Senate Approves Bigger Charity Tax Deductions

More than two years after President Bush proposed allowing more federal aid to flow to religious social-service groups, the Senate on Wednesday passed a slimmed-down version of the bill that would expand tax breaks for charitable donations but would omit much of his original “faith-based” initiative.

The Senate action, on a 95-5 vote, signaled a Republican retreat on a high-profile item on Bush’s domestic agenda.

Democrats had threatened to block any effort to pass Bush’s proposals to help religious charities qualify for more federal grants. They argued that the proposals could upset the American tradition of separation of church and state.

“Once you have opened this door and start talking about federal dollars given to religion for social services, you open up a can of worms,” said Sen. Richard J. Durbin (D-Ill.).

So Durbin struck a deal with Sen. Rick Santorum (R-Pa.), a sponsor of the Bush faith-based initiative, to limit the bill’s scope. Mindful that the president’s bill -- proposed days after he took office in January 2001 -- had languished since then without a Senate vote, Santorum said he agreed to compromise because charities urgently needed help.

“That’s part of the legislative process,” he said. But Santorum pledged a renewed push for the rest of the Bush initiative when the Senate debates welfare reform.

He added that many of the charitable donations that could be spurred by the bill would go toward religious groups -- in essence, achieving what Bush has wanted all along.

In a statement, the president applauded the Senate action. “This legislation contains key elements of the faith-based initiative that I proposed more than two years ago to encourage more charitable giving and rally the armies of compassion that exist in communities all across America,” he said.

But administration officials objected to a provision in the bill that would raise funding for social service grants by more than $1.3 billion through 2004. That issue could become a sticking point as the bill moves through Congress.

The Republican-led House, which in 2001 passed a version of the faith-based initiative that closely tracked Bush’s goals, has not passed a similar bill this year.

Although stripped of its most controversial elements, the bill the Republican-led Senate approved aims to help charities through a variety of new tax breaks, supporters said.

A major provision would allow individuals who do not itemize deductions to write off up to $250 a year for charitable donations that exceed $250. For example, those who donate $400 could deduct $150 in income. The provision would expire in January 2005.

Current law allows charitable deductions for taxpayers -- generally in the upper income brackets -- who itemize.

Another provision would allow qualified taxpayers to make charitable donations from Individual Retirement Accounts without incurring taxes or penalties.

The measure “is a breath of fresh air for every charity in this country,” said Paulette V. Maehara, president of the Assn. of Fundraising Professionals.

She predicted the legislation would unleash billions of dollars in new giving. “Just think what that amount of money can do in every community in this country,” Maehara said.

Other portions of the bill would provide new tax incentives for charitable donations of food, books and computers. The bill also includes tax breaks for selling or donating undeveloped land for conservation.

Sponsors said the costs of the bill in lost tax revenue would be offset by provisions cracking down on corporate tax shelters.

The Senate’s 48 Democrats, plus Sen. James M. Jeffords, a Vermont independent, joined 46 Republicans in voting for the bill.

Five Republicans were opposed: Don Nickles of Oklahoma, Mike Enzi and Craig Thomas of Wyoming, and Larry E. Craig and Mike Crapo of Idaho.

Bush already has used his executive power to help religious groups obtain federal contracts.

Current law does not bar such contracts. And the 1996 welfare reform law encouraged them for groups that deal with substance abuse, mental illness and other social troubles. Still, religious groups applying for aid often encounter hurdles that Bush has sought to remove.