Washington Proposals that Affect the Charitable Deduction

Final Version of the Tax Cuts and Jobs Act: H.R. 1, or The Tax Cuts and Jobs Act, was officially signed into law by President Trump on December 22, 2017. This follows both the House and Senate passing the final legislative text of the bill on December 20, 2017, as it was released by the Conference Committee. The majority of the bill went into effect on January 1, 2018.

The final version of the bill includes several provisions important to the charitable sector:

  • Doubled standard deduction to $12,000 for individuals and $24,000 for marrieds until 2025
  • Increased AGI limits to 60 percent for cash contributions to public charities and certain private foundations
  • Repeal of Pease limitation until 2025
  • Doubled estate tax exemption to $10 million until 2025
  • Repeal of exception to the substantiation requirement for gifts over $250 when the donor organization reports the gift; effectively requires all donors to substantiate gifts over $250

While doubling the standard deduction lowered and simplified taxes for millions of Americans, it also eliminated their ability to deduct charitable giving, potentially reducing both the number of charitable givers and the total amount given to charities. In order to restore the charitable deduction and expand it to more taxpayers, leaders from the philanthropic and charitable communities have urged Congress to pass what is often known as a “universal charitable deduction.” Several members of Congress have introduced legislation to do just that, including:

Charitable Giving Tax Deduction Act: In January 2019, Rep. Henry Cuellar (D-TX) and Rep. Steve Smith (R-NJ) introduced the Charitable Giving Tax Deduction Act of 2019 in the House of Representatives. The bill would allow taxpayers to take an “above the line” deduction for charitable contributions, making it available to taxpayers who do not itemize. The bill has gained bipartisan support, and is identical to legislation introduced by Reps. Cuellar and Smith in 2018.

Universal Charitable Giving Act: In October 2017, Rep. Mark Walker (R-NC) introduced the Universal Charitable Giving Act of 2017 in the House of Representatives. The bill would extend the charitable deduction to non-itemizers, which would be capped at one-third of the standard deduction. The legislation would also preserve the current charitable deduction for those who itemize. On November 14, Senator James Lankford (R-OK) introduced the Senate companion to the Universal Charitable Giving Act.

H.R. 1260: In February 2019, Rep. Danny Davis (D-IL) introduced a bill that would create a universal charitable deduction to allow all taxpayers, regardless of whether they itemize their deductions, to deduct their charitable donations. Rep. Davis is a longtime member of the House Ways and Means Committee – which has sole jurisdiction over charitable issues – and is well-positioned to lead this effort. The bill is nearly identical to the Charitable Giving Tax Deduction Act. It has the support for seven Democratic House members.

Universal Giving Pandemic Response Act: In June 2020, a group of six senators introduced the Universal Giving Pandemic Response Act, which would expand the cap on and extend the availability of the universal charitable deduction that was included in the COVID relief bill, known as the CARES Act. It would increase the $300 cap on the temporary universal charitable deduction to one-third of the standard deduction, so about $4,000 for individuals and about $8,000 for married couples filing jointly. Senators James Lankford (R-OK), Chris Coons (D-DE), Mike Lee (R-UT), Amy Klobuchar (D-MN), Tim Scott (R-SC) and Jeanne Shaheen (D-NH) are championing the bill and are working to get it included in the next round of COVID relief legislation.

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