White House Again Proposes Cap on Charitable Deductions
(Feb. 15, 2011) President Obama's FY2012 Budget includes a cap on itemized deductions, including charitable deductions, for high-income taxpayers to pay for an Alternative Minimum Tax (AMT) fix.
In the budget, the President stated, "As a start, my budget proposes a 3-year fix to the AMT that is paid for by an across-the-board 30 percent reduction in itemized deductions for high-income taxpayers."
The Administration proposes to limit the tax rate at which high-income taxpayers can take itemized deductions to a maximum of 28 percent, affecting married taxpayers filing a joint return with income over $250,000 (at 2009 levels) and single taxpayers with income over $200,000. Currently, these taxpayers may claim up to a 35 percent deduction. The proposed limitation would be effective for taxable years beginning after December 31, 2011.
This is the third time that the White House has included this proposal in its budget. The proposal originally was created to pay for the healthcare reform bill.
As has been the case for the past two years, AFP plans to oppose this proposal because it would discourage charitable giving at a time when nonprofits are facing enormous financial challenges stemming from the economic downturn.
AFP is hosting a conference call on Wednesday, Feb. 16, with a coalition of other organizations including ASAE, CASE, AHP and many others to discuss a unified strategy. AFP also is working with charitable organizations to develop impact studies to demonstrate the potential financial and substantive impacts on nonprofits and their missions, as well as the potential cost to the federal government if it were required to provide critical services in place of charities.
AFP will provide talking points and draft letters shortly. In addition, AFP plans to introduce a brand new internet-based advocacy tool that will allow AFP members (and non-members) to contact their Members of Congress with the mere touch of a button.
Related AFP ResourcesAFP Offers Tax Incentive Recommendations to Finance Committee
President Obama and GOP Tax Cuts Extension Could Extend the IRA Rollover Provision
AFP Political Action Committee Fact Sheet and Q&A
IRS Issues Revised Instructions on New Form 990
IRA Rollover Provision Introduced by Key Senators