President's Budget Proposes Key Domestic Investments

Yet, Capping the Charitable Deduction Will Hurt Communities
Wednesday, March 5, 2014

President Obama unveiled his Fiscal Year 2015 Budget yesterday, which sets forth the Administration’s spending and policy priorities for the coming year. The Budget presents a fiscal plan oriented around three White House priorities: accelerating economic growth, expanding opportunity for all Americans, and reducing deficits. To cover the cost of these proposals, the Administration seeks to close certain “tax loopholes” it views as providing particular benefit to the wealthy, such as the carried interest deduction. At the same time, though, the President again proposes to limit the charitable deduction.

The Budget makes new investments in infrastructure repair, job training, manufacturing innovation, energy efficiency, a climate resiliency fund, preschool education, and the recently-announced My Brother’s Keeper’s Initiative, a public-private partnership that will engage a coalition of philanthropic leaders in a task force committed to leveraging philanthropy’s role in improving life outcomes for boys and men of color. The President also emphasizes anti-poverty programs and creating economic opportunity – a central message in his 2014 State of the Union address.

Vikki Spruill, the Council’s President and CEO, released a statement on the proposed Budget earlier today:

The Council on Foundations recognizes the powerful potential of public-philanthropic partnerships, like the President’s proposed My Brother’s Keeper initiative. The philanthropic community looks forward to working with the Administration to create innovative and collaborative solutions to the challenges facing our country, particularly in expanding opportunity for boys and men of color.

The Council supports the President’s proposal to simplify the private foundation excise tax to a single flat rate. We have long argued that a single flat rate will simplify the tax laws and will increase charitable activity. We would prefer to see a flat rate of one percent, the rate proposed by House Ways and Means Chairman Dave Camp (R-MI-4) in his recent “Tax Reform Act of 2014” bill. As tax reform decisions are made, the Council will work with lawmakers and the Administration to ensure that philanthropy’s voice resonates.

Since 2009, President Obama has proposed a 28 percent cap on itemized deductions, including the charitable deduction. Both the Council and nonprofit sector have repeatedly expressed disappointment with this approach because the charitable deduction is a proven way to strengthen communities. The Council remains steadfast in our position on the charitable deduction— it encourages philanthropic giving and benefits people in need by creating a powerful incentive for donors. Capping it would have a cascading impact on nonprofits and philanthropic organizations across the country. If donors have less incentive to give, donations will decline by billions of dollars—cutting a lifeline for millions of Americans.

The Council also notes with interest the new proposed penalties associated with failure to file returns electronically. We will continue to assess how this will impact the foundation community.

As our country continues to recover from the worst recession in generations, policymakers should advance proposals that would increase charitable giving—not degrade it.

The Council looks forward to working with the Administration and Members of Congress to develop policies that allow philanthropy to continue building a strong, resilient economy and thriving communities.