10 February 2017

ACR News 2.10.17 – Charitable Deduction Available to Only 5 Percent of Americans?

>> Federal: Washington Roundup
>> Federal: Charitable Deduction in Tax Reform
>> Federal: Letter to the Editor
>> Federal: ACR Summit for Leaders
>> Consider This: Outside the Box
>> Top ReadsThis May Be the Last Year You Get a Charitable Deduction

Washington Roundup

The House and Senate were in session this week, and while Senators remain busy with their Cabinet confirmation workload, House Republican leaders and tax writers are making the rounds to speak in support of the controversial border adjustability proposal from their tax reform blueprint. House Democrats convened beginning on Wednesday for their annual retreat in Baltimore, where they discussed party strategy and messaging. While there was no big drama, reports indicate there is an apparent divide among those Democrats who want to continue to resist the President and those who might consider working across the aisle.

Last week, following a boycott by Senate Finance Democrats, Committee Chairman Orrin Hatch (R-UT) suspended quorum rules to pass Treasury Secretary nominee Steve Mnuchin’s appointment out of committee with no Democrats present. Then early Friday morning, the full Senate held a procedural vote that advanced Mnuchin’s nomination. Mnuchin, who would have a large role in tax reform, is expected to be confirmed by the Senate on Monday.

Charitable Deduction in Tax Reform 

Ways and Means Republicans are reportedly still working on legislative language for a tax overhaul. You may recall in the House GOP tax reform blueprint the charitable giving incentive was mentioned, but authors were not explicit on whether whatever incentive they ultimately include in tax reform would cover the full value of the current deduction. The blueprint also includes an estimate that with an increased standard deduction, the amount of taxpayers who itemize will decrease from about 30 percent of taxpayers to 5 percent, severely limiting who can take the charitable deduction. See the Consider This section below. In response, ACR will join with colleagues in the sector next week for the 100 Years of Giving Fly-In during which nonprofit leaders will gather on Capitol Hill to advocate for maintaining the full scope and value of the charitable deduction, and possible expansion to all taxpayers, in tax reform.

Letter to the Editor 

On January 30, Judd Gregg wrote in The Hill that there should be trade-offs in tax reform between how low rates can go and how high limits on deductibility can go on big items such as mortgage interest and charitable giving. We were concerned with the assumption that the charitable deduction will certainly be limited, as a result our communications team responded with a letter to the editor, the full text of which can be found here.

ACR Summit for Leaders 
You are invited to the ninth annual Alliance for Charitable Reform Summit for Leaders!

March 21, 2017
8:15 a.m. – 11:45 a.m.
Continental breakfast to be served at 7:45 a.m.
Hyatt Regency Washington on Capitol Hill
400 New Jersey Avenue, NW
Washington, D.C. 20001

The next two years will be a time of vulnerabilities as well as opportunities for the philanthropic sector. The likelihood of sweeping tax reform has risen dramatically with the election of a Republican president along with Republican control of both the House and the Senate. As part of the tax reform discussion, we’ve already seen lawmakers propose provisions that may threaten charitable giving. With many tax issues still undecided, nothing is completely on or off the table.

The ACR Summit for Leaders is part of Foundations on the Hill. Programming features leaders in philanthropy, policy experts, and congressional staff.

Registration: Click here for session descriptions and for registration information. Attendance at the ACR Summit is free of charge.

Consider This – Outside the Box

As we reported a few weeks back, we were delighted to attend an event where House Ways and Means Chairman Brady said he was looking at ways to encourage more low-dollar donors to charity, continue to encourage current giving and unlock new giving.

All welcome news.  The problem is, the House Tax Reform Blueprint – the document House Republicans are working off of in crafting tax reform legislation – won’t necessarily accomplish all of those goals.

Here’s why. The blueprint expands the standard deduction for taxpayers, something that will greatly simplify tax filings for a whole lot of people. That’s the good news. Here’s the not-so-good news for charitable giving – in doing so, the blueprint aims to “reduce the number of taxpayers who itemize their deductions from about one-third under current law to approximately 5 percent under our simpler, fairer, and flatter tax system.”

We can’t deny that simplifying tax preparation makes sense. However, if the number of taxpayers who itemize goes from one-third to 5 percent, we worry that the 28 percent that no longer itemize will rethink the size and timing of their gifts. So while the structure of the charitable deduction may not change, the number of people who give more—at least in part because of the deduction—will change.

Houston, that’s a problem, but not one that is insurmountable. We need to be thinking outside the box about ways to preserve – or even expand – tax incentives for giving.  Under the scenario sketched by the blueprint, that might come in the form of a charitable deduction that can be taken before taxpayers take the standard deduction. Keep following us as tax reform, with all of its twists and turns, unfolds.

Top Reads

Please feel free to email us at info@acreform.com if you have any questions, stories or topics you would like us to include in our newsletter.

Looking for ARCHIVES of this newsletter? Click here.