Alert

Members of the Nonprofit Sector Encourage Expanded Charitable Deduction Policies

March 21, 2022

On March 17, 2022, Senate Finance Committee Chair, Ron Wyden, convened a hearing to examine charitable giving and trends in the nonprofit (“NFP”) sector and discuss methods for promoting charitable giving in America. Senator Wyden stressed that “charity is one of the key incentives embedded at the heart of our tax code and a top priority for Democrats and Republicans on this committee.” Recognizing the continued need for support among Americans due to the hardships imposed by the pandemic, Senator Wyden noted his belief that “the charitable tax deduction is a lifeline, not a loophole.”

Senator Lankford referenced what he called the three main safety nets – Family, Community, and Government, praising the critical role of NFPs as part of the Community safety net.

The committee called key witnesses from the NFP sector to provide testimony on how they believe the government can best assist the NFP community in its mission to help the public. The witnesses included:

  • Daniel Cardinali, President and CEO of Independent Sector;
  • Susannah Morgan, CEO of Oregon Food Bank;
  • Una Osili, Ph.D., Efroymson Chair In Philanthropy, Associate Dean For Research And International Programs of Indiana University Lilly Family School of Philanthropy; and
  • Eugene Steuerle, Ph.D., Co-Founder of The Urban-Brookings Tax Policy Center, The Urban Institute’s Center on Nonprofits and Philanthropy of Urban Institute and ACT for Alexandria, a community foundation

The witnesses each had a different take on how the government can best support the NFP community in its mission to help the public.

  • Cardinali’s key priorities were the following: restore the employee retention credit, pass the Legacy IRA Act to expand tax-free distributions from individual retirement accounts, increase the charitable mileage rate (14 cents/mile) to mirror the business mileage rate (58.5 cents/mile), and create policy solutions to strengthen partnerships between the government and the NFP sector (Seat at the Table Initiative).
  • Morgan’s call to action to reduce hunger included reinstating the child tax credit, modernizing SNAP (Supplemental Nutrition Assistance Program) to reflect the true cost of healthy food, raising revenue by requiring the wealthiest taxpayers to pay what they owe, sustaining the charitable deduction for certain gifts of up to 100% of AGI, and increasing the amount that private foundation and commercial donor advised funds are required to distribute annually.
  • Osili raised concerns about the impact of the increased concentration of giving among high-income households on the NFP sector and strongly encouraged the use of charitable deduction incentives for individuals not itemizing their deductions (most Americans) in order to help bolster their role in the philanthropic sector.
  • Steuerle focused on how various approaches to the charitable deduction (unlimited, subject to a cap, subject to a floor, etc.) impact tax revenue received by the government as well as contribution revenue received by the NFP community, ultimately concluding that a universal deduction above 2% of AGI would increase charitable giving while raising revenues for government.

While many disagree about how government can best support the NFP sector and the effects that different tax policies may have in motivating donors, the critical importance of the NFP sector in assisting vulnerable Americans, especially during the recent pandemic seems unarguable. It will be interesting to see if any changes to the charitable deduction arise out of today’s hearing.

Access member and witness written statements submitted as part of the hearing here.