February 23, 2006 | Read Time: 3 minutes
Congress is moving closer to a decision on the most important and largest piece of federal tax legislation for nonprofit organizations in years.
Charities and their lobbyists are in overdrive as they try to influence House and Senate members — including lawmakers who will work out vast differences between tax bills passed late last year by each chamber. On one controversial proposal, many charities find themselves at odds with each other over what Congress should do.
The Senate bill has many provisions for nonprofit groups that are aimed at cutting down on abuses of charity tax laws and encouraging charitable giving (The Chronicle, December 8, 2005), while the House bill has no provisions involving charities or donors.
Nonprofit officials who approve of the charity elements in the Senate bill worry that House members may balk at accepting them in a final bill, or accede to provisions that are designed to fight charity tax-law abuses, which would bring revenue to the Treasury, while rejecting provisions that are aimed at promoting giving, which would lose money for the federal government.
A key Senate provision is designed to increase donations to charity by allowing people who do not itemize deductions on their tax returns — more than two-thirds of Americans — to write off a portion of their charitable donations. Individuals could deduct the sum above $210 that they donate each year to nonprofit organizations; couples filing jointly could write off the amount that exceeds $420. The provision would be in effect for two years — 2006 and 2007 — unless Congress voted to extend it.
But many charities are on opposite sides over another provision in the Senate bill that would cause some people to lose part of their write-offs.
Donors who itemize deductions would no longer be able to claim deductions for cash and noncash gifts that together are worth $210 or less — $420 for couples filing jointly; they could write off only the portion of their annual charitable donations that exceed that sum.
Some organizations are concerned that a new floor on charitable deductions taken by donors who itemize could offset any new donations spurred from allowing people who do not itemize to claim deductions.
“We recognize that the avowed purpose of this floor is to support a theoretical expansion of giving, but we worry that proponents have been far too ready to accept theory as fact,” said a letter to members of Congress signed by more than 60 organizations, including the American Society for the Prevention of Cruelty to Animals, the National Catholic Development Conference, and the Association of Direct Response Fundraising Counsel.
“What we do know with certainty is most important: If this floor passes, it will be a major shift by Congress away from the salutary tax policy that grants taxpayers full credit for their support of America’s charities.”
Meanwhile, the United Way of America, which supports the Senate bill’s changes in the way people take charitable deductions, said in a new report that the provisions could result in an additional $180-million annually in contributions to United Ways across the country and billions of new dollars to charities of all kinds. The report is available online at http://national.unitedway.org.
The United Way of America said its research shows that extending the charitable deduction to people who do not itemize would increase giving to United Ways by $242-million annually.
“This increase will be somewhat offset by an expected $62-million drop in giving by itemizing taxpayers, who would face the new $210 floor for the first time,” the group said. “However, less than 6 percent of giving by itemizers to United Ways comes from donors who give less than the $210 floor to charity.”
The United Way of America plans to send members of Congress a letter supporting the provisions that has been signed by organizations that include the nonprofit coalition Independent Sector and the Salvation Army.
