Charitable Contributions Deduction for Nonitemizers

An Open Letter to the Nonprofit Community

Why Nonprofits Should Support the Nonitemizer Charitable Deduction

Tens of millions of Americans make charitable contributions every year to support local religious organizations, youth and family programs, medical research, theaters and museums, and a host of other causes. From 1982 to 1986, federal tax law allowed all taxpayers to deduct their charitable contributions regardless of whether they took the standard deduction or itemized deductions separately. Since that legislation sunset at the end of 1986, only those who itemize deductions separately receive direct recognition for their charitable gifts at tax time.

The CARE Act of 2002 will allow the 86 million taxpayers who take the standard deduction to deduct up to $400 for charitable contributions they made during the tax year if they file individually, and up to $800 if they file jointly. The provision would be in place for two years, allowing sufficient time to assess the impact of this deduction on federal tax revenues and on charitable giving before Congress would decide whether or not to extend the deduction for a longer period. There is no guarantee that the provision would be extended, as the nonprofit community clearly learned in 1986.

The Charitable Contribution for nonitemizers will bring greater equity to the tax system by giving a tax break to the many low- and middle-income people who currently give and will provide reinforcement and incentive for them to keep giving. It would provide an immediate tax break to nonitemizers—90% of whom earn less than $50,000—who make charitable contributions. It also provides a concrete reminder to all taxpayers—much like the reminder they now receive to make annual contributions to an IRA—that they should consider making or increasing their charitable donations.

No one can estimate precisely how much new giving will be generated by this tax deduction, but there is broad agreement that there will be an increase in donations. When nonitemizers were recognized for their contributions from 1982 to 1986, there was a substantial increase in giving noted in reports from the IRS and from nonprofit organizations. nonitemizers who take the deduction for their charitable contributions would be subject to the same substantiation requirements as itemizers, and it is unjust to claim that nonitemizers are more likely to submit fraudulent reports to the IRS than are other taxpayers.

There is no basis for claims that the CARE Act of 2002 and its charitable deduction for nonitemizers will lead to reduced government funding for other social services programs. In fact, many nonprofit organizations are particularly supportive of the CARE Act because it includes a substantial increase in funding for the Social Services Block Grant program. 

Our nonprofit organizations do not seek to replace government. We want to work in partnership with government to address the needs of all Americans. And we want to see that all Americans are recognized for and encouraged to continue making charitable contributions to support the work of the nonprofit organizations they care about.

Sincerely,

Sara E. Meléndez President and CEO INDEPENDENT SECTOR

John R. Seffrin CEO, American Cancer Society Chairperson, INDEPENDENT SECTOR