Charitable Deduction
The Chronicle of Philanthropy reports that New York Governor David A. Paterson has signed into law a revenue bill passed by the state’s legislature that limits charitable deductions for wealthy residents. New Yorkers with state-adjusted gross incomes above $10-million annually—about 3,500 taxpayers— are now able to write off only 25 percent of their charitable contributions on their state income taxes rather than the previous 50 percent.
“The last thing on earth charities need is a disincentive from the government to people who are their donors, especially their biggest donors,” says Abigail Disney, New York philanthropist and grandniece of Walt Disney.
She makes a stark prediction: “New York is a leader in philanthropy, so what New York does I can’t imagine other states won’t follow,” she said, adding: “Congress could go looking at it, too.”
Read full coverage here.
Last night, the New York Senate joined the Assembly in passing a budget plan that included a provision limiting the deduction for those who earn more than $10 million annually to only 25 percent of their charitable contributions, rather than the current 50 percent. This affects approximately 3,500 New York taxpayers and would be in effect for three years, including the current 2010 tax year. Governor David Paterson is expected to sign the budget into law.
ACR and The Philanthropy Roundtable joined efforts with other national nonprofit organizations to express opposition to this measure. ACR is also concerned that this may signal a trend we’ll see in other states and in Washington.
For full coverage, visit the Chronicle of Philanthropy.
Click here for additional background on this issue.
The Washington Legal Foundation just published its Summer 2010 edition of Conversations With…
This edition is dedicated to threats to philanthropic freedom and features Former Attorney General of the United States and Pennsylvania Governor Dick Thornburgh leading a discussion with Dr. Larry P. Arnn, President of Hillsdale College; Heather R. Higgins, President and Director of The Randolph Foundation; and Adam Meyerson, President of The Philanthropy Roundtable. The three reflect on the American tradition of philanthropy and the growing movement to impose further government regulation on the philanthropic world.
Further Reading
Consider this…
There are various third rails in politics – things politicians don’t generally touch for fear of the backlash. Programs like Medicare and Social Security, farm subsidies, and veteran’s benefits.
And there are some third rails in the tax world as well. For years, Congress has implemented and extended popular tax deductions and credits for both individuals and institutions that have achieved a “sacred cow” status. The home mortgage interest deduction and the R&D tax credit are just two such examples…
Set this against our country’s current fiscal situation: Rising national debt and new public policy priorities… Suddenly, those sacred cows in tax world aren’t so sacred anymore.
Nonprofits are not immune from this debate – the charitable deduction is considered a tax expenditure… What does this mean for us?
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Efforts to cap the charitable deduction in New York are pending.
Update:
August 10, 2010 - New York Governor David A. Paterson has signed into law a revenue bill passed by the state’s legislature that limits charitable deductions for wealthy residents.
Read full coverage here.
Continue reading...
Further Reading
Consider this…
Unlike the federal government, every state except Vermont has some form of balanced budget requirement. What does this mean in practical terms for the future of philanthropy?
We all know that the economy has not been kind to state and federal budgets. At the federal level, the government has responded by pumping money into the economy, in the hopes of jumpstarting economic growth and in the process running up enormous deficits. But balanced budget requirements at the state level won’t allow that and as a result, states are in the hunt for revenue with a vengeance.
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Governor Linda Lingle vetoed H.B. 1907 a tax bill that would have capped itemized deductions for higher income individuals including charitable contributions. The measure would have resulted in tax increases totaling more than $140 million over the next five years.
The non-profit community expressed concerns to Governor Lingle that this measure would discourage donations and contributions from individuals and small businesses since they would no longer be able to deduct these contributions on their State income tax returns.
Lingle noted in a Statement of Objection (see below), “Our community is still feeling the impacts of the recession and this is the time when we want to encourage donations to charitable organizations, not enact laws that hinder them.”
Download:
- Press Release: Governor Lingle Vetoes Bills that Discourage Investments, Charitable Contributions
- Governor’s Statement of Objection
Chicago-Kent Law Review
The newly released article Respecting Foundation and Charity Autonomy: How Public is Private Philanthropy? in the Chicago Kent Law Review, Number 85, Volume 2 reexamines the “public money” argument. It was published as one of several articles included in the “Symposium on the Law of Philanthropy in the Twenty-First Century”.
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Consider this…
If ever there was a year to think about upping your charitable giving, this is the year.
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Consider this…
Why are we still talking about Congressional proposals to limit the charitable deduction? Hasn’t this issue been put to bed?
Washington is in an unprecedented revenue hunt. And from a policymakers’ perspective, the revenue cupboard is empty. The House and Senate can’t find $30 billion to pay for a tax package that includes the IRA charitable rollover. They would like to pass a small business tax bill but they don’t have the money for that either. And they really don’t have the $100 billion-plus they need to prevent the tax on dividends from jumping from 15 to over 40 percent.
Enter the charitable deduction. It is a tempting target. The Obama Administration is already on board with capping the deduction at 28 percent. Others want to keep the deduction at the current maximum of 35 percent, even AFTER the top rate is expected to float back up to 39.6 percent in 2011. These limits would raise billions. And billions is what Congress desperately needs. But at what cost? Both studies and anecdote suggest that a cap on the deduction could chill charitable giving.
So, that’s why we’re still meeting with Members of Congress. They are desperate and we are a tempting target.
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