On October 12, 2017, at the conclusion of the annual conference of The National Association of Charitable Gift Planners (NACGP), a group of approximately 70 members of NACGP were organized to go to Capitol Hill to present the case for a universal charitable deduction.
This issue was previously discussed in the blog titled Charitable Giving: Potential Changes Ahead, but its importance increases as tax reform is actively being considered. We believe that tax reform should take good tax policy and make it better, and should include incentives to encourage Americans to give more money to charities. American voters strongly support incentives for charitable giving. A 2016 national survey of voters, for example, found that 88% believe Congress should make it easier to deduct charitable contributions from their taxes. Seventy-nine percent believe that all taxpayers should be able to take advantage of the charitable deduction.
The concern expressed with some of the current tax proposals revolve around the potential doubling of the standard deduction making it less likely that taxpayers will receive any tax benefit from their charitable giving. The charitable deduction is now an itemized deduction that only provides taxpayer benefit if the total of all itemized deductions exceeds the standard deduction. It has been estimated that the number of itemizers is currently around 30% of tax filers but that would decrease to only 5% of filers with proposed plans, giving ordinary Americans no tax incentive for giving. A study conducted by the Indiana University Lilly Family School of Philanthropy estimates that the doubling of the standard deduction and potentially lower marginal tax rates would decrease national charitable giving by up to $13 billion dollars or perhaps 5% of charitable giving. Allowing all taxpayers to receive tax benefit for charitable giving (through a deduction before adjusted gross income or “above-the-line”) could increase charitable giving from current levels by as much as $4.7 billion.
There is currently some recognition in Congress of the unintended negative effects on giving, which is encouraging. HR 3988 was introduced by Rep. Mark Walker from North Carolina and is titled “Universal Charitable Giving Act of 2017.” The bill proposes that for individuals not itemizing their deductions they could take an above–the–line deduction for up to one-third of their standard deduction. This would certainly be a step in the right direction but we hope Congress will go further with an unlimited standard deduction.
NACGP members met with various Congressional offices to discuss charitable giving. They were paired with a group primarily from Virginia and met with the staff of Rep. Donald McEachin from Virginia’s 4th district, Rep. Thomas Garrett from Virginia’s 5th district, Rep. Dave Brat from Virginia’s 7th district, and the offices of Senators Warner and Kaine. All of the offices were receptive to charitable giving but were limited in their response as there was not an overall tax bill proposed at the time of the meeting. The Congressional offices were made aware of HR 3988 and the possible unintended consequences of doubling the standard deduction.