WASHINGTON, DC—Rep. Chris Smith (R-NJ) is to remedy a flaw in the 2018 tax law that is expected to result in a significant decline in charitable donations and leave many unable to meet the humanitarian needs that they have supported for decades.
“Many Americans want to give generously to charities, but they may not be able to afford to do so now with the changes implemented in the 2018 tax law,” Smith said. “My legislation would fix this problem, protecting taxpayers while encouraging continued support to charities. Charitable organizations—churches, synagogues, homeless shelters, soup kitchens, job training programs, and all other groups that do heroic work helping the vulnerable among us every single day—depend on the generosity of taxpayers, and they could once again benefit under this bill.”
Smith’s Charitable Giving Tax Deduction Act, HR 651—which he introduced in the 115th Congress before reintroducing it on Thursday—would make charitable deductions universal and above-the-line, meaning that taxpayers can deduct charitable donations from their taxes whether or not they choose to itemize. As charitable giving is expected to decline by billions of dollars because of the new increase to the standard deduction, Smith’s bill would ensure that taxpayers who want to make tax-deductible donations to charities have the greatest flexibility possible to do so—either while itemizing their deductions, or taking the standard deduction.
Rep. Henry Cuellar (D-TX) is the lead Democratic co-sponsor of the legislation. “I believe that it is always important to give back to the community,” said Rep. Cuellar. “This bipartisan bill not only encourages us to help our fellow neighbors, but it also makes sure that taxpayers can receive their due deduction for charitable giving if they choose not to itemize. I thank Rep. Smith for his continued efforts on this issue and am glad to support this legislation that will encourage charitable actions.”
Charitable and faith-based groups are supporting the legislation.
“The New Jersey Catholic Conference thanks Congressman Smith for introducing this important legislation. Every year, New Jersey Catholic Charities agencies assist hundreds of thousands of individuals and families meet their most basic needs. A substantial percentage of Catholic Charities operating budget comes from charitable donations,” said James King of the Office of Social Concerns of the New Jersey Catholic Conference. “Unfortunately, provisions of The Tax Cut and Jobs Act of 2017 makes charitable giving increasingly more difficult. Limiting the amount of charitable giving individuals and families can deduct from their annual tax bill could cause unnecessary harm to the operating budgets for Catholic Charities and other nonprofits that serve the poor and vulnerable. Congressman Smith’s bill would protect this source of revenue that is vital to the assistance of some many in need.”
“By ensuring that taxpayers at all income levels can deduct their charitable gifts, the Charitable Giving Tax Deduction Act can strengthen America’s houses of worship and faith communities and increase fairness in the tax code. We want an America where all—not just the wealthy—are encouraged to contribute to their communities through faith-based and other charitable organizations,” said Brian W. Walsh, Executive Director of the Faith & Giving Coalition.
“For the past 100 years, U.S. tax policy, through the charitable tax deduction, has encouraged individuals to make philanthropic gifts to colleges, universities and independent schools. We applaud Representatives Henry Cuellar (D-TX) and Chris Smith (R-NJ) for re-introducing legislation that expands the charitable deduction, encouraging all Americans to support student scholarships, research, faculty and academic programs that help educational institutions provide transformational learning opportunities,” said Sue Cunningham, President & CEO of the Council for Advancement and Support of Education (CASE).
“United Way Worldwide applauds Congressman Smith for his leadership in reintroducing the Charitable Giving Tax Deduction Act, critical legislation for the charitable sector,” said Steven S. Taylor, Senior Vice President & Counsel for Public Policy at United Way Worldwide. “Americans who donate their hard-earned income to charities – regardless of their income level or tax filing status – should not be taxed on money they are giving back to their communities. Congressman Smith’s bill would make the tax law fair for everyone who makes a financial sacrifice in order to help those in need. We deeply appreciate Congressmen Smith and Cuellar for their support for American charities.”
“The Charitable Giving Tax Deduction Act reflects the values of the American people by making this vital incentive available to all taxpayers,” said Daniel J. Cardinali, President and CEO of Independent Sector. “We are proud to support this legislation, which will enable the charitable sector to better fulfill their missions and help all civil society organizations serve our communities.”
Recently, USA Today reported concerns of organizations that say charitable giving in this year alone could decline by as much as $20 billion, and studies including the American Enterprise Institute’s“Charitable Giving and the Tax Cuts and Jobs Act” report predicted that charitable giving would significantly decline in 2018. This shortfall was linked to an increase in the standard deduction in the 2017 Tax Cuts and Jobs Act, which would result in many taxpayers no longer choosing to itemize on their taxes including being able to write off charitable donations.
In May of 2018, Rep. Smith introduced HR 5771, the bipartisanCharitable Giving Tax Deduction Act, to make charitable tax deductions universal and “above-the-line,” allowing taxpayers to write off charitable donations on their taxes whether or not they choose to itemize. The amount of charitable contributions would not be capped under the legislation.
The AEI report estimated that provisions like those in Smith’s bill, HR 5771—which allowed taxpayers who took the standard deduction to also be able to deduct their charitable contributions—could boost charitable giving by $21.5 billion, offsetting the estimated charitable giving shortfall by several billion dollars.