Monday, May 17, 2010

“Tit-for-Tax-Break” - A Real Economic Stimulus Would Be to Give Tax Deduction for Volunteer Service to Nonprofits!

Why does pro bono work have more socio-economic value to the beneficiary nonprofit organization than to the person who donated her expertise?

Giving “charity”, with no expectation of benefit in return, is instilled within the foundations of many civil societies across time, space and cultures, and it comes in many forms. People in all walks of life donate their money, stuff and expertise to aid other folks, around the corner and around the world.

To his credit, President Barack Obama has made community service a key theme of his administration’s strategy for socio-economic change. There’s a lot to say for earning “social capital” or “street cred” through volunteerism, but the popular valuation of such civil service in support of the public “weal” needs real reform for real change.

One such area needed for immediate reform is the distorted understanding and valuation of pro bono work. USA's GDP still does not include “nonmonetized” productive volunteer activity for NPOs, not to mention unpaid housework and child-rearing. It is only being accounted for by a few countries, notes the United Nations (see footnote 1)

This can be seen most easily in the consideration of income tax itemized deductions.

“Out-of-pocket expenses giving services” (i.e. telephone calls, transportation, supplies, etc.) connected with volunteering for an NPO (i.e. board service, providing legal counsel, administrative support, clinical services etc.), are generally considered allowable by the IRS 1040 Schedule A (see footnote 2)

The value of volunteered “productive activity” by the donor categorically, is not. In effect, it has no “tax cred.”

But why?

If a person can be employed or hired as a contractor at a known rate (salary or fee) to accomplish the same task and pay tax on the income, why can’t the value of a volunteer’s contribution of her expertise and effort over time to an NPO be accounted and credited?

While the debate goes on about the need to evaluate housework (predominantly by women and especially for Social Security), clearly the value of the “productive activity” donated to an officially designated 501(c)3 can be “monetized”. NPOs are fast to parade budget lines bulging with the value of in-kind or pro bono services before potential donors and audit committees to demonstrate their lean costs of operations. Indices used to evaluate the work include Independent Sector's annually updated estimated quantifier of volunteer time (see footnote 3) and Points of LIght Institute's nifty calculator (see footnote 4) where, by job title, the value of professional work at all levels of engagement in the economy can be figured. “Professional” should be extended to include all colors of men’s shirt collars; if one can be paid for a task, it should be included in the list and GDP.

There’s nothing in the literal meaning of the term pro bono that states the work must be done for free!

Pro bono Is a Latin term that literally means for (the) good, rightly, morally. It has nothing to do with undertaking work without any compensation. It is good in its simple understanding. We may even need to redefine, if not altogether abandon, the notion of giving “charity”; no longer must we sacrifice something of our own to relieve the suffering of “others”. We may not have to suffer, but, rather willingly, gracefully give a bit of ourselves (expertise, time) for the common “weal”. There are no “others” left in the world. Income tax credit for volunteer work would smooth that out.

When so many NPOs are short staffed (due to lay-offs), over extended (due to greater demands for services due to government agency cut-backs) and financially strapped ... when so many qualified and talented people are out of work and want to continue to contribute to society, it would be “good, right and moral” to recognize our contributions of volunteer time in some way more significant than a plaque or pin.

In fact, it may be a profound and timely response to our dire our socio-economic predicament.

When Michelle Obama challenged the George Washington University Class of 2010 (see footnote 5) to engage in volunteer public service in exchange for her appearing at their commencement, they responded with overwhelming success. Holding up her end of the bargain, she then challenged them to make it a lifelong commitment.

It was a nice gesture, but she missed opportunity to do more. There are many graduates who will not find work in the nonprofit sector of the current economy, much less work at all. Some even think that they will never be paid a reasonable wage working for an organization or agency. “Why do you think it’s called ‘nonprofit’,” I’ve heard tell. It would have been more gracious, not to mention powerful, for the First Lady to announce that, whatever their first jobs would be, they would earn income tax credit for contributing their newly-acquired zeal for volunteer work. Even a waiter or file clerk who volunteers at a free clinic will appreciate the “tit for tax break”.

Then there are the rest of us whose successful careers in nonprofit service have been cut to shreds due to the recession. We are struggling not to fall through the bottom of Abraham Maslow's (see footnote 6) classic “Hierarchy of Needs” chart (see footnote 7). While we look for gainful (i.e. paying) employment, many of us continue to respond to the needs of others through professional, unpaid pro bono effort. Tax credits would be welcome for “good, real and moral” unpaid work. (Funny, or not, that the Father of Modern Management & Leadership by Employee Motivation never included volunteer or pro bono work on the great pyramid.)

As USA First Lady, Mrs. Barack Obama receives no salary, but serves as an “extension” of her husband’s executive responsibilities. Glad she can afford to. As for me, to paraphrase a pop tune, written by Ronnie Self and sung by Brenda Lee, “I need to be valued.” There’s nothing wrong with practicing random acts of kindness, but let us be thanked in ways more than in-kind, too.


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