President's Tax Panel Recommends Changes in Charitable Contributions

The President's Advisory Panel on Federal Tax Reform released its final report on November 1, which includes several recommendations regarding charitable donations and charities. The report endorses two alternative simplified income tax plans that would both, among other changes, allow all taxpayers to claim a deduction for charitable contributions that exceed one percent of their income. The Panel also recommended allowing taxpayers over age 65 to make donations from IRAs directly to charities without negative tax consequences. This is similar to IRA rollover legislation that has been introduced in the House and Senate.

In addition to these incentives for charitable giving, the Advisory Panel recommends increased reporting by charities for large donations in order to “improve the accuracy of charitable contributions claimed as deductions.” To address uncertainty in valuing charitable gifts of property, the Panel recommends allowing taxpayers to sell property without realizing a capital gain if the entire sales proceeds are donated to charity within 60 days of the sale. It also suggests the following changes for appraisals of donated property: (1) new rules requiring clearer standards for appraisals; (2) information reporting by appraisers to the IRS, the donor, and the charity of the appraised value of property; and (3) new penalties for appraisers who misstate the value of property. Additionally, the Panel suggests that deductions for gifts of clothing and household items be allowed only when the taxpayer receives a price list and an itemized receipt from the charity.

Finally, the Advisory Panel suggests that Congress review the types of organizations that qualify for tax-exempt status and the standards for maintaining that status. While it does not make any specific recommendations in this area, the Panel urges “greater oversight and better governance” of exempt organizations. The recommendations were transmitted to Treasury Secretary Snow who said he hopes to “refine” the suggestions and then present them to President Bush by the end of the year.

Read a summary of the final report
Read the final report (See Chapter Five for recommendations on charitable donations.)

Last Updated: November 3, 2005

-Top of Page-