Increasing Donor Incentives Would Help Nonprofits, Sens. Say

By Dylan Moroses
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Law360 (June 2, 2020, 7:32 PM EDT) -- Increasing the limit on a tax deduction to encourage charitable contributions would help nonprofits as they assist families and front-line workers during the novel coronavirus pandemic, a bipartisan group of U.S. senators said Tuesday during a web conference.

The Coronavirus Aid, Relief and Economic Security Act , passed into law in March, included a $300 above-the-line charitable deduction available to those who make qualified contributions. But the senators said during a web conference sponsored by several nonprofits that increasing the limit on the incentive could help assistance and recovery efforts during the pandemic.

The senators will seek to include an increase to the charitable-giving deduction if there's additional legislation to address health and economic crises caused by the pandemic, said Sen. James Lankford, R-Okla. Initially, the lawmakers were looking for a higher limit, Lankford said.

"When people invest in nonprofits … it actually creates greater efficiency," Lankford said. "You really need to look at the bigger picture to see it."

Increasing the deduction might cost the federal government more money, but Lankford said that "government assistance is always more costly than not-for-profit assistance."

Sen. Christopher Coons, D-Del., said that expanding the above-the-line deduction would encourage more donations at a time when they are sorely needed to keep organizations operational.

"If more Americans were acknowledged and supported in their charitable contributions, there would be more giving," Coons said.

Sens. Amy Klobuchar, D-Minn., and Jeanne Shaheen, D-N.H., both said that expanding the charitable contribution deduction would help preserve essential employers and services in communities throughout their states and the country during the pandemic.

Lankford said he and his Democratic colleagues, along with Sens. Mike Lee, R-Utah, and Tim Scott, R-S.C., are still discussing whether the provision would need any reporting requirements to prevent false claims of the above-the-line charitable deduction. The provision should be designed "as simple as possible" to encourage as many people as possible to donate, Lankford said.

The above-the-line deduction generated some confusion among lawmakers and stakeholders in the final hours before passing the coronavirus relief bill because it was described in a widely circulated bill summary as a temporary incentive for 2020. However, the actual bill text said the provision would apply to all "taxable years beginning after Dec. 31, 2019."

A senior GOP aide told Law360 that language in the bill text could have been a drafting error.

Other lawmakers have offered ideas for expanding the above-the-line deduction. Coons, ranking member on the Senate Appropriations subcommittee responsible for the Internal Revenue Service's budget, said he was weighing a proposal to cap the deduction at 1% of adjusted gross income. A bipartisan proposal by Rep. Mark Walker, R-N.C., H.R. 5293, would cap the above-the-line deduction at a third of the standard deduction.

Advocates for charities have long sought an above-the-line-deduction for charitable gifts to provide an incentive for donations by middle-class families, who now claim the expanded standard deduction — $12,400 for an individual and $24,800 for a married couple — under the 2017 tax law . The traditional charitable deduction is now used mainly by wealthy families, who can piece together enough deductions to itemize them rather than using the standard deduction.

--Additional reporting by Alan K. Ota, David van den Berg and Stephen Cooper. Editing by Neil Cohen.

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