Over the past several weeks, we’ve seen Americans step up to help their fellow men in a time of true crisis. Whether it’s by donating protective health equipment, volunteering to make a grocery run for an at-risk neighbor, or the thousands of health care workers putting patients’ health first, the spirit of American generosity is on full display.
Equally important to these efforts are the missions being carried out by charities across the country, which are enabled by donations from individuals that often make up most of a nonprofit’s operating budget. Under prior law, only about 10 percent of taxpayers received a tax deduction for their gifts to charity, while the other 90 percent who took the standard deduction did not. However, in the CARES Act passed last month, lawmakers signaled the importance of individual charitable giving in times of crisis by creating a temporary universal charitable deduction (UCD) for cash gifts, capped at $300, that would be available to that 90 percent.
The $300 UCD is a great first step and a welcome acknowledgement that the charitable deduction incentivizes more giving. However, I believe lawmakers can, and should, do even more to encourage giving at time when it is most needed. Some ideas: increase the cap or get rid of it all together; extend the window of time it can be taken to at least 2021, if not beyond; and let taxpayers claim their charitable gifts made up until this year’s filing deadline as a deduction on their 2019 returns.
The good news? These aren’t just lofty goals. Lawmakers on both sides of the aisle and both sides of the Capitol already introduced bills that would cover all of these, and ACR is working with our allies in the sector to advance these bills.
Coronavirus Help and Response Initiative Through Year (CHARITY) 2022 Act (H.R. 6490)
Sponsored by Rep. Mark Walker (R-NC), the CHARITY 2022 Act would increase the cap on the above-the-line charitable deduction from $300 to one-third of the standard deduction, or $4,000 for individuals and $8,000 for couples filing jointly. The tax break would apply to tax years 2020, 2021 and 2022. The bill is a version of Rep. Walker’s Universal Charitable Giving Act, which he has led the past two congresses and would create the same universal charitable deduction without an expiration.
On March 22nd during negotiations for the CARES Act, Senator James Lankford (R-OK) introduced a bipartisan amendment, similar to the Walker bill, that would increase the $300 limit on the universal charitable deduction for the remainder of 2020 to one-third of the standard deduction, so $4,000 for individuals and $8,000 for couples filing jointly. Cosponsors included: Senators Chris Coons (D-DE), Mike Lee (R-UT), Amy Klobuchar (D-MN), Tim Scott (R-SC) and Jeanne Shaheen (R-NH). The amendment is a version of the Universal Charitable Giving Act, which Senator Lankford sponsored in the 115th Congress and offered as an amendment during the 2017 tax reform process.
The amendment was not voted on during the consideration of the CARES Act, but we understand Senator Lankford and the other sponsors hope to include it in a future relief bill.
Save Organizations that Serve (SOS) Act
On March 27th, Representatives Seth Moulton (D-MA) and Brian Fitzpatrick (R-PA) introduced the SOS Act. While the bill text is still being finalized, the bill would, among other things, create a permanent above-the-line charitable deduction, likely without a cap, for nonitemizers. The sponsors are also contemplating allowing taxpayers to claim the deduction on their 2019 tax returns, which are now due in mid-July.
When the text is finalized, we will provide an update.
Rep. Danny Davis (D-IL) Bill (H.R. 1260)
In early 2019, Congressman Danny Davis introduced a bill to extend the charitable deduction to all taxpayers, regardless of whether they itemize. There is no cap and no expiration. The bill was in response to the falling number of donors and donations in 2018, and it has five cosponsors. Congressman Davis is a member of the House Ways and Means Committee, which has sole jurisdiction over the charitable sector in the House, so he is well-positioned to lead this bill.
Charitable Giving Tax Deduction Act (H.R. 651)
Also in early 2019, Congressmen Chris Smith (R-NJ) and Henry Cuellar (D-TX) introduced the Charitable Giving Tax Deduction Act, which would also extend the charitable deduction to all taxpayers, similar to the Davis bill mentioned above. The bill is a reintroduction of an identical bill the two leads introduced in the last congress. In addition to the two leads, the bipartisan bill currently has 32 cosponsors.
For more coverage of the policy response to COVID-19, check out the following:
- Joanne Florino, VP of philanthropic services at The Philanthropy Roundtable, alerts nonprofits to the under-the-radar proposals from House Democrats that would restrict lobbying for and require more reporting from corporations that accept COVID-19 assistance.
- A preliminary look at the provisions in the CARES Act that impact nonprofits.