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Copyright 2000 Phoenix Newspapers, Inc.  
THE ARIZONA REPUBLIC

July 18, 2000 Tuesday, Final Chaser

SECTION: BUSINESS & MONEY; Pg. D1

LENGTH: 502 words

HEADLINE: WITH ESTATE-TAX REPEAL A POSSIBILITY, CHARITIES WONDER IF THEY'D BE HURT

BYLINE: RUSS WILES, The Arizona Republic

BODY:
Now that both the House and Senate have passed a law that would repeal the estate tax, it raises an important question: Would charities and other non-profit groups suffer as a result?

There's little reason to worry about an immediate drop in giving since President Clinton has promised to veto the measure. But estate taxes could linger as an election issue and move back to the front burner, especially if the Republicans fare well at the polls in November.

"We're not jumping out of any windows," said Stephen Mittenthal, president and executive director of the Arizona Community Foundation. "But I think it will test the belief that people give for eleemosynary reasons."

It's hard to say for sure what motivates people to donate money, but tax minimization certainly is a factor.

Estate taxes kick in at 37 percent and go as high as 55 percent. This year, estates above $675,000 are subject to tax, although a married couple can shelter $1.35 million with proper planning. Those figures will rise to $1 million and $2 million by 2006 in the absence of repeal.

(Incidentally, income-tax-deductible donations to charity wouldn't be affected by the estate-tax legislation.)

Currently, people can skirt estate taxes on assets they donate to non-profit groups. But if the tax obstacle is removed, giving could decline, some fear.

"Charities, which have been one of the tremendous beneficiaries of the tax, will see a dramatic reduction in the numbers of large donations that they will receive," said Mitchell Gaswirth, an estate-planning attorney at the law firm Proskauer Rose in Los Angeles.

All sorts of non-profit groups could be hit, ranging from churches and philanthropic groups to research institutions and universities.

But it's hard to estimate how big the impact might be. Mark Feldman, a partner at Arthur Andersen in Phoenix, thinks the consequences would be most noticeable among people with small fortunes but less discernible among the superwealthy.

"I don't think Warren Buffett or Bill Gates would change their minds one bit," said Feldman, citing the charitable plans announced by the two billionaires.

Some wealthy people don't want to leave so much cash to heirs that it would spoil them.

Besides, many benefactors believe in the causes they aid and want to create legacies. "People still want to be remembered," said Craig Wilson, a senior vice president at Northern Trust Bank of Arizona in Phoenix.

Some philanthropic groups like the Carnegie Corp. were established before estate taxes, or income taxes, debuted around World War I.

Mittenthal thinks the health of the stock market is more critical for giving, partly because a person can avoid capital-gains taxes by donating appreciated shares.

He even sees a silver lining in that the political maneuverings might spur more Americans to think hard about their own estate plans, with donations an option.

"Who would have thought that the estate tax would ever become a major issue for political debate?" he asked.



COLUMN: YOUR MONEY

LOAD-DATE: July 22, 2000




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