Amid widespread concerns about the effects proposed federal budget cuts could have on nonprofits, Independent Sector is doubling down on the charitable deduction and calling for the tax incentive to be extended to all taxpayers regardless of whether they itemize.
The membership association, a key lobbying force for nonprofits in Washington, launched a campaign Tuesday called Giving100 that commemorates the centennial of the deduction and aims to make its benefits universal. Under current tax law, approximately 30 percent of taxpayers itemize their charitable gifts. Most are in the top brackets.
Independent Sector has not drafted policy language for expanding the tax incentive, nor has a specific legislator stepped forward to champion the idea, says Dan Cardinali, the association’s chief executive. But he hopes Giving100 empowers charities to do their own lobbying in favor of expanding the deduction by providing them with videos, informational graphics, and talking points.
The messaging highlights the results of a recent Independent Sector poll, which found 75 percent of Americans in favor making the tax break for donors universal. Charities are invited to pledge support on the Giving100 website for the universal deduction and encouraged to contact legislators.
Expanding access to the charitable deduction is “absolutely congruous” with demanding adequate government funding for the social sector, said Mr. Cardinali, because both efforts will lead to a “good society” with appropriate contributions from nonprofits, the government, and corporations.
Among the nonprofits that have already pledged support is the Alliance for Strong Families and Communities, whose chief executive, Susan Dreyfus, echoed Mr. Cardinali.
“I think this is the perfect moment to be pushing for this,” she said. Considering the proposed large government budget cuts, “the need for neighbors to help neighbors has never been higher.”
Balancing Act
Extending the charitable deduction to all taxpayers would likely have to be paired with a policy to offset the accompanying loss of federal revenue, such as a minimum deduction threshold, said Joseph Rosenberg, senior research associate at the Urban-Brookings Tax Policy Center at the Urban Institute. Such a threshold — perhaps $1,000 — could help prevent situations such as taxpayers claiming small gifts that would be difficult for the Internal Revenue Service to verify, like a $100 donation of clothing.
Independent Sector will not take a stance on revenue and other concerns related to expanding deduction benefits until the White House formally proposes a tax plan, Mr. Cardinali said. But the association supports providing the IRS with adequate resources that “allow for appropriate and robust regulation,” he added. “Funding cuts to the IRS are bad for the social sector.”
Foggy Outlook
President Trump’s proposal on the campaign trail to cap charitable deductions has made nonprofit leaders nervous. Hundreds of charity and foundation leaders have visited Capitol Hill in the last two months, meeting with members of Congress to discuss potential budget and tax overhauls.
It’s too soon to predict the likelihood of a universal charitable deduction policy coming to pass, Mr. Cardinali and Mr. Rosenberg said.
“The political environment is still pretty foggy to us about how much tax reform is going to take place,” Mr. Cardinali said.
But at least legislators are paying attention.
“It is definitely game time on tax reform,” said Hadar Susskind, senior vice president of government relations for the Council on Foundations. “Staffers are calling the advocacy organizations and not the other way around. You can really feel that difference.”
And the anniversary of the charitable deduction has not gone unnoticed. On March 17, representatives John Lewis and Patrick Tiberi, co-chairs of the House Philanthropy Caucus, introduced a resolution commemorating the centennial of “one of the oldest preferences in tax law.” The measure says the deduction “empowers individuals to give of their personal income for the benefit of the public” and serves as a “dynamic force” for channeling private resources into tackling societal needs.
Alongside Giving100, Independent Sector is organizing charity leaders in 11 states whose elected officials work on congressional tax-policy committees: Colorado, Idaho, Illinois, Massachusetts, Michigan, Minnesota, Missouri, Ohio, Oregon, Texas, and Utah.
Association representatives discussed their tax goals with members of President Trump’s transition team prior to the inauguration and have also met with aides to Rep. Kevin Brady, chairman of the House Ways and Means committee. Mr. Brady did not immediately return a request for comment.
