Tax Reform and Charitable Giving

Many experts anticipate tax reform in 2017. What might this mean for charitable giving?

After several years of bipartisan Congressional studies and committee work in the House and the Senate, it now appears that the prospects for comprehensive tax reform have moved to the front of the legislative agenda for 2017.

The president-elect’s tax reform proposal is based on an agenda designed to stimulate the economy by cutting taxes and creating jobs. While not identical, the plan largely follows the “Better Way” blueprint laid out in a policy statement made by Republican Congressional leaders this past summer.

The plans’ similarities will no doubt make it easier to craft a final bill. House Ways and Means Committee Chair Kevin Brady has said that his staff is already drafting tax reform legislation to be reviewed during the first 100 days of the new administration. Meanwhile, Senate Majority Leader Mitch McConnell has also indicated that he is enthusiastic about the prospects for bipartisan tax reform.

Some legislative experts have stated that there is an 80 percent probability that Congress will pass comprehensive tax reform legislation before the August 2017 recess.

What tax reform may look like

The basis of most tax reform plans calls for simplification of the Internal Revenue Code by eliminating or curtailing various deductions or policies that reduce tax revenue, thereby broadening the tax base. Additionally, tax rates may be reduced or increased depending on the plan, a taxpayer’s marital status and other factors.

Some of the various tax reform proposals feature reduced tax incentives for charitable giving, according to the Tax Policy Center. The potential reduction is in the 2 to 9 percent range, or potentially $6 billion to $26 billion per year.

Even though the percentage drop is small, the dollar amount is significant. It is certain that organizations like the Association of Fundraising Professionals (AFP), the National Association of Charitable Gift Planners (CGP), the Independent Sector and Charitable Coalition and other groups will rally to protect the important incentives to encourage charitable gifts.

In past tax reform acts, Congress has carefully addressed changes that would adversely affect philanthropy. Since the income tax deduction for charitable gifts has been a central component of the modern federal income tax code for nearly 100 years, many observers are confident that Congress will once again act to protect incentives for qualified gifts to charity.

Sources for More Information

House Ways and Means Committee
Senate Finance Committee
White House
Congressional Budget Office
Alliance for Charitable Reform
Urban Institute
Brookings Institution
Tax Policy Center
Tax Foundation
Association of Fundraising Professionals
National Association of Charitable Gift Planners
National Catholic Development Conference
Association for Healthcare Philanthropy
Council for the Advancement and Support of Education
Independent Sector 
Giving Institute
Library of Congress

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