CONTACT: GEORGE MCCRORY
100 Old Public Library
Iowa City IA 52242
(319) 384-0012; fax (319) 384-0024
Release: March 14, 2001
Coleman testifies before U.S. Senate Finance Committee on tax-free charitable
IOWA CITY, Iowa University of Iowa President Mary Sue Coleman testified
today (Wednesday, March 14) before the U.S. Senate Finance Committee about
how universities could benefit from allowing contributors to roll over Individual
Retirement Accounts (IRAs) into a tax-free donation.
President George W. Bush has proposed as part of his overall tax plan to
allow tax-free charitable gifts from IRAs to encourage giving. The Senate
Finance Committee, chaired by Sen. Charles Grassley (R-Iowa), is reviewing
this proposal made in the IRA Charitable Rollover Incentive Act, which was
recently reintroduced by Sen. Kay Bailey Hutchison of Texas.
Coleman explained that while she was representing the UI, the American Council
on Education (ACE) and the Association of American Universities (AAU), many
other programs and services in the nonprofit sector would also be strengthened
by this proposal.
"The future of the charitable sector and of the public services it
provides depends upon securing the financial resources to meet our pressing
social needs. This proposal would allow individuals, who have assets in excess
of requirements for their retirement, to make penalty-free donations of IRA
funds to support the charitable sector and its public-service mission,"
In her testimony, Coleman noted that the UI is a comprehensive public research
university providing higher education to 28,000 students, serving as a vital
resource to Iowans. The universitys 11 colleges graduate 50 percent
of Iowa's physicians, 80 percent of its dentists, 60 percent of its pharmacists,
and 50 percent of its baccalaureate trained nurses.
"The UI has trained K-12 teachers for all of Iowa's school districts
as well as a high percentage of the states leaders and employees in
business, industry and other critical areas. In addition, we provide a broad
range of services to Iowans, including more than 700,000 patient visits per
year to our academic health center and community-based clinics," she
Coleman explained that while state support is the foundation upon which the
UI is built, it provides only 21 percent of the university's $1.5 billion
budget. "A crucial part of the remainder comes through donations from
loyal friends and alumni. These funds provide support for facilities, equipment,
student aid, the recruitment and retention of outstanding professionals and
for centers and programs that would not be possible otherwise," she said.
While tax implications are not the only motivation donors have for private
giving, Coleman said they may be influenced by the tax code as to the timing
and amounts of their giving.
She gave two examples of UI donors to illustrate the dilemma many potential
donors face: Both people are professionals who are longstanding friends of
the university and have given substantial gifts to the university over many
years, Coleman explained. They say they want to give their IRAs as a final
substantial gift to the UI, and that they have provided for their families
and will not need their IRAs for retirement purposes. However, the IRAs are
the only asset left that would provide a gift of the magnitude that they would
like. Both have indicated that they probably will not make this contribution
unless current law is changed, she said.
"Some may incorrectly characterize this act as a tax break for the
wealthy. The plain fact is that many middle-class Americans, including teachers,
nurses, sales persons, retired military, and librarians, frequently express
their desire to make gifts using IRA funds. These donors want the removal
of a tax disincentive, not a tax break, in order to complete their charitable
objectives," Coleman said.