Charitable Deduction Cap Pulled From Bill

October 7, 2011       Mark Hrywna      

A proposed cap on charitable deductions for people earning more than $200,000 annually was removed from the American Jobs Act by the Senate majority leader.

In an email to supporters this morning, Independent Sector (IS) President & CEO Diana Aviv reported that Senate Majority Leader Harry Reid (D-Nev.) announced late yesterday that he has removed the charitable deduction cap from the American Jobs Act.

“Our assiduous efforts to share with lawmakers concerns about a cap, combined with your outreach to members of Congress to explain why tax incentives for charitable giving are critical to nonprofits and the people in our your community, made a real difference,” Aviv wrote. “In fact, many lawmakers on both sides of the aisle have indicated that they do not support a cap on charitable contributions.”

Reid’s office did not immediately return calls for confirmation. However, William Daroff, vice president for public policy, Jewish Federations of North America, too, said it had happened. “I can confirm from my discussions on the Hill and with the Administration, that the Senate Democrats have pulled the proposal to reduce the deductibility of charitable contributions as a pay-for for the jobs bill,” said Daroff.

It was President Barack Obama’s fourth attempt targeting the charitable deduction as a revenue source, each time to pay for something else. The cap would have limited the deductibility of charitable contributions for those earning more than $250,000, from 35 percent to 28 percent. The cap has been replaced with a 5.6-percent surtax on individuals earning income of more than $1 million a year, which would raise $445 billion over 10 years, according to Aviv.

The Alliance for Charitable Reform (ACR), a project of the Philanthropy Roundtable, organized meetings yesterday with elected officials about the deduction cap, with as many as 40 nonprofit leaders from around the nation converging on Capitol Hill. In a letter last month to congressional leaders, including Senate Finance Committee Chairman Max Baucus (D-Mont.) and members of the Joint Select Committee on Deficit Reduction (“Super-Committee”), ACR asked that that the charitable deduction be preserved at its present level.

The cap on charitable deductions is still part of the president’s formal recommendation to the Super-Committee, Aviv said, which is charged with finding at least $1.2 trillion in deficit reduction by Nov. 23.

“We continue to be concerned about the Administration’s continuing focus on placing a stumbling block in front of the abilities of charities to raise funds, as we continue to serve as a vital safety net for the vulnerable who continue to suffer during this downturn,” said Daroff. “We anticipate seeing this flawed proposal again during the Super-Committee process, and we will continue to fight it — and defeat it.”