The House Committee on Ways and Means has announced that its subcommittee on oversight will hear testimony on February 14 about how changes to the charitable deduction would affect charitable giving and the work of tax-exempt organizations.
Earlier this year, the committee invited nonprofit sector stakeholders and members of the public to provide, before close of business on February 7, oral testimony or a written statement for inclusion in the printed record of the hearing. Ideas that have been floated in the past include reducing the rate at which contributions may be deducted, putting a dollar cap on total itemized deductions, establishing a floor below which contributions may not be deducted, and replacing the deduction with a tax credit.
At the end of 2012, Congress and the Obama administration avoided the so-called fiscal cliff by agreeing to a deal that raised income taxes rates on the wealthiest Americans and postponed automatic spending cuts to domestic and defense spending programs until March 1. With the cuts looming, the administration is pushing for a deal that would combine smaller cuts with new revenue derived from changes to the tax code, possibly including attempts to cap the charitable deduction at 28 percent, the NonProfit Times reports.
Responding to news of the hearing, Independent Sector posted a statement on its Web site that urges lawmakers to consider the implications of such a cap. "Experts estimated that when top marginal rates were 35 percent, capping the charitable deduction at 28 percent would have reduced charitable giving by as much as $7 billion a year," the statement reads. "With an even wider disparity now between tax rates (39.5 percent) and the president's proposed cap at 28 percent, the reduction in giving could be even more severe, and any decrease in giving would come on top of the nearly $20 billion drop in annual giving since the economic downturn began in 2007. Charitable organizations have been asked for too long to meet increased demands for programs and services in the face of dwindling revenue from federal, state, and local government. It is simply unconscionable to ask them to now endure the reduction in giving that will be driven by a cap on the charitable deduction."