More on the Temporary Nature of the Above-the-Line Charitable Deduction

Thanks to Lloyd for the follow-up post explaining why the above the line deduction is only for one year.

I strongly agree that the provision is temporary and blog to emphasize that point as this has been raised as an issue in other forums.

As Lloyd notes, the confusion stems from the fact that the above the line deduction in § 2204 of the CARES Act is effective for taxable years beginning after December 31, 2019 and does not contain a sunset. Without more this would be a permanent provision.

But the operative terms of the provision provide the sunset. The statutory text allows a deduction “In the case of taxable years beginning in 2020” for “contributions made . . . during the taxable year.”

The text “in the case of taxable years beginning in 2020” indicates that the provision is temporary. For calendar year taxpayers, any contribution made after the year 2020 would not be eligible for the deduction for the simple reason that the contribution would not be made in a taxable year that began in 2020. For example, if a calendar year taxpayer made a contribution in the year 2021, the deduction would not be available because the taxpayer’s taxable year did not “begin in 2020” but rather began in 2021. This is a plain, straightforward, and fair reading of the text – it applies only with respect to taxable years “beginning in 2020” and not to contributions made in taxable years that begin in a year after 2020.

I suppose there is some room for ambiguity if the language “In the case of taxable years beginning in 2020” is read to be the equivalent of “in the case of taxable years beginning in 2020 and for taxable years thereafter” but that obviously is not what the statute says. Nor does the operative language track the effective date, i.e., the statute does not say contributions may be made “In the case of taxable years beginning after 2019,” which clearly would have been a permanent provision.

One could argue that the provision is ambiguous as compared to other provisions in the statute that are, arguably more explicitly, made temporary. For example, changes to the itemized charitable deduction (which are contained in the very next section of the bill, § 2205) have more direct language. The title of § 2205 is “Modification of Limitations on Charitable Contributions During 2020,” a point emphasized in the text of each subsection, to wit: a “temporary suspension of limitations on certain cash contributions” (from the heading to 2205(a)); “such contribution is paid in cash during calendar year 2020” (from the text of § 2205(a)(3)(A)(i); and “In the case of any charitable contribution of food during 2020” (from the text of § 2205(b)). This bolded language (my emphasis) is more direct than the language for the nonitemizer deduction (“in the case of taxable years beginning in 2020”) thus suggesting that Congress could have been a bit more clear about the temporary nature of the nonitemizer deduction. But even so, “taxable years beginning in 2020” has a pretty straightforward literal meaning. Further, § 2205, like § 2204, also is without an explicit sunset; and in fact both provisions have the same effective date of “taxable years ending after December 31, 2019.” In other words, the drafters relied on the operative text of both provisions to create a sunset and not the effective date itself.

An additional contextually important factor is that revenue estimate for the nonitemizer provision was scored as a temporary provision, which is very strong contemporaneous evidence of what the drafters were thinking.

In short, any concerns about this provision being permanent do not appear persuasive, notwithstanding the absence of a sunset.

In any event, Congress has more work to do here. The above the line deduction is poorly designed and will in all likelihood operate just as a tax cut for those who were going to give $300 to charity anyway, and so will not generate much in the way of new giving.

Roger Colinvaux