Tax and Spending Proposals Affecting Charities and Charitable Gifts

The Chronicle of Philanthropy is running three stories discussing certain of the provisions affecting the charitable sector in President Obama’s proposed budget, one of which stories also notes efforts in the House of Representatives to make permanent several temporary charitable giving incentives. 

One article observes the “mix of praise and criticism for a nearly $4-trillion budget package for fiscal year 2016 that was formally released by the White House on Monday.”  The sense of the article is that the nonprofit sector is (unsurprisingly) embracing many of the President’s funding initiatives, while (also unsurprisingly) expressing some disappointment with his perennial proposal to limit the value of the charitable contributions deduction to higher income taxpayers.  One of the fairest assessments comes from a YMCA leader:

Regardless of what is ultimately passed by Congress, the proposal is a good reflection of the President’s priorities, said Neal Denton, senior vice president and chief government affairs officer for the YMCA of the USA. “We’re especially happy to see his focus on ensuring opportunities for children and families to learn, grow, and thrive,” he said, noting line items that would increase access to child care and early education, among other things.

Key excerpts from another article, which focuses on tax matters:

 

Part of a massive $4-trillion proposal, President Obama’s plan would limit the value of all itemized deductions, including one for charitable gifts, to 28 percent for individuals who earn more than $200,000 and couples who earn more than $250,000. …

 

The budget plan follows a tax proposal President Obama made in January that would raise the capital-gains tax rate and close what the White House called the “trust-fund loophole,” which limits heirs’ exposure to gains in the value of the assets they inherit. The president’s plan would subject appreciated value to the capital-gains tax but would provide an exemption if the assets are donated to charity.

 

Joanne Florino, senior vice president for public policy at the Philanthropy Roundtable, an organization that represents donors, said it was curious that President Obama exempted charitable gifts on those inheritances, yet is still pushing to limit the deduction over all. …

 

Meanwhile, House Republicans are pushing to make a set of temporary tax breaks for charitable giving permanent. The tax benefits, for gifts of land for conservation purposes, gifts of food to food banks and other charities, and gifts made by retirees straight from individual retirement accounts, are part of a slate of about 50 temporary tax provisions called “extenders” that are usually renewed each year.

And yet another piece explains why the President’s proposal to raise the estate tax rate – while simultaneously not subjecting appreciation on assets to federal income taxation when the assets are donated to charitable entities – is a significant tax incentive for charitable giving:

An estate-tax increase would provide a huge benefit to charities because donations to these groups would become the only easy way to legally avoid capital-gains taxes, according to Len Burman, director of the Tax Policy Center.
 
Rather than pass assets down to heirs and incur a higher tax levy, more wealthy tax filers will chose to bequeath their assets to charities upon their death, Mr. Burman said.
 
“The president has locked up the philanthropic sector vote,” he wrote in TaxVox, a blog maintained by the center. “Except, of course, he isn’t running again.”

For an opinion-free survey of the President’s tax-related proposals affecting charities, see this previous entry on the blog.

JRB