Charitable Deduction
Hearing Summary
The Senate Finance Committee held a hearing this morning titled How Do Complexity, Uncertainty and Other Factors Impact Responses to Tax Incentives?, including charitable giving incentives. Seven (of 24) Senators on the Finance Committee attended the hearing. Senator Thune specifically offered his support for the charitable deduction. He noted that by incentivizing private giving, the charitable deduction reduces the burden on government (and taxpayers) to provide social services. Witnesses were also generally supportive of the charitable deduction noting that reducing the charitable deduction would decrease the overall amount of giving, regardless of income level. While supportive of current law, one witness offered an alternative to consider—a flat credit across all income levels with a floor (for example $100) to encourage larger gifts.
In conjunction with the hearing, the Heritage Foundation released a paper on the charitable deduction, Obama’s Latest Proposal to Reduce Charitable Deductions Would Crowd Out Civil Society, available here.
The Senate Finance Committee intends to hold more than 20 hearings this year on various issues associated with the tax code as part of its tax reform agenda. We can expect foundation issues to be focused on generally in some of these hearings as well as specifically in at least one focused hearing – tentatively scheduled for the 2nd Q 2011.
The Hill reports on efforts to limit the charitable deduction
An article yesterday (March 27, 2011) from The Hill reports on the Administration’s propsal to curtail the charitable deduction to raise revenue. members of the nonprofit community also respond. Notably, the ACR and Nonprofit Coalition letter to the president is noted among nonprofit responses.
Here’s an excerpt:
For their part, [nonprofit] advocates stress that they will continue to take their case about the need to encourage charitable giving to Washington officials…
Steve Taylor, a United Way Worldwide vice president, said he thought the charitable deduction was different [from other tax breaks] because it wasn’t focused solely on economic gain.
“Maybe that’s an overgeneralization,” he said. “But this goes to the core of who we are as a nation. We have a long tradition of charitable giving, of taking care of our own groups, and this deduction is an embodiment of that spirit.”
Further Reading
Consider this…
Next week, the Senate Finance Committee is due to hold a hearing on how complexity and uncertainty affect the use of tax incentives for things like charitable giving and retirement savings.
We will be watching this hearing closely and hope to get a better sense of where policymakers are headed on the question of whether we should trade or trim tax incentives on items like the charitable deduction to achieve a “flatter” tax code with lower tax rates. To date, we think it is fair to say that policymakers have been all over the map on these questions and we won’t conjecture where it will all land.
We do think it is important for policymakers to get it right.
Click here for a summary of the hearing
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2011 Summit for Leaders
ACR held its second annual Summit for Leaders yesterday (March 8) in Washington D.C. Over 100 leaders from 21 states (and the District of Columbia) representing private foundations, community foundations, academia and national nonprofit organizations packed the Capitol Hilton hotel for a morning of sessions devoted to public policy. Several senior staffers from the House and Senate discussed a variety of topics from the prospects of tax reform in the 112th Congress to the measures currently being proposed that directly impact the nonprofit community including the charitable deduction. After a review of the rules for engaging in advocacy for nonprofit organizations, attendees listened to challenges that several well-known organizations faced when engaging in advocacy on a domestic and international scope from both ends of the political spectrum. The panels generated thoughtful questions from organizations looking to maximize their resources to affect change in the public space.
Check this Friday’s newsletter for a full recap of the sessions.
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Charitable deduction in FY 2012 Budget
A coalition of national nonprofit organizations, inclduign the Alliance for Charitable Reform and The Philanthropy Roundtable, have today sent a letter to President Obama asking him to reconsider his proposal to cap the charitable deduction.
Here’s an excert:
As charities struggle to meet increased demands for their services and raise additional funds, we need to encourage all individuals, regardless of income and wealth, to give more to charitable organizations. Limiting the value of the charitable deduction does the exact opposite and would fundamentally change a tax structure that has contributed to a cherished tradition of charitable giving that is unmatched in the world.
Again, we urge you to withdraw any proposal that would limit the value of itemized deductions for charitable contributions in your FY 2012 Budget.
Download the full letter below.
Further Reading
United Way Worldwide comes out against the president’s FY 2012 budget
Brian Gallagher, president of the United Way Worldwide, pens an op-ed in the Huffington Post about the proposal by President Obama to cap the charitable deduction.
Here’s an excerpt:
The President’s budget proposal seeks to limit a vital incentive for charitable giving, the charitable deduction in the federal tax code.
It’s understandable that Congress and the Administration are committed to reducing the deficit, with the financial integrity of the United States being at stake. They are competing to find cuts to all manner of programs, many of which provide assistance to children and low-income families.
At a time when unemployment remains high, our nation’s most vulnerable families need more help, not less. States can’t fill the gap and most are cutting their human services budgets. As a result, more and more people are turning to charities for assistance.
Thus, any change to the federal tax code that undermines charitable giving is a bad idea…
Further Reading
President’s Budget Calls for Sharp Reduction in the Charitable Deduction Again
In his Fiscal Year 2012 budget proposal, President Obama again included a cap on the charitable deduction for upper-income taxpayers. The provision proposes to “limit the rate at which high-income taxpayers can take itemized deductions to a maximum of 28 percent, affecting only married taxpayers filing a joint return with income over $250,000 (at 2009 levels) and single taxpayers with income over $200,000,” and it would take effect January 1, 2012. It’s worth noting that the charitable deduction was NOT singled out. Like last year, the cap is on ALL itemized deductions, including the charitable deduction.
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Consider this…
Here in DC, budget season is about to kick off with a vengeance. This year, the federal budget process promises to be messier than most.
We expect the President’s budget to be unveiled on Valentine’s Day and then promptly shelved. Later in the week, the House intends to debate legislation to extend the operations of the government past March 4th for the remainder of the fiscal year ending on September 30, 2011. We understand they plan to do so under what is known as an open rule - something more often seen in the Senate. Under this rule, during the budget debate any House member can offer an amendment to the budget bill, talk about it and then ask House members to vote on it – a tedious and time-consuming process. This translates into a free-for-all on the House floor. Why do this? By allowing freshmen to engage directly in the legislative process and offer spending cuts, Republican leadership expects to amass political chips it can use down the road when they need votes for more meaningful legislation – such as voting to increase the amount of debt the U.S. can borrow (i.e., raising the “debt ceiling”).
Why do this? What about the substance of the budget?
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Consider this…
As the 111th Congress winds down –most likely with a whimper not a bang– it is worth looking ahead to the next Congress to see what’s on their agenda for the issues important to the charitable community. Let’s start with the charitable deduction.
Here is what we already know:
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In the New York Times today, Stephanie Strom reports on the response of the nonprofit community to the debt reducing proposals emerging on the Hill that take aim at the charitable deduction.
Further Reading
