A new bill in Congress would allow all American taxpayers to take the charitable deduction, regardless of whether they itemize their deductions. Unlike a similar measure put forth last year, it would not include a cap.
Permitting all taxpayers to take the charitable deduction is sometimes called a “universal deduction” or an “above-the-line deduction.” Introduced last week, the newest bill, called the Charitable Giving Tax Deduction Act, is co-sponsored by two House members, New Jersey Republican Chris Smith and Texas Democrat Henry Cuellar.
“Charitable organizations are the lifeblood of services to those in need in our society, and I am committed to a tax policy that amplifies their ability to serve our community,” Smith said in a statement.
The bill comes five months after President Trump signed into law the first comprehensive rewrite of the tax code in more than 20 years. Under the new law, the charitable deduction remains unchanged. Still, an increase in the standard deduction — to $24,000 for couples and $12,000 for single filers — means 21 million fewer taxpayers will itemize deductions, including the charitable deduction, according to the Tax Policy Center. That, in turn, is likely to suppress giving by at least a few billion dollars, according to multiple analyses. Americans gave $281.9 billion in 2016, according to the annual “Giving USA” study.
The idea of an “above-the-line” charitable deduction has been around for years. In October, as Congress prepared to vote on the 2017 tax bill, North Carolina Republican Representative Mark Walker introduced the Universal Charitable Giving Act of 2017. He, too, proposed extending the charitable deduction to all taxpayers, but with limits. Walker’s bill would allow individuals taking the standard deduction to write off up to $4,000 in donations; the limit for couples would be $8,000. At the time, nonprofit leaders called the proposal a good first step but warned the cap could temper some donors’ giving. If a couple taking the standard deduction could only write off $8,000, why give more than that?
The Walker bill was never added to the House version of the tax bill last year, despite lobbying by charity leaders. It could still be taken up and tacked onto a larger bill in the future.
‘Huge Push’
The new bill from Smith and Cuellar is exactly what nonprofits have been looking for, said Steve Taylor, senior vice president and counsel for public policy at United Way Worldwide and a major nonprofit lobbyist on Capitol Hill.
“This has really been, from the sector’s perspective, the consensus solution to the unintended consequences on charitable giving as a result of the tax reform law,” Taylor said.
He was frank about the chances of it advancing in Congress.
“It is going to take a huge push and big effort by the sector to get this legislation to move,” Taylor said. “Sometimes it takes a year or two to get legislation enacted. The No. 1 most important thing that local charities can do is ask their representative to sign on as a co-sponsor to this bill.”
In an op-ed published by the Chronicle in February, Eugene Steuerle, co-founder of the Urban-Brookings Tax Policy Center, said that nonprofit leaders need to mount a “long-term and broad campaign” to improve the image of the nonprofit world.
