The Alliance for Charitable Reform (ACR) submitted a letter for public record this week to the House Ways and Means Charitable/Exempt Organizations Working Group, focusing on issues important to the philanthropic community including the charitable deduction, the Private Foundation (PF) excise tax, and the Pease limitation on itemized deductions for certain taxpayers.
The Charitable/Exempt Organizations Working Group is part of the Ways & Means Committee’s process to move forward on tax reform. Preserving the charitable deduction has been a key focus of the charitable community as the deduction has been widely considered as a source of revenue for government spending or to pay down the deficit. ACR, along with the Charitable Giving Coalition, has been very vocal in stressing to lawmakers that the charitable deduction is different, the benefit is to the recipient of charity, and that it must be protected.
ACR’s letter also focused on the PF excise tax, which was originally intended to fund the enforcement and oversight of nonprofit organizations at the IRS. The two-tiered tax includes a complex formula that has the perverse and unintended consequence of deterring foundations from increasing their contributions to charity in times of great need. Additionally, the tax revenue collected has not been solely dedicated to charitable oversight and has been directed to other parts of the government. ACR supports establishing a flat rate of 1 percent, which will eliminate the perverse consequence.
While cuts, caps or limits to the charitable deduction are ill-advised, so are other taxes on charitable giving, like the Pease limitation. This tax reduces the value of itemized deductions, including the charitable deduction, for taxpayers with incomes over $250,000 a year. Not only does this Pease limitation add complexity to the code, but it also decreases the incentive to give. ACR supports a carve-out from the Pease limitation for the charitable deduction which could encourage more giving to charity.
You can read ACR’s full letter to the Committee here.
ACR, a project of The Philanthropy Roundtable comprised of nonprofit leaders and groups, serves as a leading voice on opposing legislative or regulatory proposals that could diminish private giving.
For more information about ACR contact Alison Hawkins at firstname.lastname@example.org or at 202-822-8333.