Some of the nation’s most prominent charities and advocacy groups are asking the U.S. Senate Budget Committee to reconsider changes to the itemized deduction for charitable giving for fear that it would reduce giving by billions of dollars each year.
The Charitable Giving Coalition released a letter sent to Senate Budget Committee Chair Patty Murray (D-Wash.) urging her and the Budget Committee to reconsider implementing proposals in the FY2014 Senate Budget Resolution that would limit the value of itemized deductions for charitable contributions. President Barack Obama has targeted the charitable deduction, at least for higher-income households, in each year of his administration so far, but it has yet to survive the budget process.
The Charitable Giving Coalition is comprised of private and community foundations, grantees and charities, including Salvation Army, The Philanthropy Roundtable, and United Way Worldwide, among others. Hundreds of nonprofit leaders from around the country gathered in Washington, D.C. for the annual Foundations on the Hill, urging legislators to protect the charitable deduction.
The deduction is different than other itemized deductions, the coalition argues, in that it encourages people to give away part of their income to those in need. For every dollar that a donor can deduct for their donation, the public receives about $3 of benefit.
The coalition points to the American Taxpayer Relief Act of 2012, which reinstated the Pease limitation and likely will reduce the value of itemized deductions for some taxpayers. They cited studies that estimated losses in charitable giving of anywhere between $1.7 billion and $5.6 billion if a 28-percent cap were imposed on the charitable deduction, based on a 35 percent top marginal tax rate; the actual loss would be greater given the new 39.6 percent tax rate.
An actual dollar cap, however, would hit charitable giving even more, the coalition argues, because many would exceed a hard dollar cap before claiming a charitable deduction. Other estimated effects on charitable giving would be a $3 billion loss should a 2 percent adjusted gross income (AGI) floor be imposed, and more than $9 billion if a deduction were replaced with a 12 percent tax credit.
It was signed by 41 groups, including Volunteers of America, Independent Sector, Giving USA Foundation, American Red Cross, Council on Foundations and Alliance for Charitable Reform, Association for Healthcare Philanthropy and Alliance of Nonprofit Mailers. NPT