02 February 2015

Mixed Signals From the President in Budget Proposal

WASHINGTON, D.C.— The Alliance for Charitable Reform (ACR) issued the following statement upon the release of President Barack Obama’s budget proposal for fiscal year (FY) 2016.

“The charitable community is receiving mixed signals from the White House about charitable giving,” Sandra Swirski, executive director of ACR, said. “On one hand, the President’s budget would hamper charitable giving by proposing a 28 percent cap on the charitable deduction, despite studies showing that this cap would reduce gifts to charities by as much as $9 billion in one year. On the other hand, the President’s budget somewhat safeguards charitable giving by carving out gifts to charities both from his Buffett Rule proposal and his new capital gains tax.”

President Obama’s capital gains proposal, which was first introduced alongside this year’s State of his Union address, would exclude assets donated to charitable organizations from an increased capital gains rate on upper-income earners. The so-called Buffett Rule institutes a minimum 30 percent tax on incomes of $1 million or more, but allows for a charitable deduction providing credit against taxes owed. However, the deduction in the Buffett Rule is capped at 28 percent.

“We encourage the President to reevaluate his insistence on capping the charitable deduction, which is a lifeline for Americans in need and not a taxpayer loophole,” Swirski added. “ACR will continue to work with our colleagues in the sector to educate our elected officials on the unique nature of the charitable deduction.”

The President also proposed streamlining the private foundation excise tax at 1.35 percent. ACR is encouraged by this proposal but strongly supports establishing a flat rate of one percent.

“While we applaud the President for recommending a simplified private foundation excise tax, he has done so at a rate that will ultimately increase taxes on many grantmaking nonprofits. We believe the tax needs to be streamlined at a flat one-percent rate, such as the proposal that passed the House of Representatives last year,” Swirski concluded.

The release of President Obama’s FY2016 budget comes as ACR is preparing for the 2015 ACR Summit for Leaders. The budget proposal is sure to be among the topics discussed.