TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Monday, December 9, 2013

Madoff: It's Time for Charitable Deduction Reform

Charitable DeductionNew York Times op-ed:  How the Government Gives, by Ray D. Madoff (Boston College):

Nonprofit hospitals could be required to provide charity care (an idea floated by Senator Charles E. Grassley, Republican of Iowa, and enacted by a few states). Golf courses could be made ineligible for the conservation easement deduction, as President Obama proposed in his latest budget. Most important, Congress could impose a seven-year payout obligation for donor-advised funds and forbid foundations to meet their payout requirements by giving to donor-advised funds.

This would be a good start toward aligning the charitable deduction with the public good. But no doubt there are other issues as well. The last time Congress took a serious look at the charitable deduction was in 1969. A lot has changed in 44 years, and these rules are too important to ignore.

Of course, any solution — large or small — will require Congress to pay attention to the problem. This will be no mean feat. Too often when Congress considers legislation limiting the charitable deduction, the conversation is overly simplistic — pretending that all charitable giving is supporting local soup kitchens. The lobbying arm for the charitable sector has not helped the situation. While it purports to represent both donors and charities, it has focused its efforts on preserving the maximum charitable deduction for donors, while paying scant attention to closing the loopholes that divert resources away from true charities.

We all know that Congress needs to get our financial house in order. Curbing wasteful charitable deductions is the perfect place to start.

<(Hat Tip: Ann Murphy.)

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