Debt-Ceiling Deal Spares Charitable Deduction for Now, Future Uncertain
Debt-Ceiling Deal Spares Charitable Deduction for Now, Future Uncertain
While the charitable tax deduction will not be affected by the debt-ceiling legislation that President Obama signed into law on Tuesday, it is likely to receive scrutiny in the second round of cuts stipulated by the deal, the Chronicle of Philanthropy reports.
The debt-ceiling agreement, which will cut the projected federal deficit by as much as $2.5 trillion over the next decade, identifies $900 billion in short-term budget cuts and stipulates that a bipartisan committee of six Democrats and six Republicans identify a further $1.5 trillion in cuts by the end of the year. It is feared by many in the nonprofit sector that changes to the charitable deduction, which have been proposed by a number of politicians, including President Obama and a bipartisan group of senators, are likely to be considered. Perhaps just as significantly, spending cuts included in a second deficit-reduction deal are likely to slash funding for many arts, education, and social service nonprofits that rely on federal dollars.
Nonprofits have generally opposed changes to the charitable deduction out of concern that they would lead to a reduction in charitable giving. But some organizations now appear to be considering other ways to encourage philanthropy. Sandra Swirski, executive director for the Alliance for Charitable Reform, a group that has long advocated for the tax break, said she believes Congress will likely make changes to the tax code and is therefore considering alternative ways to promote giving.
"We will continue to educate members of Congress on the importance of charitable-giving incentives," said Swirski. "Note that I'm not saying we need a charitable deduction, I'm saying we need an incentive for charitable giving."
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