Washington — Independent Sector today released new research showing that two tax provisions currently under consideration in Congress could reduce charitable giving by billions of dollars annually. The analysis, conducted by researchers at Indiana University’s Lilly Family School of Philanthropy and by Ernst & Young, examines the impact of key elements in the Senate Finance Committee’s draft budget reconciliation legislation.
The provisions in question, a 35% limit on all itemized deductions and a 1% floor on corporate charitable giving, have already passed the House of Representatives and are being considered in the Senate. Independent Sector strongly opposes using the charitable sector as a revenue source for unrelated policies, and co-led a letter with approximately 2,300 nonprofit sector organizations in opposition to these and other provisions.
“These tax changes are more than just harmful, they are counterproductive,” said Akilah Watkins, president and CEO of Independent Sector. “The research shows these provisions will reduce charitable giving by far more than the government would gain in revenue. This is a lose-lose-lose for taxpayers, for nonprofits, and for the communities they serve.”
Key Findings from the Research:
35% Limit on Itemized Deductions
- Estimated Impact: $4.1 to $6.1 billion in lost giving annually
- Provision: Section 70111 of the Senate draft limits the value of itemized deductions—including charitable donations—for high-income taxpayers to 35%, instead of the current top marginal rate of 37%.
- Analysis: High-income donors are particularly responsive to tax incentives. These donors are responsible for more than half of all itemized charitable giving, making this provision especially damaging.
Revenue vs. Impact: According to the Joint Committee on Taxation, the provision would raise $34.4 billion in tax revenue over 10 years. However, it would reduce charitable giving by at least $40 billion over the same period—likely more.
1% Floor on Corporate Charitable Giving
- Estimated Impact: $4.2 to $4.8 billion in lost giving annually
- Provision: Section 70426 disallows a deduction for the first 1% of taxable income that a corporation donates to charity.
- Analysis: Research by Ernst & Young, using IRS and Joint Committee on Taxation data, shows this measure would disincentivize giving across the corporate sector.
- Revenue vs. Impact: The provision is expected to raise $16.6 billion in federal tax revenue over 10 years but would reduce corporate charitable giving by approximately $45 billion in that same period.
About the Research
The analysis on individual giving was conducted by researchers at the Indiana University Lilly Family School of Philanthropy, a nationally recognized leader in philanthropic studies. The corporate giving estimates were developed by Ernst & Young, drawing on federal data and established academic methodologies.
About Independent Sector
Independent Sector is the national membership organization that connects, strengthens, and advocates for nonprofits and philanthropies.
###
Media Contact:
Andrea Risotto
andrear@independentsector.org
