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Nonprofits Seek Enhanced Giving Deduction for Non-Itemizers

Posted on Jan. 26, 2021

Nonprofits are asking the White House and Congress to beef up the charitable giving tax break for non-itemizers in the next COVID-19 relief bill.

In a January 22 letter, 74 charitable organizations asked President Biden and congressional leaders to boost the temporary, $300 above-the-line charitable deduction that was established by the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136).

The groups are seeking a significant increase of the $300 amount and an extension of the deduction through at least 2022. They also want preservation of the itemized charitable contribution deduction.

COVID-19 relief legislation (P.L. 116-260) enacted at the end of 2020 raised the cap to $600 for joint filers while leaving the amount at $300 for individuals, and it extended the deduction through 2021. By enhancing the non-itemizer deduction in that bill, “Congress acknowledged that tax policy will continue to be an important incentive to help every American support pandemic relief and recovery,” the letter said.

“We know that greater incentives are needed in 2021 as nonprofits respond to the growing health and economic crises and will be critical in the future as nonprofits play an essential role in recovery efforts when the pandemic ends,” the organizations said.

“Further, tax reforms must recognize that limits to existing giving incentives would have the unintended consequence of undermining the charitable sector upon which governments rely and would result in increased costs for governments if they had to replace nonprofit services,” the groups added.

In general, groups representing the nonprofit sector have been pleased with the enhanced deduction in the December 2020 relief bill, although they had asked for larger amounts and want to make the deduction permanent. During the last Congress, charitable giving advocates supported the Universal Giving Pandemic Response Act (S. 4032/H.R. 7324), which proposed increasing the amount of the above-the-line deduction to one-third of the standard deduction and extending it through 2021.

The January 22 letter also asked that the next COVID-19 package provide refundable tax credits and other relief provisions “for all nonprofits.”

Although some nonprofits participated in some of the relief programs enacted in 2020, a lot of those programs were designed primarily to help for-profits and excluded many charitable organizations, the signatories explained, adding that nonprofits with more than 500 employees haven’t been eligible for the Paycheck Protection Program or other grants or forgivable loans.

“Restrictions based on previous employee size and gross-receipts declines in the Paycheck Protection Program and the Employee Retention Tax Credit do not make sense in the nonprofit context,” the letter said. “Nonprofits frequently employ large numbers of part-time employees and, unlike for-profit businesses, demand for nonprofit services and the resulting costs of operating during a pandemic have far exceeded normal levels, without a similar increase in revenues to keep pace.”

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