Although none of the major proposed restrictions were placed on the charitable deduction, the “Pease” limitations—phasing out deductions for charitable giving, mortgage interest, and state and local taxes for high-bracket taxpayers—were reinstated and made permanent beginning 2013 to the disappointment of many in the charitable sector.

Late on the first day of the new year, the Senate and House of Representatives joined together in passing the American Taxpayer Relief Act to avoid what had become known as the “fiscal cliff”—a series of broad tax increases and major spending cuts by the federal government scheduled to take effect at the end of 2012 unless Congress agreed otherwise.

Not without controversy, the bill was finally passed after great concern that if Congress failed to reach some agreement the American economy would suffer and potentially lead to another recession. After Congress voted to approve the measure, President Obama announced he would sign the bill into law.

For the most part, charitable giving incentives were not directly impacted by the legislation. President Obama and other political leaders from both parties had proposed greatly limiting the value of the charitable deduction through percentage caps, dollar caps, tax credit substitutes, and a variety of other alternatives, which could have cost charities billions of dollars in contributions. The bill also extended the IRA charitable rollover provision through December 31, 2013, allowing taxpayers who are age 70 ½ or older to give up to $100,000 from their IRAs and Roth IRAs to qualifying charities without having to pay income tax on the withdrawn amount.

ECFA has been working diligently along with a broad coalition of other leaders in the charitable community to preserve and strengthen our nation’s strong commitment to giving. ECFA encouraged lawmakers that during these challenging economic times important giving incentives like the charitable contribution deduction should not be eliminated or reduced for those who generously support the work of religious and other charitable organizations. Despite this good news in the bill, charitable giving incentives will undoubtedly be back on center stage in the next 60 days as Congress faces the debt ceiling debate.

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