NGOs and the Law

Country Reports: North America

The International Journal
of Not-for-Profit Law

Volume 3, Issue 3, March 2001

the United States

Deductibility of Charitable Donations for Non-Itemizers

By Katharine Larsen and Theo Nkwenti, ICNL Legal Interns

Eight Congressional tax relief bills – four in the House and four in the Senate – propose extending deductions for charitable donations to non-itemizing taxpayers. Such an amendment to the Internal Revenue Code of 1986 (IRC) would allow millions of non-itemizing taxpayers to fully claim a charitable deduction for their contributions up to the amount of standard deduction.

None of these proposals was included in the Bush Administration’s tax package. Although the bills enjoy bi-partisan support, links to controversial charitable choice proposals – allowing governmental contributions to religious charities – weakened support for the non-itemizer deduction. Because President Bush is promoting charitable choice as part of his faith-based initiatives and independently of other IRC amendments, the non-itemizer proposals, particularly H.R.777, may gain favor as stand-alone bills.

Currently, approximately 84 million Americans cannot deduct any of their charitable contributions because they do not itemize their tax returns. The Congressional proposals would serve to increasingly recognize and encourage giving among all Americans.

A brief description of each proposal follows below.

Bill No. Title/s Sponsor/s Status Summary
H.R.777 Charitable Giving Tax Relief Act Rep. Phil Crane (R-Ill) Referred to Ways and Means Committee, 2/28/01 Amends the Internal Revenue Code of 1986 (IRC), allowing non-itemizers to deduct a portion of their charitable contributions.
H.R.824 Neighbor-to-Neighbor Act Rep. Jennifer Dunn

(R-WA)

 Referred to Ways and Means Committee, 3/1/01 Amends the IRC to: (1) allow non-itemizing taxpayers a limited charitable deduction; (2) exclude charitable deductions from the income-based limitation on itemized deductions: (3) repeal the special limitation on charitable contributions of capital gain property; (4) extend the excess contribution carryover period; and (5) allow tax-free distributions from individual retirement accounts (IRAs) for qualifying charitable purposes.
H.R.7/1284 Community Solutions Act of 2001, also Charitable Choice Act Rep. J.C. Watts

(R-OK) and

Rep. Tony Hall (D-OH)

 Referred to Ways and Means Committee

and Judiciary Committee, 3/29/01

 Amends the IRC to: (1) allow charitable contribution deductions for non-itemizers; (2) allow governmental funding of religious organizations; and (3) allow for the establishment of Individual Development Accounts (IDAs) for lower-income taxpayers.
H.R.494 Charitable Giving Act of 2001 Rep. Dan Burton

(R-IN)

 Referred to Ways and Means Committee, 2/7/01 Amends the IRC to establish, for all taxpayers, a charitable contribution tax credit of up to $200, in lieu of any deduction otherwise allowed.
S.35 Tax Cut with a Purpose Act of 2001, also Tax Reduction Bill Sen. Phil Gramm

(R-TX)

 Referred to Finance Committee, 1/22/01. Hearings held 3/14-15/01. While amending the IRC to reduce tax rates and increase deductions generally, also (1) allows deductions for charitable giving for non-itemizers, (2) allows tax-free distributions from IRAs for charitable purposes, and (3) increases allowable charitable contribution deductions for corporations.

 

S.298 Giving Incentives for Taxpayers Act Sen. Mitch McConnell (R-KY) Referred to Finance Committee, 2/8/01. Hearings held 3/14/01. Allows non-itemizing single-filers to deduct up to $500 in charitable contributions annually (up to $1,000 for joint filers).
S.592 Savings Opportunity and Charitable Giving Act of 2001, also Faith-Based and Community Initiatives Bill Sen. Rick Santorum

(R-PA)

 Referred to Finance Committee, 3/21/01. Among other amendments, (1) allows non-itemizers to deduct a percentage of charitable contributions over a floor of $500 for single filers ($1,000 for joint filers), (2) establishes Individual Development Accounts (IDAs) for lower income taxpayers, (3) includes tax-free distributions from IRAs, and (4) allows a limited charitable deduction for contributions of food inventory.
S.793/780 Neighbor-to-Neighbor Act Sen. James Inhofe

(R-OK)

 Referred to Finance Committee, 4/26/01. See H.R.824.