The $1.7 trillion spending package President Biden signed into law shortly before the New Year left the biggest item on charities’ legislative agenda out in the cold.
For the past several years, advocates for nonprofits have been pushing lawmakers to extend a tax provision that expired in 2021 that allowed people who don’t itemize their tax bills to write off up to $300 for their charitable gifts. They saw Congress’s last business of the session, a huge bill funding all aspects of the government, as their big chance to restore the tax break and increase the amount people could write off annually to $4,000 for individuals.
Action on the change fell victim to a larger disagreement between Democrats and Republicans on how to treat tax provisions that have nothing to do with charity. Unable to reach agreement, lawmakers decided to scrap a whole set of tax proposals, including the one designed to boost giving.
“It was collateral damage,” said Sandra Swirski, founder of Integer, a lobbying firm represents the Philanthropy Roundtable, Council of Michigan Foundations, and others.
Looking Ahead
Charities have been advocating for enhanced giving incentives ever since major tax legislation in 2017 doubled the standard deduction, a move that meant all but the wealthiest taxpayers itemized and therefore had access to the charitable deduction. A temporary measure to allow for a $300 deduction for charitable gifts for all taxpayers expired at the end of the 2021 tax year.
Swirski has some confidence that Congress will act on the deduction next year because so many of the tax provisions, known as extenders, favored by businesses were also left out.
“All is not lost,” she said. “We are still coupled with those business extenders. And there is tremendous pressure, not just from nonprofits but from the business community, to get those extenders passed.”
With the House controlled by Republicans and the Senate by Democrats in the next session of Congress, it will be difficult to move legislation through both chambers, Swirski and others said. But she sees opportunities to attach the charitable-deduction legislation to bills that are seen as a high priority, including the Farm Bill and negotiations on raising the debt limit that will take place in the spring and summer.
Partisan Wrangling
Partisan politics will make passage of any legislation next year a difficult feat, according to Brian Flahaven, vice president for strategic partnerships at the Council for Advancement and Support of Education. Flahaven is chairman of the Charitable Giving Coalition, a group of nonprofits that lobbied hard for the expanded deduction.
In November, coalition members visited 60 congressional offices to push for the measure, and more than 600 groups, including nonprofits in each state, signed a letter urging lawmakers to act.
The bill that nonprofits hoped would be included in the end-of-year spending bill had 19 sponsors in the Senate and 29 in the House. Supporters included Republican Senators Marco Rubio of Florida and Roy Blunt of Missouri and Democrats Sherrod Brown of Ohio and Raphael Warnock of Georgia.
“We have great champions in the Senate for this, and we put a ton of effort the last few weeks into getting the issue in front of lawmakers,” Flahaven said. “We were pretty well positioned.”
The inability of members of the two parties to reach an agreement frustrated nonprofit observers, including David Kass, vice president for government affairs at the Council on Foundations.
“It’s just not something that you can control,” he said. “It’s just hard to get things through, even when there’s bipartisan support.”
Still, Kass saw an upside to the action in the waning days of the year. Instead of simply passing a bill that temporarily funds government programs for a month or two, Congress is poised to take action on a budget for the full fiscal year. That, he said, is welcome news for nonprofits that struggle when federal support is budgeted on an ad hoc basis.
