White House Proposes Tax Breaks to Spur Giving to the Nation’s Charities

By GRANT WILLIAMS

While most of the national attention last week focused on the White House’s

plan to help faith-based organizations, President Bush says his administration is dedicated to a massive effort to help expand private giving to all charities through major changes to the federal tax code.

“The independent sector is on the threshold of a great renaissance,” proclaims a White House report called “Rallying the Armies of Compassion.” The document provides a blueprint of Mr. Bush’s agenda for philanthropy. “We anticipate that America’s nonprofit sector will emerge as perhaps the most dynamic arena for creative problem solving in the 21st century,” it states.

Mr. Bush noted that trillions of dollars are likely to be transferred from today’s retired generation of older Americans to their children. “We must act affirmatively to capture this wealth for purposes of generating social renewal,” the White House report says.

While the federal government must not get in the way of charities and their volunteers, Mr. Bush says that the government can and should do more to help foster philanthropy.

“Tax law promotes civil society by encouraging individual and corporate donations to a wide range of charitable and religious organizations through tax deductions,” the White House says. “This administration will help water the garden of civil society through innovative measures.” (To read the complete text of Mr. Bush’s agenda, go to http://www.whitehouse.gov.)

New Tax Deductions

The proposal with the biggest potential impact on all charities is Mr. Bush’s plan to pass legislation that would allow people who do not itemize deductions on their federal income-tax returns to write off charitable gifts.

Roughly 70 percent of Americans cannot claim a tax deduction for their gifts because they do not itemize. Such a write-off was permitted in the early 1980’s, but Congress removed the option in 1986 when it revamped the tax code.

Charities have been asking lawmakers to restore the deduction ever since, and have come close to getting their wish. The bill has bipartisan support: In 1999, the Republican Senate passed a bill providing a partial deduction, and last year President Clinton endorsed legislation that would allow people who don’t itemize to write off a portion of their charitable gifts.

Many charity leaders say that Mr. Bush’s support of a full deduction for those who do not itemize could make final passage likely, especially because of the timing: A hefty federal surplus makes the expensive tax break more affordable for the federal Treasury.

Mr. Bush’s proposal, if enacted, could spur an additional $14.6-billion a year in charitable gifts, according to an analysis done by the accounting firm PricewaterhouseCoopers for Independent Sector, a coalition of more than 700 charities and grant makers.

Also, the report — which can be found on Independent Sector’s Web site, http://IndependentSector.org — predicts that 11.7 million more Americans would become donors if people who do not itemize their tax returns were offered a charitable deduction.

Its report, which provides a state-by-state estimate of projected increases in giving under the Bush plan, uses a computerized model of charitable giving by individuals to predict future behavior. Estimates are based, in part, on the charitable contributions claimed by people who didn’t itemize in 1986, the last year such a deduction was permitted.

Sara E. Meléndez, president of Independent Sector, notes that a Congressional committee previously estimated that restoring the deduction to non-itemizers would cost the federal Treasury an estimated $75-billion over a decade. But Ms. Meléndez says her organization’s new report predicts the provision would wind up adding $160-billion to nonprofit coffers during the same period of time.

Other Tax Measures

Mr. Bush also endorses another proposal long sought by charities and fund raisers that also has bipartisan support on Capitol Hill: legislation to allow donors over age 59 to give money to charity directly from their individual retirement accounts without incurring taxes.

To encourage more corporate gifts, the White House will press Congress for legislation to increase the annual limit on charitable deductions taken by corporations from 10 percent to 15 percent of a company’s taxable income.

In addition, Mr. Bush wants the House and Senate to approve legislation that would encourage states to offer charity tax credits to individuals and companies — up to 50 percent of the first $500 for individuals, and up to $1,000 for married couples and corporations — for gifts to antipoverty groups. Under the plan, states could use federal welfare money to offset the costs of the tax credits.

CHARITABLE GIVING AND BUSH’S TAX PROPOSAL