Tuesday, October 8, 2019
Roger Colinvaux (Catholic) & Ray D. Madoff (Boston College), Charitable Tax Reform For the 21st Century, 164 Tax Notes 1867 (Sept. 16, 2019):
The article identifies two goals of the charitable giving tax incentives: promoting actual charitable work and fostering a strong culture of charitable giving with broad participation. The recent increase to the standard deduction and the rise of donor-advised funds compromise both goals. The article outlines reform proposals to bolster the charitable sector, including expanding the giving incentive to all taxpayers in the form of a credit (subject to a giving floor), allowing some tax benefits to DAF donors upon contribution but delaying the income tax deduction until DAF funds are released from advisory privileges, closing loopholes that enable foundations and donors to skirt long-standing legal requirement, and modifying incentives to foundations to foster more spending.
The charitable sector is in peril. Too few taxpayers have incentives to participate in charitable giving, and too many donors can claim tax benefits without truly relinquishing control of their donations to an independent charity. On our current path, the result will be a charitable sector that reflects the voices of the wealthiest donors, and where working charities are starved for resources waiting for foundations and DAF advisers to release their funds. Fortunately, solutions are at hand: Expanding the incentive to all taxpayers in the form of a credit (subject to a giving floor), suspending the income tax deduction to DAF sponsors until the contribution is released from advisory privileges, closing loopholes that enable foundations and donors to skirt long-standing legal requirements, and modifying incentives to foundations to foster more spending will restore sanity and legitimacy to the law and establish a strong platform for our 21st-century charitable sector.