The charitable deduction is in congressional crosshairs again as Rep. Dave Camp (R-MI) called for a hearing on the topic on Feb. 14.
Camp, the chairman of the House Ways and Means Committee, announced Tuesday that he wants representatives from the charitable sector to testify to the Committee about how limits to the charitable deduction would impact nonprofits. Organizations have fought changes to the deduction in the past, and the hearing by the House Ways and Means Committee will give representatives from the sector another chance to explain why they believe it’s a bad idea to limit the deduction.
“Because of the critical role that charities play, the Committee must hear directly from the charitable community before considering any proposals as part of comprehensive tax reform that might impact their ability to obtain the resources they need to fulfill their missions,” said Camp in a statement.
Examples of efforts to limit the charitable deduction in the past include limiting the tax rate against which contributions may be deducted; a dollar cap on total itemized deductions; a floor below which contributions may not be deducted; and the replacement of the deduction with a tax credit available regardless of whether the taxpayer itemizes.
Although Congress averted part of the so-called “fiscal cliff” by avoiding across the board tax-increases for all Americans, the deal reached only delayed the sequester – automatic budget cuts to domestic and defense spending – until March 1. The White House and many members of Congress would like to replace it with new, more targeted spending cuts, but Democrats and President Barack Obama are insisting that any deal must include revenue from tax reform. Presumably, some of this revenue would come from limiting the charitable deduction which, under Section 170 of the Internal Revenue Code, provides a deduction to the nearly one-third of taxpayers who itemize their deductions for charitable contributions.
In a statement published Tuesday, Washington, D.C.-based Independent Sector urged the White House not to cap the charitable deduction at 28 percent.
“Even though the Administration has expressed a commitment to ensuring that the cuts do not fall disproportionately on those least able to bear them,” the statement read, “this action to cap the charitable deduction does not penalize those taxpayers who claim it, but the millions of individuals, families, and communities who rely on the programs and services provided by America’s nonprofit and philanthropic sector.”
The statement from Independent Sector noted that experts believe that a cap on the charitable deduction, when marginal tax rates for the wealthy were at 35 percent,would have reduced giving by $7 billion a year. With rates now at 39.6 for Americans earning more than $400,000 a year, that number is expected to be even larger.
The House Ways and Means Committee hearing will begin on Thursday, Feb. 14 at 9:30 AM in Room 1100 of the Longworth House Office Building. Individuals from the charitable sector who are interested in testifying can contact the committee by phone (202-225-5522) or at email@example.com using the subject line “charitable deduction.” Individuals who are not able to make the hearing are encouraged to submit written statements. Requests must be submitted by Thursday, Feb. 7.
You can find out more information at http://waysandmeans.house.gov/news/documentsingle.aspx?DocumentID=318995