Official Statement of Philanthropy New York on:
Tax Reform that Sustains and Grows Charitable Giving
Since 1917, the federal charitable tax deduction has provided a tax deduction for donations made to nonprofit organizations by taxpayers who itemize their tax returns, currently roughly one-third of all Americans. The charitable deduction is a vital incentive that significantly encourages charitable giving. The charitable deduction is an especially efficient method of directing resources to communities, because for every $1 that the federal government forgoes in revenue from the deduction, nonprofits receive $3 from individual taxpayers utilizing the charitable deduction. As noted by the United Philanthropy Forum, “It is unlikely government could find a better way to leverage private investment in community services.”
In its deliberations on tax reform, Congress is considering proposals that would reduce the value of the charitable deduction, potentially jeopardizing billions of dollars in donations to support nonprofits that serve millions of people every day. While Philanthropy New York took a position in 2013 advocating for “maintaining the full deductibility” for donations to charity, that statement does not take into account several potential directions that tax reform deliberations may take, such as raising of the standard deduction, the adoption of caps or floors on the charitable deduction and the possibility of a “universal charitable deduction.”
Philanthropy New York supports efforts to revise the tax code in ways that will further incentivize charitable giving and opposes efforts that would reduce charitable giving, including the following:
- PNY supports extending the charitable deduction to all tax payers, otherwise known as the “Universal Charitable Deduction.” According to Independent Sector research, “Expanding the charitable deduction to non-itemizers, as a stand-alone provision, increases total giving by between 1.3 percent and 4.3 percent and has a negligible effect on total tax revenue (decrease by 0.41 percent to 0.47 percent).”
- PNY opposes raising the standard deduction, unless a “universal charitable deduction” is extended to all taxpayers or other offsetting changes are made to the tax code to maintain the impact of the current deduction on charitable giving. Raising the standard deduction would significantly decrease the number of Americans utilizing the charitable deduction, resulting in decreased charitable giving.
- PNY opposes caps on the charitable deduction. Research indicates a cap on the charitable deduction would reduce the amount of giving from those in the highest income tax bracket.
- PNY could support a floor on the charitable deduction that increases giving. A floor would decrease the number of middle- and low-income tax payers who would be able to utilize the charitable deduction; however, Urban Institute research indicates that a well-crafted floor might actually increase overall giving by incentivizing giving levels to meet the floor.
Philanthropy New York supports efforts to revise the tax code in ways that will further incentivize charitable giving and opposes efforts that would reduce charitable giving.
Date of recommendation by the Public Policy Committee: October 18, 2017
Timeframe of open member commentary period: October 26- November 10, 2017
Date of official approval by Board of Directors: November 15, 2017