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Report: Expanded Charitable Deduction Could Make Up for Potential Funding Shortfall

Independent Sector, a group that represents charitable nonprofits, says that current budget proposals could severely hurt charitable funding—but a change to the tax code could help solve the problem.

With aggressive budget proposals coming out of Congress and the White House, a group concerned with the impact they may have on charitable giving has an idea.

Independent Sector, which represents an array of 501(c)(3) nonprofits, says in a new report [PDF] that current proposals could reduce giving between $4.9 and $13.1 billion. However, the group makes the case that the shortfall could be made up by expanding the charitable deduction to non-itemized tax returns.

According to the report, which used the 2014 Tax Reform Act introduced by then House Ways and Means Committee Chairman Dave Camp (R-MI) to estimate the potential effects of tax policies on charitable giving, this expansion would more than make up for the deficit created.

“Regardless of which elasticity is used, adding a non-itemizer charitable deduction to the current tax reform proposals would more than offset the amount of charitable giving that would otherwise be lost under the current proposals, resulting in a $1.1 billion to $4.8 billion increase in total giving overall,” the report, researched by the Indiana University Lilly Family School of Philanthropy, stated.

In a news release, Independent Sector President and CEO Daniel J. Cardinali noted that the findings generally supported the association’s own stance on the issue.

“We took the position last year that expanding the charitable deduction to 100 percent of taxpayers would encourage all Americans to give more and ensure that more dollars were being put back into communities for local, effective solutions,” said Cardinali. “We are encouraged that the research shows that expanding the deduction has the potential to more than offset the estimated loss in charitable dollars resulting from current reform proposals. Those charitable dollars improve lives and the natural world for all Americans.”

The group has been beating its drum in favor of the issue in recent months, conducting a poll in March that found three-quarters of all voters surveyed supported the charitable deduction on non-itemized tax forms.

(iStock/Thinkstock)

Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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