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Opening to Expand Charitable Giving Perk May Be Next Relief Bill

April 16, 2020, 8:45 AM

Nonprofit groups want Congress to expand the tax break individuals can get for donating to charities, citing the crucial role the entities are playing during the pandemic.

Calls are building for an expanded charitable giving deduction, which mean individuals could claim the perk regardless of whether they itemize their taxes. The third relief package (Public Law 116-136) made a $300 deduction available for those who claim the standard deduction. But nonprofit advocates hope the next package goes further—and the momentum to quickly dole out relief could finally push across the finish line an idea that has been on lawmakers’ minds for years.

“Right now, nonprofits are facing unprecedented challenges and we need every tool at our disposal to incentivize giving,” said Rick Cohen, chief operating officer of the National Council of Nonprofits. He said that in states where charitable contribution incentives have been expanded, donations have increased.

It’s too soon to tell if the expansion will make it into the next coronavirus relief bill, which will take shape in the coming weeks. But early signs are promising.

Rep. Mark Walker (R-N.C.) introduced a bill (H.R. 6490) earlier this month that would increase the above-the-line deduction from $300 to one-third of the standard deduction, which is $12,000 for an individual filer and $24,000 for married couples filing jointly.

The idea has bipartisan support: Rep. Judy Chu (D-Calif.) backed it this week, saying in a press call that “there is more work to be done out there to help the nonprofit sector, like bringing back the charitable giving deduction.”

In the Senate, Oklahoma Republican James Lankford has been pushing a measure like Walker’s since 2017. He tried unsuccessfully to include it as an amendment to the recent relief legislation, with the backing of Democratic Sens. Chris Coons (Del.), Amy Klobuchar (Minn.), and Jeanne Shaheen (N.H.).

Congress’ 2017 tax law almost doubled the standard deduction, reducing the incentive to itemize and consequently make a charitable contribution that could be deducted. According to Giving USA, individuals in 2018 contributed an estimated $292.09 billion, a decline of 1.1%—3.4% if the figures were adjusted for inflation.

“Encouraging charitable giving for COVID-19 relief is a sensible thing to do because it encourages giving by those who have funds to spare,” said Alexander Reid, a Morgan, Lewis & Bockius LLP partner who specializes in tax-exempt issues.

Other Measures

Nonprofits favor other measures, too, for inclusion in the next virus relief package.

The American Heart Association, YMCA USA, and others have called for access to small business loans included in the last relief package.

But there’s some debate on what kind of relief will be the most effective.

Although the small-business loans are attractive, many can’t access them easily where they currently bank, said Sandra Swirski, a public policy attorney with Urban Swirski & Associates LLC.

“And some are concerned about the optics and wary about what strings could be attached when the loans are forgiven. Gifts from individual donors don’t raise these concerns,” she said in an email.

Philip Hackney, a professor at the University of Pittsburgh School of Law who specializes in the nonprofit sector, said the organizations could benefit most from direct cash assistance.

“A far better way and a far fairer way is actually using the government to prop these organizations while they need it,” Hackney said. “Just give the nonprofits checks, it’s a far more efficient way at this moment in time.”

The message, though, is clear. Rep. Gwen Moore (D-Wis.) said in the press call that “nonprofits that do real work” should get the help they need in the next relief package from Congress.

—With assistance from Sam McQuillan.

To contact the reporter on this story: Kaustuv Basu in Washington at kbasu@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com

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