Over its nearly 100-year history, the charitable deduction has become one of the most time-tested provisions in the Internal Revenue Code. But it has also been a perennial target by people on both ends of the political spectrum who want to eliminate or restrict it.
While economists have long studied the impact of the deduction, they have not reached a clear consensus on how much it matters. A new study, however, along with recently released IRS data make it quite clear that America’s charitable organizations could be hurt greatly if donors lost all or part of the charitable income-tax deduction as lawmakers seek ways to avert the looming “financial cliff.”
The new study of the wealthy and their philanthropy, released last month by Bank of America, asked affluent people (mostly with incomes of $200,000 or more and net assets of at least $1-million) how they might alter their giving if deductions were eliminated.
Just under 50 percent said their giving would remain the same. But nearly 49 percent said they would decrease their giving—and 20 percent of those people said they would “dramatically decrease” their giving. Less than 2 percent said their giving would increase.
Read Financial Impact on American Charity
Excerpts of an article by Robert Sharpe, a fundraising consultant
The U.S. Department of the Treasury and the IRS have recommended a significant change in the process for determining whether a foreign nongovernmental organization (NGO) meets U.S. standards for charitable giving.
In “Reliance Standards for Making Good Faith Determinations,” a document just published in the Federal Register, Treasury and the IRS have proposed regulations that lessen the administrative and financial burdens for U.S. grantmakers to engage in international philanthropy. Secretary of State Hillary Clinton announced the guidance in an address at the Clinton Global Initiative, during which she unveiled the Global Philanthropy Working Group.
The process of evaluating whether a non-U.S. NGO is equivalent to a U.S. public charity has been subject to rules that have not changed for 20 years. Secretary Clinton noted in her remarks this morning that the change clears the way for the establishment of organizations that can serve as repositories for equivalency determinations, though the proposed regulations do not specifically address this matter.
“Secretary Clinton’s announcement and the IRS guidance support a shared cross-sector vision of ways to reduce redundancy and lower costs and are a welcome signal from the government to grantmakers and their grantees,” said Rebecca Masisak, co-CEO of TechSoup Global.
Kelly Shipp Simone, deputy general counsel of the Council on Foundations, said, “While this guidance is key to reducing the burdens of private foundations in making international grants, we expect it will also serve as a guide to public charities seeking to make similar grants. The net result will be to reduce the burden on potential grantees as well.”