Position Statement

INDEPENDENT SECTOR Policy Position on Charity Tax Credits

Charity tax credits are intended to increase the amount of private charitable contributions to organizations addressing poverty by providing a tax credit to individuals who give to these organizations. Such programs have been enacted so far in at least one state, Arizona, and have been incorporated into at least one federal block grant program to states. The Bush Administration has indicated its support for charitable state tax credits as part of its initiative to expand private giving.

INDEPENDENT SECTOR supports the intent of increasing the flow of private charitable contributions to organizations and activities that seek to meet the needs of our society’s most vulnerable people, particularly the poor. However, we do not support using charity tax credits as the means to accomplish this goal. First, they will create a new subcategory of charitable organizations with preferential tax treatment, thereby undermining the broad community benefit concept of a charitable nonprofit organization. Second, a charity tax credit will undermine the principle of private donor choice in charitable giving by offering an inducement to give to one type of charitable organization rather than another.

Meeting the needs of the poor and the most vulnerable in our midst and a commitment to inclusiveness are central commitments of the charitable nonprofit community. This is particularly true at a time when the gap between rich and poor is widening in our country. Government, business, and the nonprofit community all must dedicate themselves to narrowing this gap.

Charity tax credits are not the appropriate vehicle to achieve this objective. Public policy should continue to preserve the broad concept of charity, as it is currently defined, and not establish new categories or subcategories of nonprofit organizations that will receive special tax treatment. The broad concept of charity is an important part of our American tradition and has given rise to a diverse and pluralistic set of organizations all dedicated to the public good. This will also lead to increased regulation and paperwork requirements for charitable organizations. 

In addition, government tax policy should not be designed to influence donors to favor a particular type of charitable activity. One of the great strengths of the charitable sector is that resources are given through an individual donor's private choice. Government should seek to preserve private choice in giving and not try to direct it.

In addition, it is not clear that charity tax credits would result in a net increase in funds available to organizations serving the poor. If they are funded out of appropriated funds already designated for poverty-serving organizations and if they simply reward current giving or do not stimulate more additional giving than the cost of the credit, they would decrease rather than increase funds available to poverty-serving organizations.

Thus, INDEPENDENT SECTOR believes that charity tax credits undermine two of the most fundamental principles affecting charitable giving and public policy: preserving the broad concept of charity and private choice of donors. At the same time, IS supports the intent of finding ways to increase support for charitable activities addressing poverty.

Adopted by the INDEPENDENT SECTOR Board of Directors, March 2001

Download INDEPENDENT SECTOR's Guiding Principles for Public Policy on Charitable Giving (PDF--49KB) Press Release

INDEPENDENT SECTOR Policy Position Statements on:
Estate Tax and Charitable Bequests
Charitable Deduction for Nonitemizers
IRA Charitable Rollover