Senate Finance Committee Holds Hearing on Charitable Giving
On Thursday, the Senate Finance Committee held a hearing on “Examining Charitable Giving and Trends in the Nonprofit Sector.” Witnesses included:
- Dan Cardinali, President and CEO of Independent Sector
- Susannah Morgan, CEO of the Oregon Food Bank
- Una Osili of the Indiana University Lilly Family School of Philanthropy
- Eugene Steuerle of the Urban Institute and ACT for Alexandria
Witnesses spoke passionately about the need for Congress to act quickly to support the nonprofit sector, while members of the Committee recognized the importance of charitable organizations in responding to community needs. They also discussed the need for federal policy that directly addresses poverty and the needs of nonprofits, including the Child Tax Credit and the Employee Retention Tax Credit.
Members of the Committee raised the charitable deduction several times, praising its role in supporting nonprofits during a time of economic upheaval. Sen. James Lankford (R-OK), a sponsor of the Universal Giving Pandemic Response and Recovery Act (UGPRRA, S.618), said the nonitemizer charitable deduction would allow all Americans to respond to “the call to serve,” arguing that having the charitable deduction in place would incentivize additional giving at a critical time. The Council and many nonprofits strongly support UGPRRA, which extends the deduction for nonitemizers into 2021 and 2022 and expands it to about one-third the standard deduction ($4,000 for individuals and $8,000 for couples). Take our Action Alert and urge Congress to support this critical legislation.
In addition, while the hearing was not primarily focused on issues related to donor-advised funds, they did arise, most notably when Accelerating Charitable Efforts (ACE) Act (S.1981) sponsor Sen. Chuck Grassley (R-IA) argued that the ACE Act would lead to additional charitable funds going to nonprofits.
The Council opposes the ACE Act. Strengthening philanthropic practices and further incentivizing charitable giving are critically important issues—which is why we need to get them right without incurring unintended consequences. Legislation aimed at increasing the flow of philanthropic resources to nonprofits requires a thoughtful and inclusive process to avoid some of the unintended negative consequences we see in the ACE Act. Learn more about the Council’s position on the ACE Act.
Other highlights included Sen. Todd Young (R-IN) engaging Dr. Osili on the power of Indiana’s community foundations and asking her which barriers should be removed to allow for community foundation growth in other states. Dr. Osili called community foundations “the conveners, collaborators, and catalysts for innovation.”
The Council will be submitting comments for the record that address the needs of nonprofits and philanthropy at this critical moment. Other organizations are encouraged to submit written testimony. For information on how to submit, see the Committee’s webpage. Statements must be submitted no later than two weeks after the hearing.
Congressional Research Service and Joint Committee on Taxation Release Reports on Charitable Contributions
In advance of the hearing, the Congressional Research Service (CRS) and the Joint Committee on Taxation (JCT) released reports on the federal tax treatment of charitable contributions, including the individual charitable deduction and donor-advised funds (DAFs).
On March 14, the Congressional Research Service (CRS) released a report examining the individual charitable deduction. It found that over 80 percent of charitable deduction tax expenditures in FY2022 are associated with taxpayers who earned over $200,000, while only 5 percent of the expenditures are associated with those earning $100,000 or less. This is due in large part to the changes to the tax code in the Tax Cuts and Jobs Act of 2017, which drastically reduced the percentage of taxpayers who itemize and who can therefore claim the individual charitable deduction. While a temporary charitable deduction for nonitemizers passed as part of COVID-relief legislation, it expired at the end of 2021. The Council and our partners in the Charitable Giving Coalition continue to urge Congress to extend and expand the nonitemizer charitable deduction.
On March 11, the Joint Committee on Taxation released its hearing document, which provides an overview of the current federal laws related to charitable contributions. The document briefly talks about the impact of DAFs on charitable giving. According to the Joint Committee, as DAFs have grown more widespread, total U.S. giving has also grown: “Between 2006 and 2019 … assets held in DAF accounts increased from $31.1 billion to $141.95 billion (an increase of 356.4 percent), contributions to DAF accounts increased from $9 billion to $38.81 billion (8.7 percent of total U.S. giving for 2019, and an increase of 331.2 percent), and grants from DAF accounts increased from $5.7 billion to $27.37 billion. During the same period, the total U.S. giving increased by 52 percent.”