Coalition Makes Strong Case for Charitable Tax Deduction

WASHINGTON, D.C. – Dozens of leaders from the Charitable Giving Coalition and the nonprofit sector – representing education, health, faith-based, arts and neighborhood revitalization organizations – made a strong case to lawmakers today for protecting the charitable tax deduction. Dozens of nonprofit, charity and foundation representatives testified before the House Ways and Means Committee, which is examining the deduction as it works to address comprehensive tax reform and America’s fiscal challenges.

Those who testified provided a reality check for lawmakers about charitable giving means to nonprofits that provide vital community services to millions of people every day. Speakers also explained what is at stake should lawmakers impose caps or limits on the charitable deduction.

Brian Gallagher, president and CEO of United Way Worldwide, told lawmakers that the charitable deduction does not just impact wealthy taxpayers. “If this committee reduces the charitable deduction, you should expect that many donors to charity will simply withhold the difference necessary to cover the tax from their donations,” he said. “A limitation on the deductibility of charitable donations isn’t really an increase in tax on the wealthy so much as it is a transfer to the government of money that would otherwise go to charities. The real impact will be felt by the people we serve.”

Gallagher indicated that doing away with or limiting the deduction would be the same as eliminating the work local United Ways – like Philadelphia, Washington, D.C., Cleveland or the combined efforts of several smaller community affiliates – are doing throughout the country to improve lives and strengthen communities.

According to United Way Worldwide, a 2.5 percent reduction in donations would result in 1.3 million fewer times that the organization can provide job training services for an unemployed worker, home care for an elderly citizen, service supportive housing for a single mother or a mentor or tutor for an at-risk young person.

David Wills, president of the National Christian Foundation, said, “The charitable deduction is unique and should be considered separately from all other tax incentives. It is the only incentive that encourages individuals to give away their income without personal financial gain. All others encourage individuals to consume more or save more for themselves.”

The Coalition is working to avert any caps or limits that would further diminish charitable giving. In its “fiscal cliff” negotiations, Congress already placed a limitation on deductions through the Pease provision.

“Policymakers and the president have proposed cuts, caps and limits on the deduction as one solution to our nation’s fiscal crisis,” Wills added. “While any all-out limit on the charitable deduction is ill advised, so are back door tax increases aimed at the charitable deduction. Reinstating provisions like the overall limitation on itemized deductions (known as “Pease”) would have a similar effect on giving.”

Caps or limits to the charitable tax deduction will put at risk billions of dollars in private donations that sustain diverse, worthy causes throughout America. For example, estimates show the president’s proposal to cap the charitable deduction at 28 percent would reduce giving by up to $5.6 billion each year. That is more than the combined annual operating budgets of Red Cross, Goodwill, the YMCA, Habitat for Humanity, the Boys and Girls Clubs, Catholic Charities and the American Cancer Society.

In addition to Gallagher and Wills, several other representatives from the Charitable Giving Coalition and nonprofits testified about the value of the charitable deduction in providing financial support for community services. Nearly all of the Coalition’s 60+ members will submit written statements for the record.

Bill Kitson, president and CEO of United Way of Greater Cleveland, one of several local United Way CEOs testifying at the hearing, said, “Our work relies on the generosity of donors and volunteers. And without question, the charitable deduction is an effective and important incentive to stimulate support for thousands of health and human services. For example, the charitable community is the single largest supporter of United Way 2-1-1, which covers 90 percent of the State of Ohio. Our Cleveland United Way 2-1-1 provides coverage for seven counties or 1.9 million people and answered 252,000 calls for help last year, a 33 percent increase in the last five years…Without question, a cut in the charitable tax deduction will result in a loss of support from donors to the nonprofit sector and would devastate our ability to continue to provide these services. And the responsibility could fall on government.”

Kevin Murphy, president of Berks County Community Foundation and board chair of the Council on Foundations, said, “The charitable deduction is unique in two key respects. First, the charitable deduction encourages behavior that benefits society, not the taxpayer. No matter how big the deduction is, it is a simple statement of economic truth that any charitable contribution an individual makes leaves them with less money than they had before they made the gift.”

Murphy added, “Feeding the hungry, eradicating disease, building cancer centers – these are not loopholes for the rich. These are solutions for our communities.”

In December, 300 charitable and nonprofit leaders representing thousands of American communities traveled to Capitol Hill to meet with elected leaders in Washington, D.C. and tell them how proposals to limit the charitable deduction would directly affect millions of Americans. Coalition members showed how the charitable sector is inextricably linked to vital community services that support education, workforce training, economic development, scientific breakthroughs, cultural activities and more. Charity and foundation representatives also shared an infographic illustrating the ripple effects of the charitable sector at work in communities every day.

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The Charitable Giving Coalition
Representing private and community foundations, their grantees and independent charities, the Charitable Giving Coalition’s members include United Way Worldwide, the Salvation Army, Catholic Charities USA, the American Institute for Cancer Research, the Association of Fundraising Professionals, Independent Sector, the Council on Foundations, The Philanthropy Roundtable, among others. Formed in 2009, the coalition is a broad cross-section of nonprofit organizations across the country, including both the nonprofit organizations themselves and the associations and umbrella groups that serve their needs. The coalition is dedicated to preserving the charitable giving incentive that ensures that our nation's charities receive the funds necessary to fulfill their essential philanthropic missions. The coalition provides a unique and unified voice on Capitol Hill on issues affecting the charitable deduction, a voice composed of both direct lobbying and robust grassroots advocacy. www.protectgiving.org