Senate Leaders Question Charitable-Deduction Plan

The leaders of the Senate’s powerful Finance Committee aren’t offering much praise for President Obama’s plan to limit how much wealthy donors can deduct from their federal taxes for charitable gifts.

Sen. Charles Grassley of Iowa, the senior Republican member of the committee, said in a statement today that the plan would probably hurt the nonprofit world.

But Mr. Grassley, who has been an advocate for tightening tax regulations for nonprofit groups, stopped short of offering a clear prediction about what Mr. Obama’s plan might mean.

“Calculating the new deduction would be so complex that the impact on giving is difficult to determine, but given the economic crisis and the important role charities play in responding to the crisis, any proposal that might reduce charitable contributions seems counterproductive,” Mr. Grassley said.

Max Baucus, chairman of the committee, expressed concern about the president’s plans to change the rules governing itemized deductions — though a spokeswoman declined to comment on the specifics of the concerns Mr. Baucus, a Montana Democrat, has raised.

The controversy over Mr. Obama’s proposa has at least one observer hopeful that it will lead to more sweeping debate over the relationship between the federal government and charities.

Dean Zerbe, a former aide to Mr. Grassley who works as a lawyer in Washington, said the proposal amounts to a “gut-punch” for charities. But, he said, “the proposed limitation on deductions for charitable giving does provide an opportunity for Congress to bring leadership to bear and reexamine what should be the priorities for tax incentives for charitable giving.”