Estate Tax & Other Tax Incentives

Charitable Giving

The Issue

Extenders

After nearly a decade of expiration and renewal of the two enhanced deductions for donations of food inventory and land conservation easements and the IRA charitable rollover, Independent Sector and a coalition of organizations succeeded in persuading Congress to fully reinstate on a permanent basis the three “extenders” in December 2015 through the Protecting Americans from Tax Hikes (PATH) Act.

The IRA charitable rollover allows taxpayers aged 70½ or older to donate up to $100,000 from their individual retirement accounts (IRAs) directly to charitable nonprofits. This tax incentive has provided needed support for the work of social service programs, religious organizations, arts and cultural institutions, schools, healthcare providers, and other charitable organizations — all of which benefit Americans across the country.

The enhanced charitable deduction for food inventory raised the cap on giving and allows small businesses donating wholesome excess food to a qualified nonprofit to take the same enhanced tax deduction C corporations have been permitted since 1976.  The enhanced charitable deduction for land conservation helps America’s land trusts work with farmers, ranchers, and other modest-income landowners to increase voluntary land conservation by a third, to over a million acres a year when the tax incentive is in effect.

Federal Estate Tax

The federal estate tax is assessed on property transferred from deceased persons to their heirs. The Congressional Budget Office has found that the estate tax leads affluent individuals to donate far more than they otherwise would, because such donations sharply reduce estate tax liability, and that repealing the estate tax would reduce charitable bequests by 16 to 28 percent. Currently, the tax is permanently set with a $5.12 million inflation-indexed individual exemption (yielding a $5.45 million exemption for 2016) and 40 percent top rate.

In accordance with our Guiding Principles for Public Policy on Charitable Giving, IS has long advocated that the federal estate tax should be preserved and that Congress should return the tax to at least 2009 levels: a $3.5 million individual exemption and a 45 percent top rate.

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