Community Foundation CEO, Chris Nanni, recently joined 200 nonprofit leaders in a whirlwind day of meetings on Capitol Hill. The “100 Years of Giving Fly-In,” hosted by the Charitable Giving Coalition, served as a kick-off event to implore lawmakers to recognize the value of charitable giving and the incentives that encourage Americans to contribute more to causes important to them. Here are his notes from the visit:
As Congress embarks on long-promised comprehensive tax reform, we encouraged Senate and House members to enhance and expand charitable giving incentives like the charitable tax deduction. And we cautioned them on the implications of limiting these incentives, whether those limitations are imposed intentionally or consequentially – charitable giving will decline.
Our objectives for this day were simple: deliver our message and gather intelligence that will help our efforts during the year. Throughout the day, I gained perspective and found myself both assured that our Members of Congress support charitable organizations and daunted by the way our seemingly simple issue gets quickly complicated. Here are a few of my takeaways from the day:
“I love charity” is not enough.
It comes as no surprise that our lawmakers really like philanthropy and charities. After all, our organizations help their constituents and enhance lives in the communities they represent. But, as I learned, we can’t presume that this affection for charities equates to a full or accurate understanding of the issues and complexities of our work, let alone comprehension of how tax policy changes influence us.
“I support the current charitable deduction” is not enough, either
Over the past eight years, since President Obama first proposed to cap itemized deductions (which includes the charitable deduction) to raise federal revenues, Members of Congress heard a constant drumbeat from charities – “don’t limit the charitable deduction!” But in tax reform, the playing field has changed and proposals are different. For example, today, a little more than 30% of taxpayers itemize their deductions and can therefore take the charitable tax deduction. And, over 80% of all charitable contributions are made by that 30% of taxpayers. Why is this important? Because several tax reform proposals would simplify the tax code, raise the amount of the standard deduction, and allow far more taxpayers to take the standard deduction rather than itemize. I think most people support a simpler tax code, but there’s a consequence . . . under these scenarios, only 5% of taxpayers would itemize. So, only 5% of taxpayers would have the charitable deduction available to them, and charitable giving could severely decline.
There are other “devils in the details” – limits on deductions = declines in giving
Beyond limiting the number of taxpayers eligible for the deduction, several proposed scenarios would keep a charitable giving incentive, but with limitations. For example, taxpayers could receive the incentive only if they reached a threshold level of giving (a “floor”), or would receive the incentive only up to a certain level (a “cap”). Both would result in significant declines in charitable giving. Study after study show that charitable giving would decline by billions of dollars annually if floors or caps are imposed.
We can propose a solution – a charitable giving incentive for all taxpayers
One major objective of our meetings on Capitol Hill was to introduce a different option and collect feedback – we proposed a “universal charitable deduction.” Just like other proposals, the devil would be in the details here, too, and our reconnaissance helps us finetune the plan. But the basic tenant is simple: Congress should enact a tax incentive that is not tied to itemizing deductions. If it were broadly available, it would increase giving, in terms of both dollars and donors, increase fairness by treating all taxpayers’ contributions equally, and provide modest tax relief to middle- and lower-income taxpayers.
Tax Reform is complicated and won’t happen tomorrow
Both Congressional leaders and the Trump administration have identified a comprehensive overhaul of both the corporate and individual tax codes as a priority for 2017. And, both aim to get things done by late summer. While they all may share a goal, there doesn’t seem to be much agreement on how to get over the finish line. Tax reform could take considerably longer – maybe the end of 2017 or even beyond.
Now is the time to educate
Despite this longer timeline, I’m confident that our meetings were timely and important. First, senior staff on the Congressional committees that handle tax issues are writing the legislation now. While Members of Congress may be debating big issues, like how to level the playing field for American corporations, a lot of other issues are easier to resolve and get on paper. Second, every industry and every group that has something to say about tax reform is on Capitol Hill making its case – so we need to be there, too. It’s a very noisy time, and the charitable sector must be part of the conversation and help shape solutions on tax provisions that directly impact our future.
Success is predicated on our lawmakers knowing who we are and what we do
My meetings reminded me of this simple truth – our Members of Congress are more likely to help us if we continually tell them who we are and what we do every single day in their states and districts. Without us, their lives and the lives of their constituents would be very different. I believe we take for granted that our lawmakers know us well. This is not often true. We bear the responsibility to educate, engage and inspire them, preparing our lawmakers to champion good tax policy that expands charitable giving and supports the broad, diverse charitable sector.