December 11, 2012

Independent Sector Defends Charitable Deduction

Politico, a newspaper widely circulated in Washington, published a two-page ad from Independent Sector on Monday that provided a straightforward message to Congress and President Obama: "Don't push charities over the fiscal cliff."

The ad, signed by 945 organizations, urges Congress and the president to "preserve the charitable deduction's powerful incentive for giving" as they negotiate a deal to avert tax increases and spending cuts scheduled to begin January 2.

"Since 1917, our nation's tax system has strongly encouraged Americans to give back to their communities, and the broad concept of charity on which the deduction is based has given rise to a diverse and pluralistic set of organizations all dedicated to the public good," says the ad, which is an excerpt of a letter the nonprofits sent to Mr. Obama and House Speaker John Boehner.

The ad is part of a broader strategy to persuade President Obama and Congress to avoid legislation to limit or abolish charitable deductions.

Independent Sector declined to say how much it paid for the two-page advertisement, but in late November it sent an e-mail to its members seeking donations of $250 to $1,000 to pay for it. A Politico rate card for 2011 showed that a full-spread color ad cost $24,340, but did not specify rates for nonprofits.

The advertisement comes a week after more than 250 nonprofit officials lobbied members of Congress to protect the charitable tax deduction as part of the Charitable Giving Coalition.

White House officials have stepped up their pressure on nonprofit leaders as well. In three meetings last week, senior Obama administration officials asked nonprofit leaders to support the president's plan to raise the highest rate now paid, 35 percent, to 39.6 percent on the wealthiest taxpayers.

Mr. Boehner has rejected the concept and wants to produce more government revenue by closing tax loopholes and deductions.

White House officials have been telling nonprofit leaders that the Republican plan includes a proposal to place an annual limit on all itemized deductions, including the mortgage deduction, at $17,000 to $50,000 per taxpayer.

President Obama’s plan proposes to reduce the tax deduction that wealthy people get for their charitable gifts from 35 percent to 28 percent.

But some nonprofit leaders, including Diana Aviv, chief executive of Independent Sector, have resisted taking political sides on the issue. The Alliance for Charitable Reform issued a statement last week saying the White House should not be pressuring charities to join the "political wrangling" around the issue.

Independent Sector's letter to the president and Congress says that plans to limit the deduction would deter giving.

"We are deeply troubled by reports that an aggregate cap, whether a dollar-limit or percentage, on the value of the charitable deduction is under consideration as a potential short-term revenue solution during the lame-duck session," says Independent Sector's letter. "Research has suggested that a cap on the charitable deduction could reduce charitable giving by as much as $7-billion a year; this would come on top of the nearly $20- billion annual decrease in giving since the economic downturn began in 2007."