Candidates propose caps on charitable giving

Jill Warren Lucas

National Community Foundation Week was established by presidential proclamation in 1989 and is marked annually from Nov. 12-18 as a way to recognize the “generosity [and] willingness to work together toward a common goal” as a “hallmark of the American character.”

The celebration may be less robust this year in light of proposals by both presidential candidates to cut tax donations for charitable giving. Philanthropic organizations warn that such action would have a chilling effect.

“Any proposed cap would have long-lasting negative consequences on the charitable organizations upon which millions of Americans rely for vital programs and services,” reports The  Charitable Giving Coalition.

The Coalition is leading an effort that includes numerous influential nonprofit organizations. Among them is the Council on Foundations, which helps to promote Community Foundation Week.

“Today, the impact of philanthropy and its partners is at risk. Both President Obama and Governor Romney have put forth plans that will affect giving, and Congress is eyeing all tax deductions as potential revenue raisers,” said Vikki N. Spruill, Council on Foundations president and CEO. “This would be a grave mistake and would negatively affect significant numbers of Americans.  You and I need not think long to comprehend the number of services that would face significant funding cuts as a consequence of decreased giving.”

Millions of individual tax payers claim charitable deductions each year, which makes the donated amount not subject to federal income tax. Giving USA reports that individuals gave nearly $300 billion   to support charitable causes in 2011.

According to the Charitable Giving Coalition, President Obama would limit the federal tax charitable deduction to 28 percent for individuals earning more than $200,000 and families earning more than $250,000. Currently, they may claim up to a 35 percent charitable deduction. Governor Romney has proposed potential caps on itemized deductions of $17,000, $25,000 and $50,000.

Jane Kendall, president of the N.C. Center for Nonprofits, believes that donations will decline if tax incentives for giving are reduced. “Cutting giving incentives could have catastrophic results,” she said.  “Even fewer nonprofits will be able to meet the skyrocketing demand for their services.”

Kendall adds that, in research by the N.C. Center and the Urban Institute, more than half of North Carolina’s nonprofits have already seen  a decline in individual giving in each of the past three years.  In addition, more than 90 percent of North Carolina nonprofits saw increased demand for their services in 2011 alone, and 31 percent had to cut programs or services in 2011 due to a lack of funds.

Nationwide, demand for nonprofit dollars may reach record levels this year given the widespread and devastating impacts of Hurricane Sandy.

Bobbi Hapgood, Executive Director of the North Carolina Network of Grantmakers, believes that a holistic and comprehensive assessment of tax law related to giving is necessary to protect donors and ensure that organizations can continue to serve client needs.

“The charitable deductions really do promote philanthropy and estate planning in a way that meets the needs of society,” Hapgood said. “So while I am supportive of the charitable deduction rates and would love to see those occur, in the future we may need to look at our tax structure differently.”

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