Please take action to ensure members of Congress protect the charitable deduction and do not weaken nonprofits’ ability to serve and strengthen communities. As part of efforts to reduce the federal deficit, proposals to change the charitable deduction to retain more federal revenue have been discussed. While deficit reduction is an important priority for our nation, weakening the charitable deduction would encourage less giving and reduce resources to nonprofits at a time when demands for nonprofits’ services are high and could be increased by cuts and reforms to federal programs.
The Budget Control Act of 2011 created the Joint Select Committee on Deficit Reduction (Supercommittee) to reduce the federal deficit by at least $1.2 trillion. Although the Supercommittee was expected to produce a plan consisting of revenue increases, entitlement reforms, and spending cuts, it ultimately failed to agree on a plan by the Nov. 23, 2011 deadline. As required by the Budget Control Act, failure to implement a plan triggers $1.2 trillion in automatic spending reductions over ten years starting in January 2013. About $600 billion in cuts would come from defense and another $600 billion from non-defense discretionary spending.
Congress has until the end of 2012 to determine how to implement these reductions. As an alternative, Congress could try to amend or repeal the automatic reductions though the President has said he will veto bills that change the total amount of the reductions.
While changes to the charitable deduction are not expected this year due to the failure of the Supercommittee, changes to the deduction still could be proposed over the next year as Congress continues its efforts to reduce the deficit.
Your continued help is needed to ensure our members of Congress know how changing the charitable deduction would impact Colorado’s nonprofits:
- Let your members of Congress know what the charitable deduction means to your organization. Write a letter, send an email, or call their offices and let them know how charitable giving impacts the work of your nonprofit and how you might be impacted if the charitable giving incentive is changed. You can look up your Representative and Senator at www.vote-smart.org.
- Join over 4,000 nonprofits nationwide and over 200 Colorado nonprofits by signing on to the Nonprofit Community Letter at givevoice.org.
- Contact the Association and let us know how changes to the deduction would affect your nonprofit. Email email@example.com.
Proposals to change the charitable deduction:
- 28 percent cap on itemized deductions by taxpayers earning $200,000 and up. The White House proposed this as part of the American Jobs Act to pay for job creation measures. When introduced as legislation in the Senate, this provision was replaced by a surtax on millionaries.
- Cap on total itemized deductions claimed by high income taxpayers at 2% of Adjusted Gross Income as studied by the National Bureau of Economic Research.
- 12% tax credit for all taxpayers who give at least 2% of their Adjusted Gross Income proposed by the National Commission on Fiscal Responsibility and Reform created by Presidential Executive Order in 2010.
- 15% refundable tax credit payable to nonprofits recommended by the Bipartisan Policy Center’s Debt Reduction Task Force.
- Options for Changing the Tax Treatment of Charitable Giving. A May 2011 report by the Congressional Budget Office to examine the impact of 11 proposals to change the charitable deduction.
Association Actions to protect the Charitable Deduction
- National Council of Nonprofits Sign-on Letter
- November 10 letter to Colorado’s Congressional delegation
- September 20 letter on the American Jobs Act of 2011
- Independent Sector ad in the July 18 issue of POLITICO.