Center for Non-Profits - US Senate Charitable Incentives Package

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Action Needed to Support Senate Charitable Incentives Compromise

(Posted 12/10/01)

The Bush Administration, Senators Rick Santorum (R-PA) and Joseph Lieberman (D-CT), along with members of the Senate Committee on Finance are continuing with negotiations around a charitable tax incentives package. Members of the Senate Committee on Finance will play a key role in these negotiations.

Action Needed: It is critical that the charitable and philanthropic communities in New Jersey speak out immediately by sending a letter to Senator Robert Torricelli, who is on the Senate Finance Committee, urging him to work with the White House to enact meaningful charitable tax incentives into law this year. A sample letter is at the bottom of this alert. You can also contact him by phone at 202/224-3224 or via e-mail at senator_torricelli@torricelli.senate.gov.

Background

The Bush Administration has been working with Senator Rick Santorum (R-PA) and Senator Joe Lieberman (D-CT) on compromise legislation that would provide a strong package of tax incentives to promote charitable giving, as well as spending initiatives that would further some aspects of the President's faith-based initiative. Members of the Senate Committee on Finance are now more actively involved in these negotiations. We need to garner Senator Torricelli and the Senate Finance Committee's support for a meaningful charitable tax incentives package. The draft proposal being discussed does not include the more controversial provisions of earlier "charitable choice" proposals. The proposed package includes:

A nonitemizer charitable deduction with a cap of $500 for single filers and $1,000 for joint filers phased in over 10 years (estimated cost $18.2 billion)
An IRA charitable rollover provision that would enable individuals over age 59 1/2 to give their Individual Retirement Accounts directly to charities without incurring any income tax consequences (estimated cost $3 billion)
Increasing the cap on corporate charitable deductions from 10% to 25% (estimated cost $1.7 billion)
Providing enhanced deduction for food donations by farmers and restaurants (estimated cost $516 million)
Lowering the excise tax on a foundation's net investment income from 2% to 1% (estimated cost $2.2 billion)
Expanding the tax credit to match savings accounts for low-income Americans (estimated cost $1.7 billion)

The package also includes a $135 million spending package to fund the Compassion Capital fund to assist organizations in obtaining 501(c)(3) status and accessing federal social service funds and a $362 million spending package to expand the Social Services Block grant and provide funding for the Second Chance Homes and Promoting Safe and Stable Families. It is likely that some of the provisions will be altered to reduce cost. At this juncture, it seems likely that the charitable tax incentives will remain at levels beyond the version passed by the House earlier this year. More information will be provided as it becomes available.

For more information about this legislation, contact Brian Berness at the Center for Non-Profit Corporations at 732/227-0800 or by e-mail at BrianB@njnonprofits.org.

Sample Letter to Senator Robert Torricelli

DATE
The Honorable Robert G. Torricelli
U.S. Senate
Dirksen Senate Office Building, 13th Floor
Washington, DC 20510

Dear Senator Torricelli:

Many of America's charities are facing heightened challenges due to the terrorist attacks, a shaky economy, and rising needs. Tax incentives legislation to encourage greater charitable giving is needed now more than ever. We urge you to work with the Administration and Senators Lieberman and Santorum to ensure that charitable tax incentives are enacted into law this year.

Specifically, we need your support for legislation that allows taxpayers who do not itemize deductions to deduct their cash contributions to charity, and permits individuals to transfer assets from their IRA accounts to a charity without incurring any income tax consequences. We also need your support for legislation to reduce the excise tax on private foundations from 2 to 1 percent. These three provisions combined could provide a powerful incentive to encourage and support charitable giving at a time when charitable donations are declining.

We understand that skeptics assert that the nonitemizer deduction would encourage widespread fraud. Under the current proposal being discussed, nonitemizers would only be able to claim the amount of charitable contributions they actually make, up to the maximum amount (which is substantially below what itemizers can claim). There is no reason to believe that nonitemizers would be any more likely to overstate their deductions than itemizers.

Moreover, the nonitemizer deduction represents sound tax policy. First, it would introduce a level of tax equity not currently provided by saying that nonitemizers should be recognized in the tax law when they give back to the community through charitable donations. Second, it provides a powerful incentive for charities to use in their fund- raising appeals as one more good reason why someone should support the work they do for our communities.

Again, we urge you to work with the Administration and Senators Santorum and Lieberman to enact a law that provides a powerful stimulus to all Americans to continue and extend the tremendous generosity they have already shown in their response to the tragedies in New York and our nation's capital. We look forward to working with you on this critical effort.

Sincerely,

Your name

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