Charities Concerned about Congress’s Tax Reform Proposals

A coalition of charitable organizations is calling on Congress to protect the charitable deduction as leaders of Congress’s tax-writing committees step up their efforts to forge comprehensive tax reform.

The Charitable Giving Coalition has sent a letter to House Ways and Means Committee chairman Dave Camp, R-Mich., and ranking Democratic member Sander Levin, D-Mich., expressing concern that some of the tax reform options in a report last week issued by Congress’s Joint Committee on Taxation included proposals that could reduce charitable giving (see Congress Reviews Tax Reform Suggestions).

The report summarized various provisions of the Tax Code and suggestions that were sent to House Ways and Means Committee working groups tasked with various aspects of tax reform, including charitable giving. Among the ideas were the Obama administration’s proposed 28 percent cap on itemized deductions, hard dollar caps on charitable deductions, converting the charitable deduction into a tax credit, and imposing a floor threshold for charitable contributions.

“We are particularly concerned about options on the table that would unravel the charitable deduction and hurt our communities,” the Coalition’s letter said.

The Coalition’s letter argues that any changes to existing policy on charitable deductions would reduce giving significantly and increase economic hardship for communities and individuals in need. For example, the 28 percent cap included in President Obama’s budget proposal would reduce donations by billions of dollars, the Coalition pointed out, citing research by the Urban-Brookings Tax Policy Center estimating more than $9 billion in lost charitable donations.

Of the other proposals, the Coalition argues that a dollar cap on itemized deductions would likely be exceeded by many taxpayers before they are even able to claim a charitable deduction. Replacing the charitable deduction with a 12 percent tax credit would result in a loss of more than $9 billion per year in donations. Imposing a 2 percent adjusted gross income floor on the charitable deduction would result in the loss of $3 billion a year in donations.

“We simply cannot afford to experiment further with deduction for charitable contributions,” the letter continued. “Such a move would severely disrupt the crucial work of nonprofits in our communities—developing medications, improving education and health, protecting the environment, creating jobs, enhancing arts and culture and much more.”

The Coalition is a diverse group of more than 60 nonprofits, foundations and other charitable organizations, including the American Red Cross, the American Institute for Cancer Research, the Giving USA Foundation, United Way Worldwide and Volunteers of America.

As part of its effort to educate lawmakers and the public about what is at stake, the coalition launched the Web site ProtectGiving.org last month (see Charities Worried about Obama Budget Plan). Last week, the Coalition launched a Twitter account, @ProtectGiving.

As the tax reform debate continues, the Coalition plans to remain active in making sure lawmakers understand what is at stake for communities and charitable giving, including through new platforms launched last week.

Last week, Camp and Senate Finance Committee Chairman Max Baucus, D-Mont., launched TaxReform.gov, a new Web site seeking input on the issue, and a new Twitter account, @simplertaxes (see Congress Launches Tax Reform Web Site and Twitter Page).