While awaiting the tax plan President Trump has promised to present in the next few weeks, nonprofit leaders from across the country gathered on Capitol Hill on Thursday to urge lawmakers to protect the charitable deduction.
Christopher Gates, executive vice president of the Council on Foundations, was one of about 200 charity leaders from 37 states who met with members of Congress. It is unclear, Mr. Gates says, whether Mr. Trump’s plan will differ from a proposal offered last summer by Republican lawmakers or if he’ll provide a new vision on taxes.
“Everybody’s waiting to see if it is a separate announcement or a version of the ‘blueprint,’ " on tax policy that congressional Republicans have circulated. “The question is how in synch the administration is with Congress.”
A Crimp on Giving
The talk on taxes from both the White House and the legislative branch has nonprofits concerned. Mr. Trump has previously floated tax plans that nonprofits see as a full-frontal assault on giving. Although the House Republican blueprint preserves the charitable tax deduction, many nonprofit leaders warn that it could indirectly put a crimp on giving by reducing the number of taxpayers likely to itemize their charitable gifts to claim a deduction.
During the campaign, Mr. Trump proposed capping all itemized deductions, including the one for charitable gifts, at $100,000 for individuals and $200,000 for married couples. He would also introduce a higher standard deduction, which means that taxpayers who don’t itemize their taxes would be able to reduce their taxable income by more than they can today.
The plan circulated by congressional Republicans would not impose limits on the charitable deduction, but, like Mr. Trump’s proposal, it would enact a higher standard deduction.
That worries nonprofit fundraisers who say the higher deduction offers taxpayers less incentive to give as a way to reduce their tax bills. The Tax Policy Center, a nonpartisan research organization run jointly by the Brookings Institution and the Urban Institute, predicted Mr. Trump’s plan would reduce giving by at least 4 percent.
Currently, about 30 percent of people who file tax returns itemize. The Charitable Giving Coalition, a 175-member group of nonprofits and associations that arranged Thursday’s visit to Capitol Hill by nonprofits, has noted its concern that the House’s tax blueprint says the higher standard deduction would drop that number to 5 percent.
Differing Viewpoints
Despite the concerns many charity leaders have expressed about giving incentives, Mr. Gates said he was heartened by a meeting he had less than two weeks ago with Rep. Kevin Brady, chairman of the House Ways and Means Committee, which drafts tax legislation. Mr. Brady, a Texas Republican, told him that the charitable tax deduction has “broad and deep” support from members on both sides of the aisle. Unprompted, Mr. Brady said he was interested in “making the charitable deduction universal,” Mr. Gates said.
Such a policy would place a line on individual tax returns that would allow all Americans to deduct charitable gifts, even if they don’t itemize. Doing so would be fairly expensive for the federal government. A 2013 analysis by the Committee for a Responsible Federal Budget found that allowing all taxpayers to claim the charitable deduction would result in a loss of $70 billion in tax revenue.
The committee did not project how charitable contributions would be affected if all taxpayers were allowed to take the deduction. However, the group, which promotes reducing the federal deficit, projected that making the deduction available to people who don’t itemize but adding a “floor” of $500 on charitable contributions — meaning that only donations above that amount would qualify for a deduction — would simultaneously produce federal revenue of about $3 billion a year and increase charitable giving by $1 billion annually.
‘Be Cautious’
The Capitol Hill meetings, which celebrated the 100th anniversary of the charitable deduction, were promoted online using the hashtags #protectgiving.
A big part of the Charitable Giving Coalition’s message to lawmakers: Don’t rush.
Congressional leaders have said they will begin working on a broad tax overhaul after they repeal or replace the Affordable Care Act. The goal, they say, is for the House and Senate to vote on a tax measure by the Labor Day recess.
The coalition is united in trying to preserve the charitable deduction. But changes on other tax issues, such as the estate tax and tax rates, could depress charitable giving, warned Jim Cooper, president of the United Ways of the Pacific Northwest.
“We need to have enough time for our communities to understand the impact of these proposals,” said Mr. Cooper as he paused in the hallway of a House office building after meeting with Rep. Suzan DelBene, a Washington Democrat who represents some of the United Way members Mr. Cooper leads.
Maggie Osborn, chief strategy officer of the Forum of Regional Associations of Grantmakers, agreed. While her group does not have a position on tax items other than the charitable tax deduction, she hopes lawmakers will consult her group’s members about how other changes in the tax code could impact nonprofits.
“We’re asking them to be cautious that when they pull one lever, they don’t have unintended consequences,” in other areas of tax policy.
Tim Delaney, president of the National Council of Nonprofits, said the message charities had for lawmakers reminded him of the lyrics of a children’s song his daughter used to sing.
“The shin bone is connected to the thigh bone ...” he said, explaining that seemingly unrelated items of tax policy can have an impact on each other.
Mr. Delaney said members of his group sent letters and emails on the issue to lawmakers and talked with them by Skype. He joined about 20 members of his organization on Capitol Hill. While most of his meetings were with staff members of the House Ways and Means and Senate Finance committees who are already fluent in tax policy, he said the visits were still important.
“Having live people in those offices reinforced the seriousness of the issue,” he said.
More visits to Capitol Hill are planned. Ms. Osborn’s group, for instance, will sponsor a “Foundations on the Hill” event for three days beginning March 20.
By then, perhaps, the contours of the tax debate will be more clear. But nonprofit leaders note that it’s hard to tell, because Mr. Trump has not approached governing like his predecessors have. The United Way’s Mr. Cooper said participants on the trip heard the same message coming out of many of the more than 125 Congressional offices they visited: “There is no crystal ball in D.C.”
Note: This article has been corrected to say that the source of the 5 percent figure was the House blueprint document, not the Charitable Giving Coalition.
