State Tax Reform in 2014 and Charitable Giving Incentives

State Tax Reform in 2014 and Charitable Giving Incentives

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Comprehensive tax reform remains a priority on several state legislative agendas in 2014, and nonprofits learned from past experience that such “reform” efforts could subject the charitable giving incentives in their states to artificial caps or attempts at restructuring. Governors in Kentucky, Nebraska, New York, and Oregon have identified tax reform as a policy priority in 2014, and other governors could advance similar goals in their budget proposals in the coming weeks and months. As a result of effective nonprofit advocacy, consensus among states in 2013 about the importance of charitable giving incentives holds an important lesson and warning for states wading into tax reform in 2014. Notably, legislators in Kansas, Minnesota, North Carolina, and elsewhere considered but ultimately decided against changes to charitable giving incentives that would have negatively affected the work of nonprofits and the communities they serve. Late last year, the Governor of Vermont spoke out against a proposal from the Legislature’s tax writing committees to limit state itemized deductions, including the charitable giving incentive, saying it violated his promise not to increase taxes. Legislators in Maine will be considering a bill this year to reinstate the full deduction for charitable donations retroactive to January 1, 2013. The proposal would undo the damage caused by the imposition of a $27,500 cap on total itemized deductions which was inserted at the last minute in the State’s 2014-2015 biennial budget.

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