Government Relations

Charitable Deduction Resource Center

(11-14-2011) As the Joint Select Committee on Deficit Reduction (the so-called Super Committee) is rapidly approaching a critical November 23rd deadline to make recommendations to Congress on finding $1.2 trillion in reductions to the federal deficit, various proposals to eliminate or reduce the charitable deduction are very much alive.

Republicans, for example, recently unveiled a proposal that calls for eliminating certain tax deductions including possibly the charitable deduction in exchange for a permanent reduction to the marginal rates set during the Bush Administration. Such a change in tax law could result in a net revenue increase of $300 billion over ten years. For their part, Democrats have circulated a plan that calls for spending cuts and a tax reform process to raise $650 billion in new revenue. This tax reform process would be undertaken by the two tax-writing committees next year and would include a reduction trigger if the two committees fail to act. Notably, the trigger would include severe caps (perhaps as low as two percent of a taxpayers adjusted gross income) on itemized deductions for high-income taxpayers.

Now, more than ever, is the time to act to save the charitable deduction.

PPPs Position:
The federal government must continue to support philanthropy. Tax incentives for charitable giving, such as the charitable deduction, send an essential message about the value our society places on voluntary giving and the important role of charitable organizations in meeting critical individual and community needs. The true beneficiaries of the charitable donation are not the generous Americans who make charitable gifts, but all citizens whose local communities, nation, and world are made better through the work of charitable organizations.

Americans do not make charitable gifts for tax reasons, but tax incentives encourage more giving and make bigger gifts possible. Tax incentives for charitable giving send a message that helping others is a core value to be encouraged. The charitable deduction is not a matter of providing a reward or something of value to the taxpayer; rather it is a matter of encouraging those with financial means to use their wealth to help those without. This voluntary redistribution of wealth is a cornerstone of Americas philanthropic heritage.

Take Action:
PPP urges Congress to reject any proposals that would eliminate or limit the value of the charitable deduction. Take action now by contacting your Members of Congress, and make sure they do all they can to protect the charitable deduction.

Start by identifying your two Senators and one Representative. Contact these offices directly or call the Congressional switchboard at 202-224-3121 and ask to speak to your elected officials. Please use the following talking points:

I strongly urge you to oppose any proposal that would eliminate or limit the value of the charitable deduction. The Administrations proposal to cap itemized deductions at 28 percent for higher income taxpayers, for example, would have long-lasting negative consequences on charitable organizations that millions of Americans rely on for vital programs and services.
It is estimated that this proposed cap on itemized deductions could cost charities as much as $7 billion per year in charitable contributions.
Americans strongly support the charitable deduction. In an April 2011 Gallup poll, 71 percent opposed eliminating the charitable deduction to lower the overall income tax rate, and 68 percent opposed eliminating the charitable deduction to reduce the federal budget deficit. More people supported the charitable deduction than other popular deductions like the home mortgage interest deduction or state and local tax deduction.
The difficult economy has had a significant impact upon Americas charitable community. According to the IRS, Americans claimed deductions for $172.9 billion in charitable contributions in 2008, a 10.6 percent drop from 2007. More recent IRS estimates project that Americans only claimed $148.6 billion in charitable contributions in 2009, an additional 14 percent drop. It is also worth noting that the IRS data indicates that high income taxpayers (those earning more than $200,000) contributed $49.6 billion to charities in 2009.
When the economy stagnates, nonprofit organizations and their services are needed the most. Charitable organizations bridge the gap by serving our communities and those in need when budgetary constraints hinder state and federal governments from providing similar services.
Not only does reducing charitable giving harm the nonprofit sector, but it also hurts the people typically the poor who rely upon these services. Despite arguments to the contrary, wealthy Americans will not bear the brunt of any elimination or limitation of the charitable deduction, but Americas poor will.
Studies indicate that donors give for many reasons incentives such as tax deductions being among them. While Americans do not make charitable gifts only for tax reasons, tax incentives make more and larger gifts possible.
Recent history and the actions of the federal government reveal that tax incentives do, in fact, affect charitable giving. During times of crisis, such as the natural disasters like Hurricane Katrina, the 2008 Midwest flooding and the 2010 Haiti earthquake, Congress regularly passes charitable giving incentives to make it easier for Americans to give donations and other support to nonprofits serving individuals, families and communities in need. Those incentives resulted in increased levels of resources to those charities caring for the victims.
For the sake of the economy and Americas disadvantaged, we need to encourage all individuals, regardless of income and wealth, to give more to charitable organizations. Eliminating or 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 the world over.
Again, I urge you to oppose any proposal that would eliminate or limit the value of itemized deductions for charitable contributions.

Additional Information:
Please visit the following links to get more information about proposed changes to the charitable deduction.

Statement by the American Council on Gift Annuities (October 2011). This statement, written on behalf of ACGA by Conrad Teitell, was submitted to the Senate Finance Committee for their 10-18-11 hearing �Tax Reform Options � Incentives for Charitable Giving�.
Senate Finance Committee Hearing on Charitable Giving Incentives (October 2011). The Finance Committee held an important hearing on charitable giving incentives, and the issue of reforming the charitable deduction took center stage with committee members and witnesses debating various proposals to dramatically alter the deduction. A complete recording of the days hearing, statements from Senators, and written testimony from witnesses are available on-line.
Nonprofit Coalition Letter (September 2011). PPP joined once again with some of the nations biggest charities to urge Congressional leaders to protect the value of the charitable deduction. This latest coalition letter was sent to all members of the Senate Finance Committee and the Super Committee as they reviewed jobs legislation calling for a cap on the deduction for certain individuals and families.
Nonprofit Coalition Letter (July 2011). PPP joined with over 20 national organizations to urge Congressional leaders to protect the value of the charitable deduction by opposing any efforts to reduce or cap the value of itemized deductions for charitable contributions. This letter was sent to Capitol Hill just as lawmakers began to engage in negotiations on the debt ceiling and deficit reduction.
CBO Report on Changing the Tax Treatment of Charitable Giving (May 2011). This report from the Congressional Budget Office analyzes a number of options for significantly changing the tax treatment of charitable giving. It examines specific changes that can be grouped into four categories, including adding a floor to the current deduction, making the deduction available to taxpayers who do not itemize, replacing the deduction with a 25 percent non-refundable credit, and replacing the deduction with a 15 percent non-refundable credit. Each of the latter three options come in three variations: no floor, a $500 floor ($1,000 for families), or a two percent of income floor.
Gallup Poll on Charitable Deduction (April 2011). This national public opinion poll shows that 7 in 10 Americans oppose eliminating the charitable deduction. This strong level of support holds true even when proposed elimination of the deduction is framed as part of a plan to either lower the overall income tax rate or as a way to reduce the federal budget deficit.
Presidents Deficit Reduction Framework (April 2011). The President announced this aggressive framework, which calls for a $4 trillion reduction in the deficit to come from a combination of spending cuts and tax reform (including significant revisions to the charitable deduction).
Presidents FY 2012 Budget (February 2011). The Presidents most recent budget plan once again calls for a 28 percent cap on itemized deductions, including the charitable deduction, for individuals earning more than $200,000 a year and couples earning more than $250,000 a year. The budget plan indicates that savings from this proposal will increase tax revenues by roughly $320 billion over 10 years and will be used to offset the cost of a three-year patch to the current Alternative Minimum Tax.
National Commission on Fiscal Responsibility and Reform (December 2010). This Presidential Commission released a report that recommended eliminating the charitable deduction and replacing it with a 12 percent non-refundable tax credit that would only be available for amounts beyond two percent of a taxpayers adjusted gross income.

Blueprint for Economic Recovery and Fiscal Responsibility (Economic Policy Institute) (November 2010). This plan calls for replacing the charitable deduction with a 25 percent tax credit for all charitable gifts, regardless of the donors income, and available to itemizers and non-itemizers alike.

Debt Reduction Task Force (Bipartisan Policy Center) (November 2010). This plan calls for replacing the charitable deduction with a 15 percent refundable tax credit.