Should Volunteers Be Offered Tax Incentives?

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October 30, 2012; Source: Charity Village

The term “paid volunteers” sounds like an oxymoron. However, the U.S. does provide stipends for some “volunteers” through the AmeriCorps program of the Corporation for National and Community Service. In Canada, a member of parliament has proposed a tax credit to reward volunteers for their work and to incentivize more people to volunteer. MP Jean-Francois Larose, a member of the New Democratic Party (NDP), introduced the Volunteer Tax Credit bill in February and in September, Larose made what Charity Village called “an impassioned speech” in parliament. He got some expressions of support from Liberal parliament members, but members of the Conservative party “figuratively tore the bill apart.”

The bill is actually a bit related to the U.S. practices of providing a tax deduction for volunteers’ mileage (which, as NPQ Newswire readers well remember from our past coverage, is set at 14 cents per mile driven in service to charitable organizations compared to 23 cents for medical or moving purposes and 55.5 cents for business miles driven, an inequity that has yet to be remedied by Congress—though bus, train, and other expenses incurred specifically for charitable travel can also be itemized and deducted). The Canadian bill is partly related to compensating volunteers for miles driven and partially a tax credit for volunteers who must drive.

The parliamentary report on the bill describes its operation as follows:

“Bill C-399 proposes a non-refundable tax credit for individuals who: 1) volunteer a minimum of 130 hours in a year at a charity, non-profit or municipality; and 2) make at least 12 trips in the year to perform these services. Under the Bill, an individual who met these two criteria and had no travel expenses (or was fully reimbursed by the organization) could claim the minimum tax credit that would be worth up to $75 (based on the $500 amount claimable multiplied by the federal tax rate of 15%). In addition, up to $1,500 of nonreimbursed travel expenses could be claimed which would reduce an individual’s taxes owing by up to $225 more ($1,500 amount claimed * 15%). Therefore, the maximum annual value to an individual of the proposed volunteer tax credit would be $300 ($2,000 amount claimed * 15%).”

As described by the Parliamentary Budget Officer’s report, the proposed credit sounds like a charitable deduction for volunteering plus a deduction for some unreimbursed travel expenses.

Larose explained that his bill is recognizing volunteers for the work they do, saying, “every day, we give [volunteers] a pat on the back, say congratulations and tell them we are glad they are there, but we never talk about serious measures for their future.” Larose estimated the budget cost of the credit would be $800 million over five years if every eligible volunteer claimed it, but the Parliamentary Budget Officer’s report provided a range of cost estimates, from a low-cost five-year estimate of $761 million to a high-cost estimate of $2.171 billion.

While Conservative MPs decried the record-keeping time and cost that the bill would require of volunteers and the charities they volunteer for, Ruth MacKenzie, the president and CEO of Volunteer Canada, had a different take, though not necessarily in support of the bill. She said that Larose hadn’t contacted her organization before introducing the bill and still hadn’t talked to them. That’s sort of like a U.S. Congressman introducing charitable giving or volunteering legislation without checking in with Independent Sector or the National Council of Nonprofits.

While MacKenzie didn’t come out in support of the bill due to a “lack of data to suggest that [a tax incentive] would increase volunteerism,” she thought the discussion of potential financial barriers to volunteering useful. She cited the Canadian Survey of Giving, Volunteering and Participating’s finding that “volunteering is done mostly by the more educated and people who have a higher income, which gives the inference that volunteering is a thing of privilege and is not something that people on the lower end of the socio-economic scale can indulge in, for lack of a better term.”

We think CharityVillage asks just the right question: “Does it make sense for taxpayers to pay for volunteerism or does volunteerism itself imply an altruistic, non-monetary activity that needs no material reward?”—Rick Cohen

  • Conni

    A few years ago, I put more than 10,000 miles on the family car while serving on the board and various committees of an international faith based nonprofit.
    Other years didn’t require quite so much travel. Our family finances are simple enough that we don’t itemize, so it doesn’t matter what deductions are available. Now if I lived in the nonprofit’s headquarters city, travel expenses would be minimal. It’s been a financial sacrifice to serve because of the IRS tax code. To claim that volunteerism is an altruistic activity that needs no material reward sounds just a bit patronizing. Covering travel expenses completely isn’t a reward. It makes a variety of service opportuniites available to people regardless of geographic location or financial situation.

  • Paula J. Beugen

    Specifically with regard to the U.S. charitable driving issue:
    My observation is that costs of charitable driving are increasingly prohibitive for volunteers. This is not a matter of whether or not volunteers are altruistic. It is a matter of whether or not volunteers can afford to take on charitable driving while freely donating their time to perform a needed community service. The current rate allowed for charitable driving does not begin to cover the current cost of driving, as evidenced by the allowable business mileage rate.

    On another note:
    It is necessary to consult with a broad base of experienced state and local volunteerism leaders when developing volunteerism-related policy. Volunteer resources leaders know what is happening on the ground, on a daily basis and how particular policy affects the vitality of the volunteer community and the broader community served by volunteers.