WSJ

REVIEW & OUTLOOK

Charity Case

Giuliani forces the IRS to play a role other than Scrooge.

Monday, November 19, 2001 12:01 a.m. EST

Chalk up one more accomplishment for Rudy Giuliani: He has forced the Internal Revenue Service to play a role other than Scrooge to the September 11 terror victims. Late on Friday, and under political pressure, the IRS waived its rule to force charities to subject their donations to an income test.

"It's a great victory for families of the victims of the World Trade Center," Mr. Giuliani rightly said Saturday. But the story of this rare IRS turnabout deserves a wider audience, especially because future victims won't be so fortunate.

In a sane world, the charities that have raised $1.3 billion in relief money would already be dispersing those funds as they see fit, perhaps in equal-sized checks or based on the number of surviving children. But when the Mayor's Twin Towers Fund announced it intended to donate $40 million to the families of fallen rescue workers before Thanksgiving, the IRS started waving the fine bureaucratic print.

The IRS's philanthropy czars insisted that charities could not give money to people "merely because they are victims of a disaster" such as September 11. "An affected individual generally is not entitled to charitable funds without a showing of need," the IRS's Steven Miller recently told Congress. And merely losing a lifetime partner and breadwinner doesn't qualify as enough of a "need" in IRS World.

Mr. Giuliani, and we dare say most Americans, evidently believe otherwise. They think Americans ought to be able to help other Americans without first making them beg. And after some negative publicity, the IRS finally came around. The IRS's Friday notice says that, with respect to September 11-related disbursements, all charities need do is demonstrate that "payments are made in good faith using objective standards." The statement adds that Congress is considering "clarifying legislation."

No doubt this is a victory for the thousands of families here who were seeing their checks held up. And not just the families of firefighters or police officers. The widow of a Cantor Fitzgerald bond trader living in a $450,000 house in the New Jersey suburbs may look wealthy. But with three kids, a huge mortgage and the family breadwinner buried in the rubble of the Twin Towers, those children had better be good athletes or they won't be going to college.

The point here is that as welcome as the IRS reversal is, it doesn't go nearly far enough. It is illuminating to note that when the Red Cross was pilloried for diverting funds collected after September 11 to its other worthy activities, the private charity ended up firing its president and offering to refund donations. Rest assured that no one in the IRS would ever lose his job for blocking the flow of charity to victims.

We understand, as the IRS says, that these rules are designed to prevent rich folks from using charitable loopholes to shelter income. But victims of tragedy are not people trying to push a scam; these are grieving folks who have lost a loved one through an act of war or disaster. The reluctance of the IRS to bend its bureaucratic rules for all such cases is an example of its imperial mindset, which assumes that every dollar you make is somehow theirs first.

We recently reported in these columns on the foreign widows of those killed in the attacks--women who have lived in the U.S. for years and have American children--who learned that they don't enjoy the usual spousal exemption from the estate tax. It says something about Beltway priorities that soon-to-be introduced Senate legislation aims to fix this problem not by getting rid of such a perverse IRS provision but by making it easier for legal immigrants affected by September 11 to become citizens. This means that if you were widowed by a drunk driver instead of by Osama bin Laden, the IRS would still come in for its estate-tax loot.

The amazingly generous American response after September 11 is a tribute to our shared human values and patriotism. Those millions of donors wanted to help, as directly as possible, the victims of what was an act of war on their fellow citizens. They did not want the money to pile up interest waiting for some bureaucrat to decide, like some feudal lord, who is worthy to receive charity and who isn't.

We're happy the IRS has created a September 11 charity exception. But maybe the bureaucrats and politicians all proudly wearing those NYPD and FDNY baseball caps should ask themselves why no one anywhere would ever be caught wearing one with the initials IRS.

-- Anonymous, November 19, 2001