Wednesday, November 29, 2023

A Follow-Up on Late Night Musings: More on The Charitable Act

Lo and behold, I opened up Tax Notes Today (subscription required) this morning and found an article on the Charitable Giving Coalition’s position on the renewal of the above the line charitable deduction, which I discussed in my post yesterday.

The Tax Notes article notes that the Charitable Giving Coalition sent a letter to the House Ways and Means Committee and Senate Finance Committee in support of The Charitable Act. The Charitable Act reinstates the above the line charitable deduction, increases the limitation from $300 to one-third of the then standard deduction, and permits gifts to donor advised funds.  In support of the need for the Act, the Charitable Giving Coalition noted in its letter (cited in Tax Notes) that

Giving trends from 2020 and 2021, when the temporary non-itemizer charitable deduction was in place, indicate the deduction works. According to the Fundraising Effectiveness Project, charitable gifts of $300 — the cap of the temporary deduction in 2020 — increased by 28 percent on the last day of the year. Furthermore, interim Internal Revenue Service data for tax year 2021 shows 47 million households used the non-itemizer charitable deduction for donations totaling around $18 billion. A higher deduction cap, as included in the Charitable Act, would encourage even more charitable giving in communities across the country.

While I am generally in favor of reviving the above the line deduction, I’m dubious that this thinking holds. The primary beneficiaries of the above the line deduction are lower and middle income tax payers, If the “universal” deduction (which isn’t universal because it’s not available to those who itemized…) is increased, then the question is whether individuals who don’t itemize have the financial ability to make significantly larger contributions.  There is a marked difference in $300 and $4600, the estimate for the higher deduction.  I’d also be curious to know how much of the $300 giving is giving that’s already occurred and is just being captured for the first time in tax statistics – things like the weekly contributions to the church plate and such not.  Maybe the last $25 dollars given on Giving Tuesday, but I’d be curious where the incentive effect of increase in the universal deduction tails off.  Probably an interesting project to look at…

Curiously, eww

https://lawprofessors.typepad.com/nonprofit/2023/11/a-follow-up-on-late-night-musings-more-on-the-charitable-act.html

Current Affairs, Federal – Legislative, In the News | Permalink

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