House Passes Bill to Make Charity Tax Breaks Permanent

From the Chronicle on Philanthropy by Alex Daniels.

Nonprofits cheered a successful vote in the House on Wednesday that would make several tax breaks for charitable giving permanent, but the legislation faces a steep climb to become law.

The America Gives More Act, which passed the House on a 279-137 vote, would provide tax deductions for gifts of food to food banks, land set aside for conservation, and gifts to charities made directly from individual retirement accounts. The legislation would also simplify the foundation excise tax. Currently, foundations pay either a 1-percent or 2-percent tax on investment gains depending on how much money they provided in grants. The bill would set the tax at 1 percent for all foundations.

The tax breaks for food, land donations, and gifts from retirement accounts are part of a slate of more than 50 temporary tax provisions, called “tax extenders,” that expire each year. Congress did not pass the extenders until December of last year, timing that many nonprofit leaders say nearly eliminated any incentive to use the tax preferences.

Legislation that would have made the charitable tax donations permanent passed the House last summer but died in the Senate.

“For each day that goes by without an incentive in place and assured, many of the donations the incentives were intended to promote simply will not take place,” a group of nonprofits wrote in a letter to Congress on Wednesday. “The repeated expiration and retroactive renewal of these charitable-giving incentives create tremendous uncertainty for individuals and families who want to provide donations to help their communities.”

Less Taxpayer Income

The Jewish Federations of North America praised the House for passing the retirement-account provision in particular. It allows people over 70&frac; years old to deduct up to $100,000 in charitable donations from their taxable income.

“The rollover contribution is a ‘lifeline and not a loophole’ and allows donors to plan their ability to help care for the most vulnerable among us,” William Daroff, director of the group’s Washington office, said in a statement. A number of nonprofit groups, including the Council on Foundations, Feeding America, Independent Sector, the Jewish Federations, the United Way Worldwide, and others supported passage of the bill.

President Barack Obama issued a veto threat of the bill this week. His veto statement said he “strongly opposes” the bill because it contained no spending cuts or tax increases to offset the loss of revenue.

In pressing for the tax breaks, Republicans are “seeking to impose a double standard by adding to the deficit to continue and create tax breaks that primarily benefit higher-income individuals, after insisting on offsetting the cost of measures that help middle-class and working Americans, such as the extension of emergency unemployment benefits,” the White House wrote in a statement.

The Congressional Budget Office, Congress’s accounting arm, predicted the bill would result in $14.2-billion in reduced taxpayer revenue.

While more than two-thirds of the House voted for the bill, enough to override a threatened veto, Geoffrey Plague, vice president for public policy at Independent Sector, a nonprofit membership group, predicted there would be a “different dynamic” should the Obama veto the bill. Party politics, he said, might make it difficult for Democratic House members to vote against President Obama.