(Photo From Deposit Photos)
Multiple provisions harmful to the charitable sector have been removed from the U.S. Senate Finance Committee’s (SFC) version of the federal tax bill sent over by the House of Representatives in the reconciliation process. The provision that initially was in the House version but later pulled and would have allowed the U.S. Secretary of the Treasury to revoke an organization’s tax-exempt status was not placed into the SCF version.
The Senate bill omits the proposed excise tax on private foundations and the Unrelated Business Income Tax on transportation benefits in the House bill.
The Senate proposal includes a more generous non-itemizer deduction ($1,000/$2,000 vs. House’s temporary $150/$300) but adds a 0.5% adjusted gross income (AGI) floor on itemizers. The Senate extends the 60% adjusted gross income (AGI) limit for cash contributions, versus the 50% limit proposed by the House.
For example, if someone with an AGI of $50,000 donates $251 to charity, only $1 is tax deductible. “This 0.5% floor only applies to itemizers. A $50,000 household isn’t going to itemize, so they would fall into the $2,000 (or $1,000 for singles) charitable deduction limit. All $250 would be deductible,” explained Shannon McCracken, president & CEO of The Nonprofit Alliance.
“A $500,000 AGI household that itemizes and donates $2,501 would receive the deduction on the $1 plus the additional amount, she said. “In both cases, it should encourage an increase in giving levels,” said McCracken. Fewer than 10% of Americans itemize deductions. The provision would allow all taxpayers to deduct charitable contributions — $1,000 for individuals and $2,000 for married couples — significantly expanding the potential donor pool.
It’s not all good news. The Senate version includes provisions that take resources away from the nonprofit sector. There are large spending cuts to safety net programs, such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP). Also, the Senate reduced the proposed 21% university endowment tax rate that is in the House version to a ceiling of 8%. The current rate is 1.4%.
A floor vote of the full Senate is expected next week, after days of debate that adds and subtracts from the package. Congress remains on its expedited schedule to present a final bill to the White House by July 4.
Here is a link to the Senate’s version of the tax bill which now must be negotiated with the House of Representatives. https://www.finance.senate.gov/imo/media/doc/finance_committee_legislative_text_title_vii.pdf
The Charitable Giving Coalition (CGC) is hosting today (6/17) a Digital Day of Advocacy, calling on the Senate to include the Charitable Act (S. 317 / H.R. 801) in the reconciliation package. The virtual mobilization is intended to amplify bipartisan momentum behind the legislation, which would restore the charitable deduction for non-itemizers, allowing all taxpayers to deduct their donations to nonprofits.
“Restoring the charitable deduction is not just a tax issue — it’s a fairness issue,” said Brian Flahaven, chair of the Charitable Giving Coalition. “Every American should be empowered to support the causes they care about, regardless of income level.”
Individual donors form the backbone of sustainable nonprofit funding, said McCracken. “The Charitable Act democratizes giving by ensuring every American taxpayer—regardless of income level—can receive recognition for their generosity,” she said.
Originally enacted under the CARES Act, the charitable deduction spurred an additional $74 billion in giving before expiring in 2021. The Charitable Act would reinstate and expand the provision, with bipartisan backing from Senators James Lankford (R-OK) and Chris Coons (D-DE), and Representatives Blake Moore (R-UT), Danny Davis (D-IL), Carol Miller (R-WV), and Chris Pappas (D-NH).
“We remain concerned about the proposed 35% cap on itemized charitable deductions included in both chambers’ bills,” said McCracken. “Unlike a floor, which establishes a minimum threshold, a cap actively discourages donors from making larger contributions that fuel critical nonprofit work in communities nationwide. As this legislation advances, we urge Senators to remove this cap while maintaining the positive provisions, ensuring tax policy supports rather than hinders charitable giving.”
