Legislative Affairs Report

Legislative Affairs Report

NEAHP Board of Directors Meeting of June 14, 2019

Submitted by Richard P. Solomon, CFRE

  1. Tax Law Could Slash Giving by $19 Billion a Year, Report Says (from Chronicle of Philanthropy, 6.7.19) by Michael Theis

The 2017 federal tax overhaul could cut the number of households donating to charity by 2.6 million per year and reduce charitable giving by up to $19.1 billion per year through 2025, according to a new report.

The study was commissioned by Independent Sector, a group that advocates on behalf of nonprofits, and was conducted by the Lilly Family School of Philanthropy, at Indiana University, in partnership with the Wharton School of Business at the University of Pennsylvania.

The Tax Cuts and Jobs Act, the most significant overhaul of the tax code in decades, reduced the number of households that itemize their income-tax returns. That provision left nonprofits wondering how much their individual donations may be hurt.

The study, "Charitable Giving and Tax Incentives," also simulated how five proposed changes in tax policy could affect individual charitable giving. The following figures are for 2021 only:

  • A "non-itemizer deduction" that extends the charitable deduction to all taxpayers could increase charitable giving by as much as $26.2 billion, an 8.2-percent increase over expected giving under current laws. It is also predicted to increase the number of households that donate to charity by an estimated 7.7 percent. It would reduce overall tax revenue by $21.6 billion.
  • A non-itemizer deduction with a $4,000 cap for single filers and an $8,000 cap for joint filers would increase charitable giving by $17.4 billion and raise the number of households donating to charity by nearly 8 percent. It would reduce tax revenue by $19.9 billion.
  • A proposal under which an individual would get a 50-percent tax deduction on charitable donations if they amount to less than 1 percent of their annual gross income, and a 100-percent deduction if they exceed 1 percent, would raise charitable giving by $24.9 billion and increase the number of households that donate by 5.2 percent. It would reduce tax revenue by $17.9 billion.
  • A 25-percent tax credit for charitable donations by non-itemizers would increase charitable giving by up to $36.9 billion and increase the number of households that donate by 12 percent. It would reduce tax revenue by $33 billion.
  • A more complex proposal that would provide a tax deduction of 200 percent for single filers making less than $20,000 a year and joint filers making less than $40,000, along with less generous tax benefits for higher-income taxpayers, would increase charitable giving by $29.2 billion and increase the number of households donating by 9.5 percent. It would reduce federal tax revenue by $24.3 billion.

The report didn’t endorse any specific option for boosting charitable giving.

“We care about a policy that will increase the amount of dollars donated to charities. We care about policies that will increase the number of people donating to charity,” said Allison Grayson, director of policy development and analysis at Independent Sector. She added, “We also care about the cost it incurs to the government.”

Total giving in the United States was $410 billion in 2017, according to the most recent estimate from Giving USA. Of that total, $286.7 billion was from living individuals, and the rest was from bequests, foundations and corporations.

  1. Impact of Five Charitable Giving Policy Proposals (from Independent Sector, 6.4.19)

Independent Sector’s experience advocating on behalf of the charitable community has shown us that tax policies have direct and indirect effects on Americans’ charitable contributions to all types of 501(c)(3) nonprofit organizations, from places of worship to local food banks. Between 2000 and 2014, tax policy experts documented a decline in the number of people donating to charity, particularly among low- and middle-income households. Studies have estimated recent tax policy changes also may be associated with a decline in the number of households that donate. The concentration of charitable giving among a small proportion of households poses concerns for the long-term fiscal health of the sector and a threat to its ability to reflect the breadth and interests of society.

Independent Sector believes enabling all Americans to access charitable giving incentives through the tax code is a promising solution to these concerns. Since 1917, the U.S. tax code provides incentives to Americans to invest in their communities by allowing taxpayers to deduct their charitable gifts. Currently, the charitable deduction is only available to those who itemize on their taxes. In other words, every year, the roughly 10% of taxpayers that file itemized returns receive a reminder that their charitable gifts count. Rather than incentivizing giving for a few, our tax code needs to send a message of fairness and gratitude to all Americans by affirming their charitable contributions are critically important to their communities, their government, and civil society. In this case, an important question remains: what policy details that make up a non-itemizer charitable giving incentive will help turn the curve on these concerning trends?

To help answer this question, Independent Sector commissioned research to gain a better understanding about the potential impact of a range of policy proposals that extend charitable giving incentives to non-itemizers. The Indiana University Lilly Family School of Philanthropy at IUPUI conducted the research in partnership with the Wharton School of Business at the University of Pennsylvania. Independent Sector’s aim is to provide charitable organizations and policymakers with data they can use to make sound decisions on what best strengthens American communities.

Specifically, the study analyzed the estimated impact of five policy proposals that incentivize charitable giving among non-itemizers:

  1. Deduction identical to itemizers’ tax incentive;
  2. Deduction with a cap in which gifts over $4,000 or $8,000 do not receive an incentive;
  3. Deduction with a modified 1% floor, in which donors can deduct half the value of their gift if it is below 1% of their income and the full amount of the donation above 1%;
  4. Non-refundable 25% tax credit; and
  5. Enhanced deduction that provides additional incentives for low- and middle-income taxpayers.

The research findings include:

  • The study’s estimates of giving for 2018-2025 indicate that up to 2.6 million fewer households could donate each year and charitable giving could be up to $19.1 billion less each year than had 2017 tax code changes not become law.
  • All five policies could bring in more donor households and four of the five policies could bring in more charitable dollars than could be lost due to recent tax changes.
  • Four of the five tax policies could generate more giving than cost to the government.

America has proven it is willing to invest in the activities it values, and Independent Sector believes an investment in the infrastructure that powers social change in our country is not only worthwhile, but essential to ensure we continue to work towards a future in which all people thrive. We also believe the results of this research indicate non-itemizer tax incentives would be a strong return on investment for communities.

Our tax code can and should more fairly incentivize all Americans to give in support of their communities. Independent Sector is hopeful that this research provides a foundation of knowledge for further discussion, alignment, and momentum as we pursue this vital goal.

  1. Universal Charitable Deduction Legislation Re-Introduced in Congress (from Center for Non-Profits, 2.27.19)

Congressman Chris Smith (NJ-4) has re-introduced legislation that would provide for a complete “above-the-line” charitable deduction which would provide all taxpayers with a tax incentive for charitable giving, regardless of whether they itemize on their tax returns.  H.R. 651, the bipartisan Charitable Giving Tax Deduction Act, is co-sponsored by Rep. Henry Cuellar (TX-28).

Among many concerns for charities in the December 2017, federal tax law is its impact on charitable giving. Although the charitable giving deduction itself technically did not change in the new law, it remains available only for households that itemize on their tax returns. People who take the standard deduction cannot deduct their charitable gifts, and because the standard deduction is doubled under the tax law, far fewer taxpayers – only an estimated 10% -- will itemize and be able to deduct their gifts. This change alone is expected to cost charities an estimated $12-20 billion or more annually in lost gifts. Despite aggressive advocacy by non-profits for the inclusion of an above-the-line deduction in the tax law, it was not included in the final tax overhaul passed by Congress.

H.R. 651 would allow all taxpayers to deduct their charitable donations and would not provide a cap on the amount on the amount of donations that could be deductible. It provides the full universal deduction that non-profit advocates have been seeking. If passed, it would become effective for tax years beginning January 1, 2019.

The Center for Non-Profits supports this bill as well as the state-level charitable giving legislation sponsored by Senators Tom Kean and Troy Singleton. We thank Congressman Smith for re-introducing this important bill and we will be working with allies to move it forward.

  1. Congressman Introduces Universal Charitable Deduction Bill (from CASE, 3.1.19)

In February, Congressman Danny Davis (D-IL) introduced a new bill (H.R. 1260) to establish a universal charitable deduction. Like the Charitable Giving Tax Deduction Act (H.R. 651), the bill would create an above-the-line deduction for non-itemizers. Text for the bill has not yet been released publicly.

Rep. Davis is a long-time member of the Ways & Means Committee, the sole committee in the House with jurisdiction over tax issues. As of March 18, the bill has one cosponsor, Congresswoman Eleanor Holmes Norton (D-DC).

CASE and the Charitable Giving Coalition are supportive of the bill and are working to build bipartisan support for the proposal.

For more information on the universal charitable deduction, visit the CASE Advocacy Action Center.

  1. DC Download: Unrelated Business Income Tax (from Independent Sector, 3.25.19), by Ben Kershaw

Earlier this month, Senator James Lankford (R-OK), Senator Chris Coons (D-DE), Representative Mark Walker (R-NC), and Representative Tom Suozzi (D-NY) introduced legislation that would repeal the tax on transportation fringe benefits created by the 2017 tax bill. Research indicates this tax will divert nearly $12,000 away from the average nonprofit organization’s mission. In a press release announcing the legislation, Independent Sector President and CEO Dan Cardinali noted, “The LIFT for Charities Act is a welcome recognition that this burden is unacceptable, and we urge Congress to act on it swiftly.”

  1. A Week of Climbing Higher (from Independent Sector, 4.5.19), by Ben Kershaw

Members of the House Ways and Means Committee convened the first meeting of a working group that is analyzing the 2017 tax bill’s cap on the state and local tax (SALT) deduction. While much of the focus on this issue has been about its impact on state and local budgets, legislators are clearly also hearing that this cap leads many Americans not to itemize their taxes, thus losing access to the charitable deduction. Jeff Moore, chief strategy officer at Independent Sector, was invited and shared concerns about the 2017 bill’s impact on giving, urging legislators to consider a universal charitable deduction.

  1. DC Download: IRS Reform Passes House of Representatives (from Independent Sector, 4.19.19), by Ben Kershaw

On April 9, the House of Representatives passed the Taxpayer First Act (H.R. 1957), which aims to modernize and refine processes to make the IRS more efficient. This legislation contains a provision that would institute mandatory electronic filing of Form 990s for all tax-exempt organizations, which experts across the sector have long contended will improve reporting, research, transparency, and accountability for tax-exempt organizations. The legislation would also bolster the Volunteer Income Tax Assistance (VITA) program, through which many nonprofit organizations provide tax filing help to low-income individuals. The action on this legislation now turns to the Senate, where Finance Committee Chairman Chuck Grassley (R-IA) has indicated it could move quickly. Learn more about the Taxpayer First Act.

  1. DC Download: Bipartisan UBIT Repeal Legislation Introduced in the Senate (from Independent Sector, 5.28.19), by Ben Kershaw

On May 2, Senators Ted Cruz (R-TX) and Jeanne Shaheen (D-NH) introduced the Act, which would repeal both of the onerous Unrelated Business Income Tax increases enacted in 2017. More specifically, it would retroactively eliminate the requirement for nonprofit organizations to pay a 21 percent income tax on expenditures for employee transportation fringe benefits (like parking lots or transit payments), as well as the requirement that unrelated income streams be calculated separately. Independent Sector was proud to partner with members and allies on research quantifying the resources that these provisions are diverting away from charitable missions nationwide.

  1. DC Download: CHARITY Act Reintroduced in the Senate (from Independent Sector, 5.28.19), by Ben Kershaw

Senators John Thune (R-SD) and Bob Casey (D-PA) reintroduced the Charities Helping Americans Regularly Throughout the Year (CHARITY) Act on May 15, joined by Senators Pat Roberts (R-KS) and Ron Wyden (D-OR). The legislation contains a number of provisions that impact the charitable community: simplifying the private foundation excise tax, correcting the severely outdated volunteer mileage rate, making donor-advised funds eligible for the IRA charitable rollover, and requiring electronic filing of annual 990 information returns.

  1. DC Download: Charitable Giving Legislation Adds Cosponsors (from Independent Sector, 5.28.19), by Ben Kershaw

Representatives Chris Smith (R-NJ) and Henry Cuellar (D-TX) continue to add cosponsors to H.R. 651, which would create a universal charitable deduction that is available to all taxpayers whether they itemize their taxes or not. They are now joined on this bill by 10 Democrats and 7 Republicans. 

  1. Independent Sector Releases New Value of Volunteer Time of $25.43 Per Hour, (from Independent Sector, 4.11.19)

   Today, Independent Sector announces that the latest value of a volunteer hour is $25.43 – up 3% from the previous year. That figure, estimated from data collected in 2018, shows the incredible contributions volunteers make to their communities and our country.

Currently, about 63 million Americans volunteer about 8 billion hours of their time, talent, and effort to improve and strengthen their communities. With the new Value of Volunteer Time, these Americans are contributing approximately $203.4 billion to our nation through nonprofit organizations of all types. The release of this figure coincides with National Volunteer Week, April 7-13, a program of Points of Light meant to celebrate the power and impact of volunteer service.

“Volunteerism has been a driving force in the strength and power of our civil society since this country’s founding,” said Dan Cardinali, president and CEO of Independent Sector. “We know that giving of our time, talent, and effort transforms organizations, communities, and our nation, and also has profound effects on the individuals giving their time. The Value of Volunteer Time gives us just one concrete measure to illustrate the power of individuals to transform communities.”

“We believe the most powerful force of change in our world is the individual – one who takes action and makes a positive difference,” said Natalye Paquin, president and CEO of Points of Light. “This data shows the value that volunteers bring to the sector and the world. When people use their talents and skills to take action and support causes they care about, we can build a stronger, more just and equitable world.”

“As Americans, we are remarkable,” said Greg Baldwin, CEO of VolunteerMatch. “In 2018, our generosity was greater than the profits of Facebook, Apple, Amazon and Google combined. The freedom to voluntarily associate with the people, groups, and causes we care about is what makes democracy possible, but exercising that freedom is what makes democracies great.”

In addition to the national number, Independent Sector also provides the state-level value of volunteer time for all 50 states, the District of Columbia, and Puerto Rico. State level values range from $12.64 an hour to as high as $41.72.