Charitable Deduction Under Attack – AGAIN

How much does your nonprofit rely on donations from wealthy individuals? Many nonprofit leaders are asking themselves that very question right now. Once again, calls from both Democrats and Republicans threaten to limit the charitable deduction.

In his proposed budget for fiscal year 2015 (which starts October 1, 2015), President Obama caps all itemized deductions at 28%. He explains that this will help make the tax code “more efficient and fair while reducing the deficit by about $650 billion over the next decade.” What he doesn’t say is that the pain will be hardest felt by a sector of the economy that has the least ability to make-up the cut – not to mention the millions who rely on the services of charities.

If you think this is all a bit confusing, you are not alone. The Wall Street Journal provides the following example: “$100,000 in deductions would be worth up to $39,600 for a very high-income household now, because the top [federal tax] rate is 39.6%; the proposal would limit the tax break to $28,000” (i.e., 28% of $100,000).

On the other side, Representative Dave Camp, a Michigan Republican who chairs the House Ways and Means Committee, has another plan. He is calling for only allowing people to deduct those charitable contributions that exceed 2% of a taxpayer’s gross income.

Readers of our blog know that both Democrats and Republicans have unsuccessfully called for similar reforms in the recen#protectgivingt past. But the current desperation on both sides of the aisle to reduce the deficit makes it more likely that something may actually happen this term.

More than ever before nonprofits must make their voices heard. Contact your local Senators and Representatives and tell them how the giving incentive impacts your organization.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits, 4705 Laurel Canyon Blvd, #306, Studio City, CA 91607

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