Charities fight changes on tax deductions

WASHINGTON (RNS) Most Americans who file income tax returns won't be affected by proposed changes in how charitable contributions are deducted because they don't itemize their deductions, federal income tax records show.

But that hasn't stopped charity officials and others from lobbying Congress to fight any change in deductions as part of the "fiscal cliff" negotiations. That's because they draw billions of dollars from donors who itemize, and a huge chunk of those donations come from taxpayers who earn more than $500,000.

That has placed advocates for the needy in the position of lobbying for the nation's most advantaged. Last week, a coalition of charity officials and recipients lobbied Congress for two days as part of what they called "Protect Giving – D.C. Days."

"If taxpayers get no benefit for deductible expenses above a certain amount, say $50,000, then there is no tax incentive to have expenses once the cap is reached," said Roger Colinvaux, an associate professor at the Columbus School of Law at Catholic University.

Tax records show that any change in deduction status will fall disproportionately on the nation's wealthier taxpayers, because:

• In 2010, only 32 percent of American taxpayers itemized their deductions, according to the most recent figures from the Internal Revenue Service.
• Of those that itemized, 82 percent (38.3 million taxpayers) claimed a charitable deduction.
• Of those who made more than $500,000, 93 percent claimed a charitable deduction.
• Those that itemized deducted a total of $170 billion in charitable contributions in 2010.

Anything that affects large donors could ripple through charities, said Steve Taylor, senior vice president and counsel for public policy for the United Way. Taylor's group, which works to help low-income people to financial stability through education and a healthy lifestyle, relies on high-income donors, as do many large charities, he said.

Last year, President Barack Obama proposed lowering the maximum value of the tax benefits for charitable donations from 35 percent to 28 percent for individuals making more than $200,000 a year and couples who earn more than $250,000. So where taxpayers in the top bracket currently pay 35 cents less in taxes for every dollar given to charity, that would be reduced to 28 cents per dollar donated, according to a new report from the National Economic Council.