By Tim Delaney and Mason Hardy
Volunteers from coast to coast have selflessly helped their fellow citizens for centuries. Here in South Carolina, for example, volunteers bring meals to the homebound, transport the elderly to doctor appointments, travel to nonprofit boards to provide accountability oversight, and deliver products from food banks to the hungry. These four examples get multiplied in countless ways every day.
At least they used to. A federal statute that effectively treats charitable volunteers as sub-standard has combined with high gas prices to erect barriers that many selfless citizens can no longer overcome.
Here’s how federal tax law short-changes volunteers. Many years ago Congress, recognizing that employers normally reimburse their employees when using their personal vehicles for work, declared that employees would not be taxed on such reimbursements, as long as the reimbursements were fair and reasonable. To avoid disputes about what is fair and reasonable, Congress authorized the IRS to set a standard business mileage rate that could be used nationwide. Congress also said the IRS can administratively adjust that rate when the cost of operating a personal vehicle increases. For example, earlier this year, because of the high cost of gasoline the IRS increased the standard business mileage rate to 58.5 cents per mile.
Although technically called the standard business mileage rate, that rate does not apply just to employees of businesses. The federal government, for example, reimburses its employees using that standard rate when they use their own vehicles for government-related duties. And nonprofits can reimburse their own employees using that standard rate. So the federal government’s policy recognizes that when employees in any sector – business, government, and nonprofit – use their own vehicle to do the work of the employer, the employer can reimburse the employee using the standard rate.
Back in 1997, however, Congress said it would treat volunteers differently. Even though volunteers often perform the exact same services that employees of governments and nonprofits would be doing, Congress declared in statute that volunteers could deduct from taxes only 14 cents per mile if volunteers used their own vehicles to deliver needed services to the community. Congress set that rate in 1997 when the average cost for a gallon of gasoline was about $1.25. So while the IRS recently announced it was adjusting the standard mileage rate to better reflect the real cost of operating a vehicle to 58.5 cents per mile, volunteers are still stuck with the sub-standard rate of a mere 14 cents.
It gets worse. If a nonprofit or government entity using volunteers has the financial ability to reimburse its volunteers using the standard rate of 58.5 cents per mile rather than just the sub-standard 14 cents per mile, then the volunteer must treat the 44.5 cent difference as taxable income. So federal law essentially says to volunteers it wants them to not only give away their time and talent to provide many needed services that government might otherwise have to pay to provide, but it also expects those volunteers to pay for the privilege of being so selfless.
Does that seem fair to you?
The good news is it seems so unfair to two U.S. Senators, Chuck Schumer (D-NY) and John Ensign (R-NV), that these normally partisan adversaries have set aside their political differences and stepped forward on a bipartisan basis to fix this injustice. Earlier this month, they introduced the GIVE Act (Giving Incentives to Volunteers Everywhere Act of 2008; S.3429) to address the two central flaws in existing federal law. First, the GIVE Act would eliminate the hidden tax on volunteerism by allowing charitable volunteers to not have to treat as taxable income the amounts they get reimbursed for mileage driven in the course of serving the community as charitable volunteers. Second, the GIVE Act would unlock the rate frozen in 1997 and give the IRS authority to adjust the charitable mileage rate administratively by tying the charitable volunteer rate to the standard business mileage rate.
The bad news, however, is that Congress will only be in session about three more weeks this year. To let Congress show it still listens to people, citizens need to reach out to their elected officials and let your voices be heard. Call, fax, and/or email your U.S. Senators and Representatives to let them know in your own voices what you expect.
Let them know if you think it’s unfair to treat employees and volunteers differently. Let them know if you think it’s past time to adjust mileage reimbursement rates now that gas prices have more than tripled what they were in 1997 when Congress locked that low rate in statute. Let them know if you expect them to quickly co-sponsor the GIVE Act and get it passed and signed into law this year.
Mason Hardy is the President of the South Carolina Association of Nonprofit Organizations located in Columbia, S.C.
Tim Delaney is the President & CEO of the National Council of Nonprofits in Washington, D.C.
The S.C. Association of Nonprofit Organizations represents the charitable nonprofit community in South Carolina, which is more than 11,000 strong. SCANPO is the statewide resource center for nonprofits and provides services such as nonprofit management training, advocacy, information, research and cost savings programs for over 800 member organizations.
For more information on SCANPO, visit www.scanpo.org or call (803) 929-0399.
Mason B. Hardy, CAE
South Carolina Association of Nonprofit Organizations
900 Elmwood Ave., Suite 101
Columbia, South Carolina 29201