Preservation of an unlimited charitable deduction garnered wide support from Senate leaders after more than 200 officials from various nonprofits paid a visit to Capitol Hill last week to lobby lawmakers.
They warned senators that any limitations to the charitable tax deduction in the context of tax reform would have negative consequences. Senators John Thune, R-S.D.C, and Ron Wyden, D-Ore.—two members of the Senate Finance Committee who help oversee tax policy—sent a letter last week to committee chairman Max Baucus, D- Mont., and ranking Republican member Orrin Hatch, R-Utah, urging them to protect the current charitable deduction. As lawmakers head into an intense period of debate over tax reform and deficit reduction, the letter underscores growing bipartisan congressional support for the nearly 100-year-old tax incentive that encourages charitable giving. The letter is being circulated for additional signatures from other members.
“We write to you to underscore the importance of protecting the full value and scope of the charitable deduction during a comprehensive rewrite of the tax code,” Thune and Wyden wrote in the letter. “Analysis has repeatedly shown that proposals to cut, cap, or limit the charitable deduction could cause charitable donations to decline by billions of dollars annually. Worse yet, weakening the charitable deduction would most hurt the adults and children who receive vital charitable services from organizations like soup kitchens, after-school programs, and medical research projects, just to name a few.
“In many cases, the government would be required to step in and fund those services now being provided through private generosity,” the letter continued. “Accordingly, preserving the charitable deduction is also prudent as a matter of broader fiscal policy. We believe the federal government must affirm its long-standing dedication to encouraging private acts of charity and compassion, especially when our charities and the people they serve are facing so many challenges.”
The Charitable Giving Coalition, the group of not-for-profits that have united behind the lobbying effort, said it is encouraged by the senators’ contention that the charitable deduction is not about the donors, but what donors’ dollars do to support worthy causes in America’s communities. The statement of support reframes the issue to reflect the impact of the charitable deduction outside of Washington.
“America has a remarkable tradition of giving back. It is a reflection of our society’s values”, said Father Larry Snyder, president of Catholic Charities USA, in a statement. “Our communities need policies that help encourage charitable giving, not discourage support of our neighbors in need.”
Members of the Charitable Giving Coalition—a group of more than 60 nonprofits, foundations and other charitable organizations serving every state in the countrymet with nearly 150 congressional offices throughout the day on November 20, dubbed “Protect Giving Day,” to share their perspectives about the role and impact of the charitable sector in communities every day.
“We applaud Senators Thune and Wyden for their recognition of the central role of private charitable giving in strengthening our civil society and for their willingness to be catalysts for public, bipartisan support for the charitable deduction,” said Adam Meyerson, president of The Philanthropy Roundtable.
The Coalition has also launched a new Protect Giving channel on YouTube along with a petition drive to head off any possible limitations on the charitable deduction. Charity and foundation leaders are also sharing an infographic that purports to illustrate the ripple effects of the charitable sector throughout communities.
While the letter from Thune and Wyden is encouraging to the group, it noted that the fight to protect the charitable deduction is not over as lawmakers search for sources of revenue in the tax reform process. The coalition argues that any limits on the charitable deduction would have “devastating impacts” on giving and communities. When giving goes down, jobs are lost, disease research stymied, economic development stunted, support services for the most vulnerable eliminated, and education, arts and recreation opportunities diminished, according to proponents of the deduction.
“Limiting the value of the charitable deduction would hobble the capacity of charities to provide assistance to families and individuals in need,” said Stacy D. Stewart, U.S. president of United Way Worldwide. “Reductions in charitable services would come as federal and state governments continue to cut funding for social programs, and would amount to a double hit to children and families in need.”
“Government cutbacks are already hurting our nation’s most vulnerable communities. To couple them with a reduction in charitable funding would be devastating,” said Vikki Spruill, president and CEO of the Council on Foundations.
At a congressional staff lunch briefing with Coalition leaders and tax policy experts, new research was shared from an upcoming report about the recession’s impact on charitable giving and the potential impact of limits to the charitable deduction. Arthur Brooks, Ph.D, president of the American Enterprise Institute, said that charitable giving stands at pre-recession levels and may not grow again strongly for several years. In addition, a proposal for a 28 percent cap on the charitable deduction could cause giving to decline by nearly $10 billion in the first year, the coalition argues.
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