Position Statement
Charitable Giving Incentives
 

statement date

November 11, 2004

overview

Revenue provisions in the fiscal 2004 budget that the Bush administration released February 3, 2004, included a number of familiar proposals designed to encourage more charitable giving, as well as a few new measures involving tax-exempt organizations.

The success of Goodwill mission-related services relies heavily upon the voluntary and generous donations made by the public. As a national average, 86 percent of Goodwill revenue is reinvested into programs and services benefiting disadvantaged populations in communities across the nation. 

position

The Council of California Goodwill Industries supports legislation and policies that encourage charitable giving and volunteering, including tax incentives for individuals to support causes of their choice through charitable contributions. The Council applauds the Bush administration for creating incentives for charitable giving and recognizing the role charities play in humanitarian assistance.

discussion

At the national level, Goodwill Industries International urged Congress to pass legislation considered in 2003 (CARE Act) that included a non-itemized deduction that allows individuals who take the standard deduction to deduct their charitable cash contributions.  An expansion of this provision to include non-cash donations is encouraged.  The bill also included an IRA charitable rollover provision that allows the direct, tax-free transfer of retirement account assets to charity.

The provision that would extend the charitable contribution deduction under section 170 to non-itemizers, has been proposed numerous times. Taxpayers who do not itemize could deduct cash contributions to qualified charities in addition to claiming the standard deduction.

Taxpayers could get a maximum deduction of $250 ($500 for married taxpayers who file jointly), according to a Treasury Department description of the budget's revenue provisions.

Proponents of the provision have argued that non-itemizers should have the same ability to deduct their charitable contributions that itemizers enjoy and that letting non-itemizers deduct their donations to charity would boost charitable giving.  Critics have countered that providing non-itemizers with this tax break would give them a double deduction.

The other familiar charitable-giving proposal in the budget blueprint allows tax-free withdrawals from IRAs for charitable contributions. Taxpayers could exclude from gross income distributions made after age 65 from a traditional or Roth IRA directly to a charity.  The exclusion would not apply to indirect gifts through a split-interest entity such as a charitable remainder trust or pooled income fund, or through purchasing a charitable gift annuity, according to the Treasury description.  The exclusion would be available regardless of the percentage of adjusted gross income limits that apply to deductible contributions.  Also, amounts transferred directly to a charity would be counted as distributions under the required minimum distribution rules.

Supporters of the IRA provision have said it would simplify charitable giving for taxpayers who have more money than they need for retirement. But critics question whether it is fair to give favored tax status to donations of IRA assets while limiting deductions for contributions of taxable income. Critics also note that IRA assets are taxable when withdrawn because they are deductible when deposited.