House Committee Hears Testimony on Charitable Deduction 10

On February 14, the House Committee on Ways and Means held a hearing to examine the itemized deduction for charitable contributions as part of the committee’s work on comprehensive tax reform. There were six panels of witnesses from the private sector including  over 40 researchers, academics and representatives from charities and small businesses whose work is directly impacted by the charitable deduction.

Other than a general reduction in the value of itemized deductions for individuals with adjusted gross income above a certain level, the charitable deduction went untouched under the last tax bill. The purpose of the recent hearing was to garner input from the charitable community before any legislation is proposed.

The charitable deduction is one of the ten largest tax expenditures in the Internal Revenue Code. Over the course of the last several years various proposals have been introduced to modify the charitable deduction. Proposals to limit the deduction have included dollar caps, floors below which contributions may not be deducted, credits instead of deductions, and the list goes on. These various scenarios have been analyzed in the past in order to determine how much revenue could be raised by the proposals and what the impact would be on charities if a particular proposal were implemented.

In addition to monetary contributions, another issue was raised regarding whether gifts of property to charities should be revisited. Concerns in this area include valuation abuses and whether it is appropriate for a donor to be able to deduct the fair market value of a donated appreciated item since it has a double tax benefit (i.e., the donor avoids paying tax on the appreciation and receives a contribution deduction for the full fair value amount).

The clear message coming out of the Ways and Means Committee hearing was that charities depend on charitable giving and cannot fulfill their missions without the level of contributions they receive. The charitable community reiterated that if they do not provide their needed services the government will have to take on the burden or people and programs will suffer.

Below are some helpful resources regarding the House Ways and Means Committee hearings:

Video of last week’s hearing
Written testimony from the hearing
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