Tax Reform Measures Proposed in D.C. May Limit Tax Exempt Gifts to Harvard

Harvard officials are worried that several tax reform proposals soon to be discussed by the House Ways and Means Committee would seriously damage the University's fund-raising efforts.

The proposals would reduce in various ways the amount of charitable contributions that an individual could deduct from his taxable income. The proposals are:

* To limit the tax deduction on stocks and other property given a charitable institution to the original cost of the property, instead of its current market valuations;

* To establish a "floor" on charitable deductions by making only contributions above two or three per cent of an individual's annual income tax-deductible;

* To change a section of the tax laws that permits a taxpayer, under certain circumstances, to deduct as charitable contributions, amounts above the usual ceiling of 30 per cent of annual income.

Though not necessarily supporting the three proposals--which were initiated by the Ways and Means Committee--the Treasury Department has estimated that they would add nearly $3 billion to annual revenues from the Income tax.

Another proposal which troubles Harvard officials is one which would make taxable the income of organizations set up by two charitable institutions to provide joint services. The Cambridge Corporation, founded by Harvard and M.I.T. to aid low income housing in the City, might fall under this provision.

Hearings Held

None of the proposals is in the form of legislation, but they are among the several score of tax reform proposals on which the committee is currently holding hearings. Rep. Wilbur Mills (D-Ark.), chairman of the committee, has said that no action will be taken on any of the proposals for at least a year. But one Harvard source recently said, "Just the fact that they've proposed them is something to worry about."

At present, no Harvard official will appear at the hearings, but representatives of the American Council on Education, a group of over 1200 colleges and universities of which Harvard is a member, are expected to testify against those proposals which they feel would hurt universities.

The most worrisome proposal to Harvard is the plan to limit tax deductions on donations of property to the original cost, not the market value of the property. Harvard usually receives $4 or $5 million annual market value in stocks each year, although one exceptionally large donation boosted this to $16 mil- lion last year. In addition, donors give the University small amounts of real estate--usually less than $50,000 worth in a year--and an undetermined amount of art works, books, etc.

"This proposal is one that would be really damaging to charitable institutions. This one would hurt," Eugene G. Kraetzer Jr., assistant secretary to the Corporation, commented yesterday.

Another Administration official agreed, saying, "If this ever passes, no one is going to be giving us IBM stock that he bought in 1946 anymore. . . we'll fight this one to the death."

The effects on Harvard of the second proposal--a floor on charitable contributions--are not quite as clear. This proposal would be to discourage smaller contributions of less than two or three per cent of annual income, and Harvard's donations come principally from larger contributions.

But Kraetzer said that the proposal might make it harder to get gifts from the big donors. "While the dollar amount is important, you've also got to have donor acceptance, large participation," he said. "A man who might give $100,000 may not do so unless he is sure that a hundred other people will give $100 each.'

'Super-Donors'

What one University source called "super-donors" would be hardest hit by the third proposal. At present, deductions for charitable purposes are limited to 30 per cent of annual income--unless an individual gives 90 per cent of his income to charity for nine years. After that, he can deduct all his charitable contributions, if they continue to be more than 90 per cent of his income.

While no one knows for sure if such "super-donors" do give money to Harvard, officials suspect they might, and are so inclined to fight the proposal