making "indirect" or "planned" gifts from their IRA’s to non-profit organizations, like colleges and universities that promote the common good. That is the case because, in moving funds from an IRA to a charitable remainder trust, a taxpayer is subjected to ordinary income tax on the bulk of his or her IRA withdrawal despite the fact that a charitable gift is being made. That clearly is not consistent with other aspects of tax policy, which are designed to provide incentives for charitable giving.

Please allow me to emphasize that prospective donors often are most interested in making gifts through such indirect, planned arrangements. In fact, using the planned giving approach to these conversions enables donors to make charitable gifts while maintaining access to their IRA resources for the remainder of one’s life and that of the spouse. By allowing this innovative form of charitable giving without negative tax consequences, the intended purpose of the IRA would be preserved and any withdrawals for other purposes, of course, would be subject to taxation, as is currently the case.

I can tell you that planned gifts are a critical component of Georgetown’s efforts to strengthen our endowment. At Georgetown, and generally throughout the charitable community, planned gifts typically represent about 40% of the total charitable gifts received from individual donors. Furthermore, I can testify to the fact that the current state of the tax code in this regard has most definitely prevented significant contributions that otherwise would have come to our University. While it would be impossible to provide the Subcommittee a precise amount of contributions that has been put in abeyance or lost outright because of the current tax treatment of such conversions, I can say with considerable certainty that several million dollars in planned giving donations, possibly reaching as high as $10 million, could realistically be anticipated in the case of Georgetown University alone in the first year of this change taking effect. Unleashing the giving potential of our prospective donors would be of tremendous help as we work to strengthen academic quality at Georgetown and to maintain our commitment to need-based, full-need financial aid. It would similarly help other colleges, universities, schools and communities across the nation.

In closing, let me say that I was pleased that the Senate incorporated provisions based on H. R. 774 and its Senate counterpart, S. 205 in its version of the tax legislation adopted by the Congress last month. Unfortunately, in the process of working to fit the Senate tax legislation into the framework of the budget resolution, the provisions concerning Charitable IRA Rollover opportunities were back loaded to take effect in 2010. Of course, subsequently, this was one of the provisions that were dropped from the bill in the House-Senate conference. That was very disappointing to those of us who understand what a tremendous difference this legislation can make in terms of encouraging charitable giving. As the House shifts its attention to other tax legislation specifically focused on charitable giving, I strongly encourage members of the Ways and Means Committee to approve this important reform effective immediately. While the Senate’s policy in this regard was absolutely on target, the delay in its implementation no doubt would have resulted in the holding back of much-needed financial support for universities and other charitable entities. As this Committee moves legislation designed to enhance charitable giving, I encourage you to do the right thing, incorporate the provisions of H. R. 774 in their entirety in the next tax bill and make them effective immediately.

I appreciate the work of these Subcommittees and having this opportunity to make the case for the immediate adoption of the Charitable IRA Rollover proposal introduced by Representatives Crane and Neal. Thank you for your consideration.