News and analysis
August 10, 2010

N.Y. Governor Signs Charitable-Gift Limits Into Law

Abigail E. Disney, a New York philanthropist and filmmaker, says New York's limits on the charitable tax break wealthy residents can claim will hurt giving.

New York Gov. David A. Paterson has signed into law a revenue bill passed by the state’s legislature that limits charitable deductions for “high earners”—a move that has nonprofits and a prominent New York philanthropist worried about a related significant loss in contributions to charity.

The law puts new limits on tax deductions for people with state- adjusted gross income above $10-million annually—about 3,500 taxpayers in New York. Those residents are now able to write off only 25 percent of their charitable contributions on their state income taxes rather than the previous 50 percent.

The provision in the budget plan runs for three years, including the current 2010 tax year.

The charitable-deduction pro­vision could provide up to $100-million in revenue during the current fiscal year for the state, which has had a budget crisis and has sought additional funds. But nonprofit organizations and donors think the change will lead many wealthy people to give less money to charity.

“Charities have been hit from every side in the last three years, including seeing decreases in public funds,” said Abigail E. Disney, a New York philanthropist and film maker.

“The last thing on earth charities need is a disincentive from the government to people who are their donors, especially their biggest donors. Because the biggest donors are the people who are least hurt by this economic downturn and more likely to be there every year with the kind of general- support money and reliable money that these organizations need.”

Ms. Disney—the grandniece of Walt Disney—said she would not be directly affected by the new state budget law because her annual state adjusted gross income falls beneath the provision’s threshold. But she said she understands the situation of colleagues, friends, and others who will be affected.

“There is no question that tax consequences do affect people’s decision -making about giving,” she said. “It’s not the primary reason anyone does it. But it’s right there in second place, and it’s a big piece of the equation for any donor, for anybody, at any level. So to throw a disincentive into this particular mix at this particular moment just seems counterproductive and ill advised.”

Ms. Disney said the new limit on deductions imposed by the New York law is significant. “It’s not a small amount, they are reducing it by half.”

Other money-starved states are likely to see New York’s action and consider following along, she said. “New York is a leader in philanthropy, so what New York does I can’t imagine other states won’t follow,” she said, adding: “Congress could go looking at it, too.”

Ms. Disney is co-founder and co-president of the Daphne Foundation in New York City, a family fund that makes grants to “grass-roots and emerging organizations” that fight poverty in New York City.

In 2008 she started a charity, Peace Is Loud, to encourage women around the world who seek to end conflicts using non-violent methods. The charity grew out of Ms. Disney’s first film, “Pray the Devil Back to Hell,” a documentary about Liberian women who worked to end the civil war.

Ms. Disney was in the headlines last month when she joined the philanthropist Julian Robertson and other high-wealth individuals, through an organization called United for a Fair Economy, in asking Congress to move quickly to immediately reinstate and strengthen the federal estate tax.