Senators call for preservation of charitable deduction

They join groups lobbying for maintenance of popular tax advantage in budget talks

Nov 20, 2013 @ 4:53 pm

By Trevor Hunnicutt

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U.S. lawmakers are facing new bipartisan pressure to preserve tax advantages for charitable giving that could be threatened by the political calculus needed to achieve a long-term debt-and-spending deal.

Sen. John Thune, R-S.D., and Sen. Ron Wyden, D-Ore., submitted a letter to the Senate Finance Committee on Wednesday asking them to maintain charitable deductions. At the same time, leaders of more than 200 nonprofit groups and service organizations, such as United Way Worldwide and Catholic Charities USA, also met with members of Congress and their staffs to press for continued tax breaks that benefit their organizations.

“Charitable giving is an integral part of our society,” the senators wrote. “It is not a loophole, but a lifeline for millions of Americans in need.”

The push for the tax deduction comes as Congress pursues negotiations to fund the government after Jan. 15, raise the debt ceiling by early February and perhaps strike a longer-term deal, or grand bargain, on spending and taxation. Last month a standoff on health care policy led to a 16-day government shutdown.

Limiting deductions for charitable giving, which is popular with affluent Americans, is one possibility on the table because it could decrease the deficit. Charitable deductions will cost the federal government $39 billion this year, according to the Congressional Budget Office.

Adding to donors' and nonprofit groups' concerns, temporary laws that allow tax-free distributions from individual retirement accounts for philanthropic spending are among 57 so-called tax extenders set to expire by Jan. 1 unless Congress acts. Four soon-to-expire tax breaks involve charitable giving.

Advocates contend that losing the tax advantages will send ripple effects through the economy and undermine the socially useful work performed by nonprofit organizations.

“Congress is under enormous pressure to raise revenue,” said Steve Taylor, senior vice president and counsel for public policy at United Way Worldwide. “If the charitable deduction is limited, then the high-end donors who account for a disproportionate share of charitable giving will just consult with their tax advisers and they'll have to reduce their gift to charity.”

Americans donated more than $300 billion to charity in 2012, of which $229 billion was itemized on tax returns, according to the letter by Mr. Thune and Mr. Wyden, which cited Giving USA, a research group.

Tax reform has been on the minds of both parties. The chairman of the Senate Finance Committee, Max Baucus, D-Mont., started circulating tax reform proposals this week. And House Ways and Means Committee Chairman Dave Camp, R-Mich., has long been working to move reform legislation to the top of agenda. Policy watchers say the issue could be seriously taken up within months.

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