February 04,2009

Grassley Seeks to Boost Charitable Services Via Economic Stimulus Bill

WASHINGTON – Sen. Chuck Grassley of Iowa is seeking to strengthen provisions in
the economic stimulus bill that would help charities continue to provide their services to people
in need. Grassley filed amendments to allow charities to reimburse volunteers at higher mileage
rates than currently allowed and to require states to pay the non-profits with whom they’ve
contracted to provide services before being able to receive increased federal funds in the stimulus
package.

“A weak economy hurts charitable giving just when charitable services are most in need,”
Grassley said. “These fixes are meant to encourage volunteer work and make sure non-profits
get the money they’re owed before states get a new infusion of federal cash.”

Grassley filed a bipartisan amendment, with Sen. Chuck Schumer, to update federal tax
law restrictions on mileage reimbursement. The tax code restricts a charity from reimbursing its
volunteer drivers more than 14 cents a mile because those drivers have to pay taxes on any
amount in excess of 14 cents per mile. For those drivers who don’t receive reimbursements from
a charity but may be able to take a deduction for charitable miles driven, the tax code also limits
that deduction to 14 cents a mile. The 14 cent rate is fixed in the tax code and has been for over
10 years. In contrast, IRS currently has the discretion to adjust the reimbursement and deduction
rates for miles driven for business, medical or moving purposes. But IRS has not had the
discretion to set the rate for charitable miles driven since 1984.

Grassley said charities in Iowa, such as Meals on Wheels and Big Brothers/Big Sisters,
saw a noticeable decline in volunteers last year. “Since Iowa is a rural state where cities are far
apart, volunteers often have to drive further than their urban counterparts to fulfill their volunteer
commitment,” Grassley said. “Unfreezing the charitable mileage rate allows those charities on
the front lines of the economic crisis to provide some incentives to volunteers.”

A second Grassley amendment would put conditions on states’ receipt of their share of
new federal funding in the stimulus bill. State and local governments often contract with
charities to run programs such as foster care for children and shelters for the homeless. Charities
consistently have problems with these governments making payments on these contracts on a
timely basis, and the economic crisis has caused even further delays in the timeframes for
reimbursement. For example, on Feb.1, the state of California instituted a cash deferral plan
under which the state will make only payments required by law, which does not include
payments to its nonprofit contractors, according to charitable groups.

Grassley’s amendment would condition states’ receipt of their share of $87 billion in the
stimulus bill on being current on their payables to the charities with which they have contracted.

This would be an alternative to the $15 billion “bridge loan” proposal that one charitable
umbrella group has promoted. “The idea is to give states an incentive to pay their bills so
charities can continue to do their good work, which is needed now more than ever,” Grassley
said.

Grassley is the ranking member and former chairman of the Senate Committee on
Finance, which writes tax policy.

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