Proposed Tax Bill Would Make Charitable Deduction Universal

Although the sweeping tax overhaul passed last year substantially changed the treatment of itemized deductions at the individual level, it left the charitable deduction in place. However, the legislation did not enact a universal charitable deduction that many in the philanthropic world had been pushing for.

On Thursday, Rep. Chris Smith, R-N.J., introduced the Charitable Giving Tax Deduction Act, which would allow all taxpayers the option to write off donations to charity on their taxes, whether or not they choose to itemize. Rep. Henry Cuellar, D-Texas, co-sponsored the bill.

Under Smith’s legislation, the amount of charitable donations would not be capped.

“This bipartisan bill not only encourages us to help our fellow neighbors, but it also makes sure than taxpayers can receive their due deduction for charitable giving if they choose not to itemize,” Cuellar said in a statement.

Last year, Independent Sector and the Council on Foundations joined other nonprofit and philanthropic organizations around the country to advocate for a universal charitable deduction.

“A true universal deduction is critical to correcting the impact of last year’s tax legislation,” Vikki Spruill, president and chief executive of the Council on Foundations, said in a joint statement with Independent Sector following the bill’s introduction.

The tax bill increased the adjusted gross income limitation for charitable cash contributions from 50% to 60% and proposed no changes for noncash gifts — effective for taxable years beginning after Dec. 31, 2017, and expiring for taxable years after Dec. 31, 2025.

It also eliminated the alternative gift substantiation, which in some instances allowed recipient organizations to file a separate document with its annual IRS return rather than provide a contemporaneous gift receipt to donors for contributions exceeding $250 — effective for taxable years beginning after Dec. 31, 2016.

Last year, the Council on Foundations estimated that the number of taxpayers and the amount they claim in charitable deductions would fall by some 40%, or $95 billion, under the House version of the tax bill, citing a report by the congressional Joint Committee on Taxation.

“At its core, our nation’s charitable giving policies should encourage and enable those small and medium-sized donors who serve as a powerful engine in the sector’s ability to assist communities,” Spruill said. “This legislation brings those givers back into the fold by expanding the charitable deduction to millions more.”

A statement from Smith’s congressional office noted that a consortium of charitable and faith-based organizations and philanthropic networks supported the bill, among them:

• Agudath Israel of America
• Union of United Orthodox Jewish Congregations of America
• New Jersey Catholic Conference
• United Way Worldwide
• Animal Welfare Institute
• National Association of Charitable Gift Planners
• Faith & Giving Coalition
• American Littoral Society
• New Jersey YMCA State Alliance
• Alliance for Charitable Reform
• Humane Society Legislative Fund

“This bill helps us live up to the idea that charitable giving is ingrained in our national identity,” Daniel Cardinali, president and chief executive of Independent Sector, said in the joint statement with the Council on Foundations.

“Expanding the charitable deduction to all taxpayers will ensure that more people actively participate in building better futures for themselves, their neighbors, and their communities.”