Nonprofits and Taxes: Key Proposals

As Congress prepares to debate budget and tax policy, President Obama and House Ways and Means Chairman Rep. Dave Camp, a Michigan Republican, have each crafted plans that seek to raise revenue by imposing new tax rules that affect donors, foundations, and other nonprofits.

Key Obama Proposals

Charitable Tax Deduction

Would place a 28-percent cap on all tax deductions, including gifts to charity, for earners in the top tax brackets. The proposal would limit deductions for individuals with more than $200,000 in income and couples with more than $250,000 in income

The Wealthy

Taxpayers who earn more than $1-million would be required to pay no less than 30 percent of their income in taxes. They would continue to have an incentive to give because they could still deduct charitable donations from their taxable income.

Foundation Excise Tax

Would replace the current two-tiered excise tax on foundations with a single rate of 1 percent.

Key Camp Proposals

Charitable Tax Deduction

Would limit the charitable deduction to gifts that exceed 2 percent of a donor’s income.

Donor-Advised Funds

Organizations that administer donor-advised funds would face a 20-percent excise tax on money that is not distributed to charities within five years of deposit.

Executive Pay

Nonprofits would face a 25-percent tax if any of their top executives received pay exceeding $1-million.

College Endowments

Private colleges and universities would be subject to a 1-percent tax on investment income if they hold assets greater than $100,000 per student.

Foundation Excise Tax

Would replace the current two-tiered excise tax on foundations with a single rate of 1 percent.