Federal Charitable Giving Incentive

The federal charitable giving incentive was significantly reduced under the 2017 federal tax law [1] because of the near doubling of the standard deduction, which results in a decline in the number of people who itemize. It is too soon to quantify the full extent of the impact that the changes under the new federal tax law will have on the ability of charitable nonprofits to raise the resources needed to provide the programs and services that fulfill their missions. It is imperative that Congress reverse the harmful effects by passing a universal, also known as a non-itemizer, charitable deduction to create a giving incentive for all taxpayers.

Why it Matters

Raising the standard deduction or capping all itemized deductions, including charitable giving effectively takes away incentives for donations to churches and synagogues, domestic violence shelters, early childhood programs, food banks, school alumni groups, and all other charitable nonprofits, and reduce the ability of charitable organizations to meet the increasing need for services in their communities.

Nonprofit organizations throughout the United States are dedicated to the public good; their work improves lives, strengthens communities and the economy, and lightens the burdens of government, taxpayers, and society as a whole. Maintaining the value of the charitable deduction is essential to the ongoing work of nonprofit organizations in delivering essential services, enhancing quality of life, and uplifting the spirit of faith, innovation, and inspiration in local communities across America.

Where We Stand

Charitable nonprofit organizations throughout the United States are dedicated to the public good; their work improves lives, strengthens communities and the economy, and lightens the burdens of government, taxpayers, and society as a whole. Consistent tax policies at the federal, state, and local levels are critical to the success of charitable nonprofits in pioneering and implementing solutions to community problems and aspirations. The National Council of Nonprofits is committed to preserving the tax-exempt status of organizations contributing to the well-being of their communities and strengthening and expanding incentives for individuals to give their time and money to the organizations whose missions they support. In practice, this commitment means … supporting existing, enhanced, and new tax and other incentives (including a non-itemizer deduction) at the federal, state, and local levels that encourage individuals to volunteer their time and contribute money to the missions of all charitable nonprofits and opposing floors, caps, or limits on existing charitable giving incentives.

Public Policy Agenda [2]

What Nonprofits Can Do

Help protect the charitable giving incentive that supports the work of nonprofits in our communities now and in the future by sharing your story here [3] and contacting your Senators and Representatives to tell them how the giving incentive translates into impact in your community. Let Congress know it can still preserve charitable giving incentives by enacting a non-itemizer or universal deduction to avoid the negative consequences resulting from the new federal tax law.

Status

The new federal tax law increases the standard deduction for individuals (to $12,000), couples (to $24,000), and heads of households (to $18,000), resulting in a decline in the number of those who itemize from 30% of taxpayers to approximately 13% of taxpayers, according to the Joint Committee on Taxation [4]. Experts estimate the change will shrink giving to the work of charitable nonprofits by $13 billion or more each year, costing 220,000 to 264,000 nonprofit jobs. Charitable and philanthropic organizations did not oppose doubling the standard deductions, but instead offered a solution to avoid the devastating consequences. To hold the work of charitable nonprofits harmless under the proposed changes, they proposed including a universal charitable deduction [5] to create a giving incentive for all taxpayers. Those efforts were not successful. The increase in the standard deduction expires after 2025.

Proposals to Alter the Charitable Deduction

Charitable Giving Tax Deduction Act (H.R. 651 [6]): The bipartisan bill, introduced by Representatives Chris Smith (R-NJ) and Henry Cuellar (D-TX), would enable all taxpayers to deduct charitable donations from their taxes, regardless of whether they itemize. The amount a taxpayer could deduct would not be capped. The introducers stated [7] they worked together "to ensure that taxpayers who want to make tax-deductible donations to charities have the greatest flexiblity possible to do so."
Universal Deduction for Charitable Giving (H.R. 1260 [8]): The bill would extend an uncapped charitalbe deduction to all taxpayers, regardless of whether they itemize. Rep. Danny Davis (D-IL) introduced the bill to "encourage and increase charitable giving."
CHARITY Act (S.1475 [9]): The Charities Helping Americans Regularly Throughout the Year Act of 2017 [10], introduced by Senators John Thune (R-SD), Bob Casey (D-PA), Ron Wyden (D-OR), and Pat Roberts (R-KS), amends the Internal Revenue Code to encourage charitable giving and ensure the value and scope of a charitable contributions not be diminished through tax reform. The legislation would ewould make four changes: (1) raise the current volunteer mileage rate, currently fixed at 14 cents/mile, to the rate for medical and moving expenses, which is regularly adjusted by Treasury and currently is set at 20 cents/mile; (2) require electronic filing of most Form 990s; (3) expand the IRA charitable rollover to allow for distributions to donor advised funds (DAFs); and (4) simplify the private foundation excise tax from the current two-tiered structure to a flat rate of one percent.