Although charities stand to lose approximately $10 billion a year if the federal estate tax is repealed permanently, most nonprofit groups have kept silent on the issue for fear of alienating wealthy donors who would benefit from repeal of the tax, the New York Times reports.

Full repeal of the tax, which includes unlimited deductions for charitable giving as a way of helping shield families from inheritance taxes, would presumably eliminate the need for many kinds of tax shelters. After Congress enacted a temporary rollback of the tax early in President Bush's first term, bequests to charity declined by $2.8 billion in 2003 — the first such decline since 1998. Moreover, according to the Joint Committee on Taxation, full repeal would reduce federal revenues by roughly $29 billion a year. Critics of repeal argue that the loss of revenue would hurt nonprofits by making it harder for the federal government to fund nonprofit activities. Last week, the House voted, as it has in each of the last three years, for full and permanent repeal of the tax. But while Senate Democrats have blocked full repeal in the past, talk of a compromise is in the air.

"About two weeks ago, when we sent out an alert on this, I got some very, very vociferous disagreement from large organizations on the charity side and foundations," said Diana Aviv, president of Independent Sector, a Washington, D.C.-based coalition of philanthropic organizations dedicated to strengthening the nonprofit sector. "People went out of their way to tell me that while they liked my leadership, on this issue I was just dead wrong."

Not all wealthy donors support repeal. William H. Gates Sr., the father of Microsoft founder Bill Gates, has spoken out against it, as have Warren E. Buffet, Steven C. Rockefeller, George Soros, and Agnes Gund.

"It's an issue of fundamental fairness in this society," said Lance E. Lindblom, president and chief executive of the Nathan Cummings Foundation, which financed a study by the Brookings Institution on the effect permanent repeal would have on charity. "Our laws, our institutions, our government, our businesses are what give us the opportunities we have. It's not just the individual's efforts that have produced the wealth in question, and so there is a responsibility to return some of it."