Jun 22, 2012
Legal Expert Explains the Foundation for America’s Charitable Deduction
With all this discussion about tax reform, tax deductions, and the role of philanthropy in American society, we want to highlight an excellent article by Jack Horak, Chair of the Nonprofit Organizations Practice Area at Reid and Riege, P.C., who handles tax, corporate, fiduciary, financial, employment and regulatory issues for nonprofit organizations. Horak is a respected legal expert in this field and authors a quarterly newsletter on issues he sees in his everyday practice. Horak participated in our panel discussion last month at the Aspen Institute on how transparency issues are becoming more prevalent in his practice.
His latest newsletter touches on the role of taxes incentives for charity and is a must read for anybody who is trying to better understand the historical and legal foundations for protecting tax incentives to give and how they are uniquely American. Horak provides a history lesson on the charitable deduction in America and provides five reasons why it is justified and necessary to our society. He writes, “The tax deduction for charitable contributions is one of the many ping pong balls being lobbed back and forth across the deficit debate table in Washington…. We believe it is misguided to target the charitable deduction because both governmental and charitable revenue must be used for a public purpose or benefit. Government does not have a constitutional obligation to provide for charity. It does so only as a matter of legislative grace. This is an important and often overlooked point. How often have you heard someone say something to the effect that ‘if the exempt sector didn’t do it the government would have to do it’. The point is that the government would do “it” only if the government had the desire (the votes to pass the legislation) and the resources (enough tax revenue) to do so. From this perspective we contend that the charitable deduction compact protects the people from Congress – and Congress from itself – by providing alternative mechanisms to direct charitable resources where they are needed.”
To read the full version of the newsletter, click here.
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