Findings Friday | The Charitable Giving Deduction

August 02, 2013
| by Editor |

The Charitable Giving Tax Deduction finds itself at the forefront of our sector's policy discussion. (This deduction allows for those who have donated money and/or gifts to nonprofit institutions to receive partial reimbursements through tax breaks.) And it’s on the chopping block…again.

Headlining in 2012 as a potential casualty in the effort to avoid going over the fiscal cliff, the deduction was ultimately preserved, thanks in large to a national advocacy effort spear-headed by a coalition led by Independent Sector, a partner of GCN.

Midway through 2013, the charitable tax deduction is at risk again as part of the developing federal tax reform. Senate Finance Committee leaders have asked, in a letter, that each member of Congress “start with a ‘blank slate’ — that is, a tax code without all of the special provisions in the form of exclusions, deductions and credits and other preferences,” and make a case for which provisions to retain. Again, this has led to an ongoing campaign by Independent Sector, again, in partnership with GCN.

THE NUMBERS

According to a 2012 survey conducted by United Way Worldwide, “30 percent of Americans would reduce their giving levels.” Of that group, more than a quarter would slash their giving at least in half. The Network for Good’s Online Giving Study and 2012 Digital Giving Index show that more than 20% of online donations occur on the last two days of the year and average more dollars per gift, suggesting a link to the tax cycle and it’s giving-related benefits.

In an environment of increasing demand for nonprofit services and a relatively stagnant rate of growth for foundation giving, the charitable giving deduction alleviates monetary burdens of the sector, invests in our communities, and lessens dependency on governmental funding. Further, the United Way shows that two-thirds of adult Americans disapprove of reducing or eliminating the deduction, while nearly 80% believe it would have a negative community impact.

"30% of Americans would reduce their giving levels" [if the Charitable Giving Tax Deduction was axed.]
United Way Worldwide 2012 survey

 

IMPLEMENTATION SCIENCE

Although the deduction is being discussed conceptually at the national level, several states have experimented with reducing or eliminating it to boost tax revenue.  In op/ed pieces in The Hill and Huffington Post, Tim Delaney of the National Council of Nonprofits declared, “If the states serve as our policy laboratories, then the lab results are demonstrating conclusively what’s in the best interest of local communities.” Kansas, Maine, Minnesota, Montana, North Carolina and Oregon (among others) have all fully supported the charitable giving deduction, even while cutting or capping other itemized deductions. According to Delaney, Hawaii capped their deduction and “later found that an estimated $12 million in revenue to the state came at an unacceptable cost of at least $60 million per year in lost donations.” (They’ve since ended the experiment and restored the tax incentive.) Michigan and Missouri have found similarly negative outcomes after repealing the tax credit or letting it lapse, respectively.

So for Congress and the states still working on tax reform, it will be important to review the data, examine the state-level case studies, and always keep our communities’ needs at the forefront of the debate.

Tommy Pearce is Communications Coordinator at the Georgia Center for Nonprofits.

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