The nonprofit sector is an important part of strong, thriving communities. The Charitable tax deduction is part of nonprofit organizations' ability to be successful in its unique role; distinct from, and frequently in partnership with government and for-profits.
The charitable deduction has been in place since 1917, providing a tax deduction for community members who contribute to nonprofit organization. It is available to any taxpayer who itemizes on their tax return.
Let's celebrate the centennial of the charitable deduction by making sure we don't go backwards. In fact, our goal is to extend the charitable deduction to all taxpayers, regardless of their itemizer status.
New proposals are surfacing that could have detrimental impact on charitable giving.
At the federal level, there has been a lot of excitement and enthusiasm about tax reform these few weeks. Importantly, the proposals that have surfaced, could have a detrimental impact on charitable giving because of the impact on the charitable deduction.
The United Framework released in late September of this year calls for dramatically increasing the standard deduction, as well as reducing the top tax rate. Doing so would reduce the number of filers who itemize their deductions (and therefore receive the full value of the charitable deduction).
This would reduce the number of itemizers from over 30 percent to only 5 percent of filers, who have the highest incomes. We know that many people will still make donations to 501(c)(3)s or religious organizations of their choice, various estimates predict charitable giving nationwide could be reduced by around $13 billion annually.
THE HARM TO THE CHARITABLE GIVING SEEMS TO BE UNINTENTIONAL.
Discussions with congressional delegates suggest this impact is an unintended consequence. There is substantial evidence showing that the amount people give is directly influenced by the economic incentives created in the tax code. When the value of the incentive is reduced, so are gifts to nonprofit organizations.
Help protect the charitable deduction that supports your mission by contacting your Senators and Representatives.
Tell them about your organization, its values and mission, and how important it is to have this giving incentive. Encourage them to extend the charitable deduction to all taxpayers, so that those who take the standard deduction have equal access to this opportunity to invest in their community.