Action Alert: Charitable Deduction
(Sept. 27, 2011) President Obama recently announced his intention to pay for his jobs bill by capping itemized deductions, including charitable deductions for high income taxpayers.
The substance of the issue remains unchanged from the Administration's proposal from two years ago—a 28 percent cap on itemized deductions for individuals earning more than $200,000 and married couples earning more than $250,000.
The President has attached this proposal to every one of his high cost initiatives including healthcare reform, deficit reduction, a three-year AMT fix and now the jobs bill. Although the viability of the jobs bill is unclear, the application of the deduction cap to the jobs bill raises the profile of the issue once again.
AFP's position, like many in the sector, is to oppose any proposed cap on the itemized deduction that would reduce charitable giving.
One key question is whether the deficit reduction super committee composed of six House members and six Senators will consider the cap on itemized deductions. AFP is contacting the super committee, as well as the Senate Finance Committee, House Ways and Means Committee and House and Senate leaders, to discuss the cap and its potential negative impact on charities and charitable giving.
AFP urges its members to educate their Members of Congress about the proposed cap and its potential harmful impact on charitable giving.
During the week of Oct. 3, AFP’s new online tool, which will help you contact your Members of Congress with the touch of a button, will go live! Check the AFP website (www.afpnet.org) for instructions at that time.
In the meantime, we urge you to do the following:
1. Identify your U.S. Representative and two U.S. Senators. Use this link and type in your zip code to determine your U.S. Representative: http://www.house.gov/representatives/
Use this link to determine your two U.S. Senators: http://www.senate.gov/general/contact_information/senators_cfm.cfm?OrderBy=state&Sort=ASC
2. Call the Congressional switchboard (202-224-3121) and ask to speak to your House Member or Senator.
3. Use the following talking points:
- I am calling on behalf of [insert name of your organization] and the Association of Fundraising Professionals to urge you to protect the value of the charitable deduction by opposing efforts to reduce or cap the value of itemized deductions for charitable contributions as part of the President’s American Jobs Act.
- Proposals to cap itemized deductions at 28 percent would have long-lasting negative consequences for the charitable organizations that millions of Americans rely on for vital programs and services.
- The charitable deduction is different than other provisions in the tax code in that it encourages individuals to give away a portion of their income to those in need.
- Although we have seen modest gains in charitable giving in 2010, it is estimated that it will take five to six years for giving to return to its pre-recession levels. And with questions surrounding the economy again, we cannot assume that charitable giving will continue to rise.
- Reducing the charitable deduction for higher income earners will negatively impact the amount these donors give to charitable organizations. Higher income taxpayers account for the majority of individual giving.
- Charity-provided services are critical, and reducing charitable giving does not just harm the nonprofit sector, it also hurts the lowest income brackets that rely heavily upon these services. Despite how the proposal looks on paper, wealthy Americans will not bear the brunt of a cap or reduction in the value of itemized deductions—America’s poor will.
- [Comment on how capping the deduction would impact your organization]
- For these reasons, we urge you to oppose any deficit reduction proposals that would negatively impact charitable giving by reducing or eliminating the charitable deduction.
4. Mail three letters, one each to your U.S. Representative and two U.S. Senators.
5. Cut and paste the sample letter below into your word processing software and personalize it with your own information (places where you can include your personal information are indicated in bold in the sample letter below):
For U.S. Representative, use:
Dear Representative LAST NAME:
U.S. House of Representatives
Washington, D.C. 20515
For U.S. Senators, use:
Dear Senator LAST NAME:
Washington, D.C. 20510
I am writing on behalf of [insert name of your organization] and the Association of Fundraising Professionals (AFP) to urge you to protect the value of the charitable deduction by opposing efforts to reduce or cap the value of itemized deductions for charitable contributions as part of the President’s American Jobs Act. Proposals to cap itemized deductions at 28 percent would have long-lasting negative consequences for the charitable organizations that millions of Americans rely on for vital programs and services.
The Association of Fundraising Professionals (AFP) represents 30,000 members in 225 chapters throughout the world, working to advance philanthropy through advocacy, research, education and certification programs. The association fosters development and growth of fundraising professionals and promotes high ethical standards in the fundraising profession.
The past few years have been incredibly challenging for our nation’s charities. According to the Internal Revenue Service, charitable giving by American donors who itemize their tax returns dropped by about 20 percent from the beginning of 2008 through 2009. Although the Giving USA Foundation and its research partner, the Center on Philanthropy at Indiana University, found that “giving by individuals rose an estimated 2.7 percent in 2010 (1.1 percent adjusted for inflation),” these modest gains will do little to offset the low levels of giving during previous years. In fact, it is estimated that it will take five to six years for giving to return to its pre-recession levels.
In addition, high-income earners are more sensitive to changes in tax incentives. Given this sensitivity, reducing the charitable deduction for higher income earners will negatively impact the amount these donors give to charitable organizations. And indeed higher income taxpayers account for the majority of individual giving. According to the recent CBO report on the tax treatment of charitable giving, tax filers who reported AGI (adjusted gross income) of at least $100,000 in 2008 were responsible for well over half (about 58 percent) of all charitable giving by taxpayers.
And yet in the face of such tough financial conditions, charities continue to do more with less. When the economy stagnates, charities bridge the gap by serving those in need and our communities as budgetary constraints hinder state and federal governments from providing similar services. These charity-provided services are critical, and reducing charitable giving does not just harm the nonprofit sector, it also hurts the lowest income brackets that rely heavily upon these services.
As charities struggle to meet increased demands for their services and raise additional funds, we need to encourage all individuals, regardless of income and wealth, to give more to charitable organizations. [Comment on how capping the deduction would impact your organization]
In fact, data suggests that for every dollar a donor gets in tax relief for his or her donation, the public typically gets three dollars of benefit. Reducing the value of the charitable deduction does the exact opposite and would fundamentally change a tax structure that has contributed to a cherished tradition of charitable giving that is unmatched in the world.
For these reason, I strongly urge you to oppose efforts to reduce or cap the value of itemized deductions for charitable contributions.
Related AFP ResourcesCareer Track
Position paper: Parity in the Fundraising Profession
New Study Shows Donors Have Little Idea About Charity Overhead
Donor Perceptions: Larger Charities More Effective, Smaller Charities More Efficient With Funds
Blackbaud Institute Reveals Key Factors Dramatically Transforming the Donor Marketplace