Nonprofits and Supporters Need to Make the Case for the Charitable Deduction

The push for tax reform continues to gain momentum, and the charitable deduction is not off limits. Many expect a tax reform bill to emerge shortly after the August Congressional recess, and officials have been busy.

In a letter to colleagues late last month, the Senate Finance Committee proposed a “blank slate” approach to tax reform, meaning a starting point that eliminates special provisions including exclusions, deductions, credits and other preferences.

However, the letter emphasizes that the blank slate is not the end of the discussion or the end product, and that some existing tax expenditures should be preserved.   But the assumption is that all special provisions are out unless there is clear evidence that they:

  • Help grow the economy;
  • Make the tax code fairer; or
  • Effectively promote other policy objectives.

Legislators have until July 26 to formally submit legislative language or detailed proposals for which tax expenditures meet the above tests and should be included in a reformed tax code. Special attention will be given to proposals that are bipartisan.

In addition, House Ways and Means Committee Chair Rep. Dave Camp (R-MI) and Senate Finance Committee Chair Sen. Max Baucus (D-MT) are on a national listening tour, which made its first stop Monday in Saint Paul, Minnesota. They are hoping to hear directly from Americans about “how to spark a more prosperous economy and make today’s broken tax code fairer for families and job creators.”

Nonprofit organizations and their supporters are encouraged to speak up about the value of the charitable deduction, either in its current form or perhaps in an alternate form that still incentivizes charitable giving. The Senate Finance Committee recently released a paper that outlines options for discussion and potential change around exempt organizations and charitable giving, which includes helpful information on a wide array of proposals for reforming the current deduction. It’s possible that one of these proposals could be on the table this fall.

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