The concern raised by charitable organizations is that such a reduction of the tax benefits for giving would ultimately reduce the amount of money people donate.

The federal government is currently working on ways to reduce the national deficit and debt. The congressional Joint Select Committee on Deficit Reduction, or “super-committee,” has been charged with finding $1.5 trillion in budgetary savings over a ten-year period before November 23. One of the changes that is being considered is a change to the way charitable deductions work. In May 2011, the Congressional Budget Office issued a report entitled “Options for Changing the Tax Treatment of Charitable Giving.” Any taxpayer who currently uses itemized deductions will be familiar with the tax credit for charitable giving.

An article by Michael E. Batts in The Nonprofit Watchman reports:

“President Obama has proposed capping the tax benefit at 28 percent of the gift amount for taxpayers whose marginal tax brackets exceed 28 percent. The National Commission on Fiscal Responsibility and Reform issued a report in December 2010 suggesting that the charitable deduction be replaced with a credit – possibly as low as 12 percent. (The report also suggested that the credit would only apply to contributions that exceed 2 percent of the taxpayer’s adjusted gross income [AGI]).”

This last part, a “floor” for charitable giving, is being given serious consideration. The idea is that charitable donations would have to be greater than 2 percent of a taxpayer’s AGI in order to be tax deductible and then only on the part above 2 percent:

“If, for example, the law applied a 2 percent floor to the charitable contribution deduction, a taxpayer with an AGI of $100,000 would get no tax benefit for the first $2,000 of charitable giving, but would get a deduction for any amount given in excess of $2,000.”

The logic is that a floor would encourage increased giving, and also increase the money the government receives through taxes. Roger Colinvaux, Associate Professor, The Catholic University of America, Columbus School of Law, Washington, DC, stated the following at a hearing on Capitol Hill:

“A floor would improve the incentive aspect of the deduction by encouraging contributions at the margin. In other words, a floor would reduce the windfall that many taxpayers receive for charitable contributions they would have made with or without a tax benefit, and so could make the deduction more cost effective.”

The concern raised by charitable organizations is that such a reduction of the tax benefits for giving would ultimately reduce the amount of money people donate. Even Professor Colinvaux went on to say:

“That said, however, some might argue that the floor would not be fair to those taxpayers who currently give at or below the floor. Such taxpayers might see their tax benefit eliminated, while others with more capacity to give would continue to get tax benefits for giving.”

Mr. Batts concludes his article with a call for nonprofit leaders and others who are concerned to contact Congress now while these policy issues are being formed.

Rachel Miller is a member of Springs Cypress Presbyterian Church in Spring, Texas. She blogs at http://adaughterofthereformation.wordpress.com