NAICU Washington Update

Senate Finance Hearing Draws Opposition to Charitable Deduction Cap

November 03, 2011

A Senate Finance Committee hearing on incentives for charitable giving took a hard look at the Obama administration's proposal to limit the charitable deduction to 28 percent. The deduction cap was soundly opposed by all participants - the nonprofit executives and think tank representatives who testified, as well as Sen. Orrin Hatch (R-Utah) and other members of the committee.

As ranking Republican on the committee, Hatch chaired the October 18 hearing in the absence of chairman Max Baucus (D-Mont.).  Witnesses spoke in strong opposition to any tampering or experimenting with charitable tax deductions in the absence of comprehensive tax reform.  Hatch noted that charitable organizations are playing an increasingly important role in the current economy - a role that could be compromised if Congress passed the 28-percent limit on itemized deductions and exclusions.

Nonprofit panelists testified that a cap on the charitable giving tax benefit would indeed result in lower contributions to charities, and subsequent job loss among nonprofit employees in an already struggling economy.  Eugene Steurle, senior fellow at the Urban Institute and former deputy secretary of Treasury, estimated that a such a cap would likely result in decrease of $1.7  to 3.2 billion in charitable contributions.

Beyond Senate Finance, both the House and Senate tax writing committees, as well as members of both parties have voiced opposition to limiting the charitable deduction.  Also, the "Super Committee" on deficit reduction is examining both spending and the tax code.  Given that several of its members also sit on the House and Senate tax committees, it is highly unlikely that the Super Committee will consider any such cap as part of their deficit reduction recommendations.

NAICU joined both the National Council on Nonprofits and other higher education associations in opposing any cap on charitable deductions.  The Statement for the Record submitted by ACE, NAICU, and other higher education associations was made part of the recent Finance Committee hearing.