The blurred lines between the tax reductions proposed by the Clinton administration in 2000 and the Clinton Library’s fundraising were an early foreshadowing of the potential ethics concerns that have flared around the Clintons’ courting of corporate and foreign donors for their family charity before she launched her campaign for the 2016 Democratic presidential nomination.
White House documents in the Clinton Library reviewed by The Associated Press show Hillary Clinton and Bill Clinton were kept apprised about a tax reduction package that would have benefited donors, including those to his presidential library, by reducing their tax burden. An interagency task force set up by Bill Clinton’s executive order proposed those breaks along with deductions to middle-class taxpayers who did not itemize their returns. Federal officials estimated the plan would cost the U.S. government $14 billion in lost tax payments over a decade.
In a January 2000 memo to Hillary Clinton from senior aides, plans for a “philanthropy tax initiative roll-out” showed her scrawled approval, “HRC” and “OK.” The document, marked with the archive stamp “HRC handwriting,” indicated her endorsement of the tax package, which included provisions to reduce and simplify an excise tax on private foundations’ investments and allow more deductions for charitable donations of appreciated property. The Clinton White House included the tax proposal in its final budget in February 2000, but it did not survive the Republican-led Congress.
“Without your leadership, none of these proposals would have been included in the tax package,” three aides wrote to Hillary Clinton in the memo, days before she led a private conference call outlining the plan to private foundation and nonprofit leaders.
Federal law does not prevent fundraising by a presidential library during a president’s term. While most modern-day presidents held off until the end of their term, Ronald Reagan, Bill Clinton and George W. Bush allowed supporters to solicit donations while they were still in office, and President Barack Obama is now doing the same.
But in directly pushing the legislation while the Clinton Library was aggressively seeking donations, Hillary and Bill Clinton’s altruistic support for philanthropy overlapped with their interests promoting their White House years and knitting ties with philanthropic leaders. Hundreds of pages of documents contain no evidence that anyone in the Clinton administration raised warnings about potential ethics concerns or sought to minimize the White House’s active role in the legislation.
“The theme here for the Clintons is a characteristic ambiguity of doing good and at the same time doing well by themselves,” said Lawrence Jacobs, director of the Center for the Study of Politics and Governance at the Hubert H. Humphrey School at the University of Minnesota. Jacobs said the Clinton administration could have relied on a federal commission to decide tax plans or publicly supported changes but not specific legislation.
Instead, Jacobs said, “this was a commitment by the Clinton White House to identify options and promote them with no regard to the larger picture.”
Spokesmen for Hillary Clinton’s campaign and the Clinton Foundation declined to comment, deferring to the former president’s office.
A spokesman for Bill Clinton’s office said that his administration was not trying to incentivize giving to the foundation, but instead was spurred by a 1997 presidential humanities committee that urged tax breaks for charities to aid American cultural institutions. Bruce Reed, Bill Clinton’s chief domestic policy adviser at the time, also responded Thursday that the former president “wanted to give a break to working people for putting a few more dollars in the plate at the church. Not for any other far-fetched reason.” Gene Sperling, former economic adviser to both Bill Clinton and President Barack Obama, added that the tax reduction package was “developed at the Treasury Department, endorsed by experts and designed to encourage all forms of charitable giving.”
The Clinton Foundation would not have benefited directly by the tax proposals. The foundation is a public charity and not subject to the excise tax, which applies only to private foundations and is still law. The foundation is also not known to donate appreciated property and stocks to other charities.
But the tax changes would have indirectly helped the foundation – as well as many other U.S. charities – by freeing nonprofits’ investments and donations that otherwise would have gone into tax payments. A reduction of the excise tax would have boosted the assets of private foundations. Higher deductions for appreciated investments and property would have also aided the Clinton Foundation, which accepts non-cash gifts. In 2010, for example, the charity declared more than $5 million in donated securities on its federal tax returns.
By the time the Clinton administration introduced its tax package in February 2000, the foundation had already raised $6 million in donations, according to tax disclosures. Among corporate-tied nonprofits that pledged or donated at least $1 million to the library project through the early 2000s, according to tax documents and published reports, were the Wasserman Foundation, the Roy and Christine Sturgis Foundation, the Walton Family Foundation and the Anheuser-Busch Foundation.
Though Bill Clinton did not take over the nonprofit until after his presidency, he had openly discussed his plans for the organization’s future with New York executives in June 1999. And the foundation’s fundraising was led at the time by a trusted childhood friend, James “Skip” Rutherford, now dean of the Clinton School of Public Service at the University of Arkansas.
Rutherford said he was not aware of the tax proposals and was focused at the time on small donors and likely contributors around Arkansas.
Months before proposing the tax breaks, Clinton White House officials began courting leaders from some of the nation’s most influential charities. In the summer of 1999, aides began discussing the possibility of a White House conference to celebrate American philanthropy at the turn of the millennium.
White House documents at the Clinton Library show that Hillary Rodham Clinton, who was herself a board director of the activist New World Foundation in the 1980s, helped oversee the conference. She and aides quickly shaped preparations for a formal White House event planned for that October.
Wealthy donors and major foundations were enlisted to plan and fund the event. Aides spent weeks in White House meetings with charity officials, culling their suggestions on boosting giving by Americans and eliminating government barriers. Department heads were ordered to identify the nonprofits they worked with and find ways to improve those relationships.
A September 1999 White House list proposing possible “philanthropy heroes” to highlight at the conference included wealthy donors of “large recent gifts,” among them Microsoft’s Bill Gates and his wife, Dell computer founder Michael Dell and investors George Soros and Eli Broad.
They all later donated to the Clinton Foundation through their companies or private foundations. There are no indications that White House officials discussed future Clinton Foundation gifts with any nonprofit. But the White House attention lavished on their concerns, Jacobs said, showed that “the president and the first lady were making tax reform for a specialized, wealthy part of American life one of their top priorities.”
In another September memo, aides told Hillary Clinton she could expect “public and private sector announcements” about tax reductions and “streamlining IRS forms for nonprofits.” The aides asked for her guidance on policy and guest lists. They told her that funding for the event would be absorbed by the Treasury Department and several foundations and donors, among them the Charles Stewart Mott Foundation, the Getty Foundation, AOL and Jill Iscol, a close Hillary Clinton friend and donor who in 2000 was named finance co-chair of the first lady’s New York Senate campaign.
When one aide wrote in an earlier email that Iscol had volunteered to aid the event as “fiscal agent,” another aide replied in a handwritten aside: “Little worried in relation to HRC scrutiny.”
Iscol’s IF Hummingbird Foundation later donated between $250,000 and $500,000 to the Clinton Foundation. Others also became donors to the Clinton Foundation: The Ford Foundation has donated more than $1 million and the MacArthur Foundation and the Mott Foundation have each donated more than $250,000.
In emails and memos, Clinton aides noted strong support among nonprofit interests for tax reductions. A key concern was the annual 2 percent excise tax on foundations’ investments that has been law since 1969. Under the excise tax, which is still law, some foundations are able to reduce the tax to 1 percent, but only by using a complicated system that sometimes leads to larger tax burdens. The Council on Foundations, a national organization of corporate grant-makers, has urged a single lower flat excise tax because the current system is too complicated.
Another voice for tax breaks was the actor Paul Newman, who routed the after-tax profits and royalties from his Newman’s Own food products to charity. An October 1999 Treasury memo to Clinton aides recounts a 1998 meeting between Newman and then-Treasury Secretary Robert Rubin in which the actor lobbied for “increasing the limits on charitable deductions for corporations and individuals.”
After Rubin ordered aides to analyze Newman’s proposal, officials warned “that it would be difficult to increase deduction limits without opening up potential abuses such a complete avoidance of income taxes” by some donors.
When Newman pressed again by letter, officials passed his name along to White House officials, who invited him to the 1999 celebration of philanthropy. Newman’s foundation later donated between $500,000 and $1 million to the Clinton Foundation before his death in 2008.
Two days after the October 1999 Treasury Department memo, the Clintons hosted the White House philanthropy conference. More than 200 guests – including Newman, singer Justin Timberlake and the heads of major U.S. charities – applauded as the Clintons hailed the accomplishments of volunteers and private foundations.
“We need to think about, in government, whether we can do more things to generate more constructive philanthropy,” Bill Clinton told the crowd. Added Hillary Clinton: “There has never been a better time for philanthropy than today.”
That day, a presidential memo from Bill Clinton ordered the heads of all executive departments to convene an interagency task force to find “ways to reduce governmental barriers to innovative nonprofit enterprises.”
In late January, the task force, which included Treasury Department and domestic policy officials, settled on three tax initiatives. They included the two tax breaks for foundations and donors and the third proposal aimed at allowing low and middle-income taxpayers who did not itemize their returns to claim deductions for charity donations over $500 each year.
Hours before Bill Clinton’s State of the Union speech in 2000, Hillary Rodham Clinton led a private conference call with charity and foundation leaders to unveil the plans for tax reduction package. Aides told her the discussion would “underscore the priority you are placing on philanthropic initiatives, show the linkage between this year’s budget initiatives and the White House Conference of Philanthropy, and to further associate you with philanthropy among the nonprofits and foundation community.”
But Bill Clinton’s speech that night mentioned only the aid to middle-class donors. He said nothing about the plan to give tax breaks for foundations and wealthy donors.
The following month, all three proposals were included in the Clinton administration’s 2001 fiscal year budget.
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