Legislation Introduced to Incentivize Giving at All Income Levels

Congressional efforts to reform the tax code are anticipated to come to a head in the weeks after Thanksgiving. As that season of giving approaches, legislation has been introduced to reward charitable donations from individuals of all income levels in hope that such a policy may ultimately be wrapped into a final tax reform package.

This week, Sen. James Lankford (R-Okla.) introduced a companion bill to Rep. Mark Walker’s (R-N.C.) Universal Charitable Giving Act. Under the current tax code, and in the current versions of the Senate and House tax reform bills, only taxpayers who itemize on their IRS Form 1040 can benefit from a deduction for charitable donations. However, the bill put forward by Walker and Lankford would allow those taking the standard deduction to also qualify for an additional charitable deduction up to one-third of the standard deduction. Under current law such a universal deduction could account for approximately $2,100 for individuals and $4,200 for married couples.

A number of nonprofit leaders have expressed concern that, while the charitable deduction is maintained in the House and Senate tax packages, an increased standard deduction could harm giving, particularly from those in lower and middle income tax brackets.

“Inexplicably, people who don’t itemize their taxes are taxed on income they give to charity,” wrote Mary Sellers, U.S. President of United Way Worldwide, this week. She warned that a resulting decline in giving for local community charities would increase demand for government social services. “In the wake of the outpouring of donations to hurricane relief efforts, it’s hard to imagine wanting to negatively impact the longstanding U.S. tax policy that encourages private charitable giving,” she said.

Upon introducing the Universal Charitable Giving Act last month, Walker said, “Many Americans believe that people – not the government – offer the best solutions to solve the ailments that face our society. Strong families, strong churches, strong communities. These are the foundation of our nation, and by supporting charities we can make our communities and our country a better place for Americans from all walks of life.”

Lankford similarly pointed to the importance of the work of faith-based and other charitable groups in communities. He said, “The government should not be the ultimate solution to the social problems we face as a nation…. All Americans should be offered the same incentive and tax benefit to give for what they believe in, not just the wealthy. I encourage my colleagues in the Senate to seriously consider this proposal as part of the tax debate.”

  • Find out more about Universal Charitable Giving Act here.

By Aaron Mercer, Vice President of Government Relations

Published: November 17, 2017

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