Limits to the Charitable Deduction: Bad Timing & Faulty Logic

Council on Foundations president and CEO Vikki Spruill and several Council members met with Congressional leaders today to deliver the important message that changes to the charitable tax deduction would diminish its value and have an undeniably negative impact on communities across the United States. Reductions in the charitable tax deduction would result in diminished support for health and human services, fewer nonprofit jobs, a reduction in research and development capacity, less educational opportunity, cuts to art funding, and decreases in economic development.  

The Council on Foundations played a leading role in the Charitable Giving Coalition’s November 20 “Protect Giving Day,” which brought more than 200 charitable leaders from across the nation to D.C. to meet with lawmakers. Using examples from their communities, coalition representatives showed lawmakers the importance of preserving charitable giving.

“During this economic recovery and against the backdrop of increasing government cutbacks, reducing the charitable deduction does not make sense,” said Spruill, whose 1,700 member organizations include community foundations, private foundations, corporate foundations and giving programs, and family foundations. “Government cutbacks are already hurting our nation’s most vulnerable communities. To couple them with a reduction in charitable funding would be devastating. Across the country, Americans continue to donate what they can to charitable organizations and foundations, but many of those donors are sensitive to tax changes.  Our policymakers must be mindful of this and, most importantly, mindful of the significant negative impact that policy changes could have on the communities most in need.”  

Several Council members participated in Protect Giving Day, including the Boston Foundation, Community Foundation of the Eastern Shore, Lubrizol Foundation, and Prince Charitable Trusts. Hundreds of other Council members are voicing their support for protecting the charitable deduction through local meetings, letters to lawmakers, and op-eds. Additionally, the Charitable Giving Coalition and its partners are launching a new Protect Giving YoutTube channel and a petition drive to make sure lawmakers understand the link between charitable giving and community success. Charity and foundation leaders are also sharing with lawmakers an infographic illustrating the long chain of positive impact created by charitable giving.

“America’s foundations understand the difficult choices facing lawmakers, but the positive impact of the charitable deduction is undeniable. Study after study proves that.” said Spruill.

The Coalition is highlighting the negative consequences of a Michigan law which removed a tax credit for charitable contributions. Since the law was passed, charitable contributions have decreased 28 percent overall for community foundations across the state, according to the Council of Michigan Foundations.

At a congressional staff lunch briefing with Coalition leaders and tax policy experts, new research was shared from an upcoming report about the recession’s impact on charitable giving and the potential impact of limits to the charitable deduction. Arthur Brooks, Ph.D, president of the American Enterprise Institute, said that charitable giving stands at pre-recession levels and may not grow again strongly for several years. The proposed 28 percent cap on the charitable deduction would cause giving to decline by a further $10 billion in the first year alone.

Spruill and Council members also reminded lawmakers that the charitable sector was a lifeline during the federal government shutdown – and continues to serve communities across the country every day.

“While charitable contributions from individual donors declined over the past five years, giving from foundations during the same time period increased nearly 30 percent,” said Spruill. “These investments totaling more than $270 billion made a positive difference in virtually every community in our nation. The charitable sector has a proven track record of making dollars and human capital accomplish more. Philanthropy’s ability to leverage collective donations for the public good makes it well-suited to take calculated risks and achieve extraordinary results.”

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The Council on Foundations (www.cof.org), formed in 1949, is a nonprofit membership association of grantmaking foundations and corporations. Members of the Council include more than 1,700 independent, operating, community, public and company-sponsored foundations, and corporate giving programs in the United States and abroad. The Council’s mission is to provide the opportunity, leadership, and tools needed by philanthropic organizations to expand, enhance, and sustain their ability to advance the common good.

The Council is part of the Charitable Giving Coalition unified to protect the charitable tax deduction: www.protectgiving.org, #protectgiving, @protectgiving