CRS Reports on Temporary Nonitemizer Deduction & Increased Contribution Limits

As part of a report on Temporary Individual Tax Provisions ("Tax Extenders") released a couple of weeks ago, the Congressional Research Service discussed the temporary nonitemizer charitable contribution deduction and temporary increased limits for charitable contributions. In that discussion, CRS made two interesting points.

With respect to the nonitemizer deduction, CRS noted (page 5):

The $300 nonitemizer deduction is likely to have a limited effect on charitable contributions because of its relatively small cap. One study estimated that the induced charitable giving from the nonitemizer deduction would be $100 million, a relatively negligible effect, because most taxpayers who donate are already contributing amounts in excess of $300. [citing “New Charitable Deduction in the CARES Act, Budgetary and Distributional Analysis,” blog post, Tax Policy Center, Penn-Wharton Budget Model, March 27, 2020, https://budgetmodel.wharton.upenn.edu/issues/2020/3/27/charitable-deduction-the-cares-act.]

With respect to the increased contribution limits, CRS noted (page 6; citations omitted):

Lifting caps on the deductions for both individuals and businesses can provide an incentive for additional charitable giving. Evidence on the response of charitable giving by individuals has been widely studied with mixed results. A review of this evidence suggests that an enhanced charitable deduction is likely to increase charitable giving by less than the associated revenue loss. Lifting the limits affects a relatively small share of charitable giving, and the revenue pattern suggests that much of the initial revenue loss (77%) can be attributed to an accelerated realization of carryovers.21 With charitable giving estimated at $427.4 billion in 2018, if all of the permanent revenue loss led to an increase in charitable giving by the same amount (i.e., approximately $1 billion), additional giving would be 0.3% of expected giving prior to the current economic slowdown.

Lloyd Mayer