The charitable deduction is a tax provision which allows individuals to reduce their taxable income by the total amount of charitable contributions they made in that tax year (with some limitations, depending of the type of gift—i.e. cash, stocks, property—or the type of organization receiving the gift). As a result, taxpayers who claim the charitable deduction are generally not subject to federal income taxes on money they give to charity.
In addition, as part of COVID relief legislation,Congress increased the adjusted gross income (AGI) limitation for individual cash gifts to public charities as well as the amount of charitable donations corporations can deduct. Unfortunately, gifts to DAFs and supporting organizations were excluded, limiting donors’ flexibility just as charities need additional funding to keep their operations going.
Generally, the charitable deduction is available only to taxpayers who do not take the standard deduction, i.e., taxpayers who itemize. However, COVID-relief legislation created a temporary $300 ($600 for joint filers) charitable deduction for nonitemizers for tax years 2020 and 2021. In 2021, the Universal Giving Pandemic Response and Recovery Act (UGPRRA) was introduced. This legislation would increase the deduction cap to one-third of the standard deduction (about $4,000 for single filers); extend the nonitemizer charitable deduction through 2022; and include gifts to donor-advised funds.
Council’s Policy Position
The Council on Foundations supports policies that expand charitable giving, including enacting tax policies that incentivize giving. The Council will prioritize tax policies that are inclusive and recognize all individuals for their charitable contributions. The Council on Foundations strongly supports expanding the charitable deduction to nonitemizers.
Enacting the universal charitable deduction would extend a tax deduction for charitable giving regardless of whether taxpayers claim the standard or itemized deductions. This would diversify the pool of charitable donors, given that higher-income taxpayers are much more likely to itemize their deductions than those with lower incomes. Another option is to enact a charitable tax credit, which expands to benefit to more people and reduces the amount of taxes an individual owes up to the limit of the tax credit.
Universal Giving Pandemic Response and Recovery Act (S. 618/H.R. 1704)
Summary: Establishes a charitable deduction for non-itemizers equal to one-third of the standard deduction. The bill includes charitable gifts to donor-advised funds (DAFs).
Council's Action Alert
Council Summary: Tax Cuts and Jobs Act (Public Law: 115-97)
A Note on Lobbying by Private Foundations on this Issue
The Council’s legal team has determined that private foundations may engage in lobbying communications with Members of Congress and their staff on the universal charitable deduction.
While private foundations are generally prohibited from conducting direct or grassroots lobbying activity, the “self-defense” exception to that rule, found in the Treasury Regulations at §53.4945-2(d)(3), allows a private foundation to communicate with a legislative body regarding legislation that affects the “existence of the private foundation, its powers and duties, its tax-exempt status or the deductibility of contributions to such foundation” (emphasis added). Legislation that would change the structure of the charitable deduction, making it available to all taxpayers, would likely affect the deductibility of contributions to private foundations as well as other charitable organizations, and would therefore fall under this exception.
If provisions affecting the charitable deduction (such as enacting a universal deduction) are included as part of a more comprehensive tax reform bill, the conservative approach for private foundations would be to limit direct lobbying communications to those portions of the bill which address the charitable deduction and any other provisions that affect the existence of the private foundation, its tax-exempt status or the powers or duties of the private foundation. However, understanding the practical problems this may present, the Council has previously taken the position that private foundations may advocate for the passage of a bill that includes one or more provisions that would qualify for the self-defense exception, even if other portions of the bill do not. For example, when simplification of the private foundation excise tax is included in a bill with other provisions that may not directly affect the existence, powers or duties of a private foundation, it is the Council’s position that the private foundation may still contact legislators urging support for the bill.
It is important to note that the self-defense exception is not available for activities that would constitute grassroots lobbying—such as encouraging grantees or others to contact their legislators.
Finally, the Council respects its members’ own determinations regarding legal issues, and individual policies or practices related to lobbying activity. We encourage members to consult with their own legal counsel regarding any questions.