Flexible Giving Accounts Legislation Getting Another Look

Last week, the Everyday Philanthropist Act that provides for the creation of “Flexible Giving Accounts” was reintroduced to the House Ways and Means Committee with bi-partisan support. The bill would allow employers to set up a fund for employees to donate directly from their paychecks up to $2,700 annually pre-tax to make charitable contributions to the charity of their choice.

The bill is aimed at creating a tax benefit for the estimated 27 million taxpayers who no longer itemize their deductions due to the Tax Cuts and Jobs Act changes in the Code. These “above the line” contributions to charity would also reduce employment taxes and provide a much needed increase in charitable giving. The philanthropic community is very supportive of the Act and sees it as a win for individuals, employers, and charities.

Under the Everyday Philanthropist Act, the number of Americans who would benefit could rise to 95 percent, meaning that the majority of everyday, working Americans would be afforded the same benefits for giving [as the wealthy]. ~America’s Charities

However, some commentators note that important details have been left out of the legislation. Privacy considerations have been raised in the case of employer-administered FGAs, with questions being raised as to whether an employee’s choice of controversial charities to support could lead to backlash against the employee or could lead to bad publicity for the employer. Having an outside administrator usually obviates this concern. Other commentators have noted that the creation of these types of funds lines the pockets of wealth managers and the software companies that design the programs necessary to properly manage FGA funds. The legislation does not address who shoulders these operating costs, nor whether the fund will be eligible to invest contributions prior to passing funds on to the charitable organizations.

Details aside, the charitable sector agrees that Congress needs to incentivize individual charitable giving again. In the wake of the Tax Cuts and Jobs Act, Giving USA reported that individual charitable donations fell by more than $3.2 billion in 2018. Individual giving represents two-thirds of the charitable sector’s support—and without an incentive like Flexible Giving Accounts or the Universal Charitable Deduction, the sector will likely see the decline in donations continue.

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