Proposed CHARITY Act Legislation Aims to Encourage Charitable Giving

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A bipartisan pair of United States senators serving on the Senate Finance Committee recently introduced a bill that may affect charitable organizations-and the individuals who donate to them.

The bill (S. 1343) is known as the Charities Helping Americans Regularly Throughout the Year Act-or, CHARITY Act for short. Sponsored by U.S. Senators John Thune (R-S.D.) and Bob Casey (D-Penn.), the proposed legislation aims to reform federal charitable tax provisions and, essentially, make it easier and more worthwhile for individuals to support their favorite charities.

Senators Thune and Casey, in the introduction of the bill, lay out a simple reason for its necessity: The charitable contribution tax deduction is an important part of the United States tax code, and it should be protected.

The full text of the bill, which can be read here (for a shorter version, a summary can be found here), includes a number of provisions that should be favorable for charities, donors and transparency proponents alike.

The provisions listed in the proposed bill include:

  • Empowering the Treasury Department to adjust the standard mileage reimbursement rate for charitable activities which, unlike the business and medical mileage rate, has not changed for 20 years.
  • Eliminating an alternative, that has never been made effective, to the requirement for taxpayers to obtain contemporaneous written receipts for large donations.
  • Requiring all tax-exempt organizations, regardless of size, to file their Form 990 electronically.
  • Permitting IRA owners over the age of 70 ½ to make charitable contributions directly from their IRAs to donor-advised funds (“DAFs”) and adding additional reporting requirements to increase transparency on inactive DAFs and DAF policies.
  • Imposing a flat 1% excise tax on private foundations to provide welcome simplification.
  • Creating a new, limited exception that would make it easier-or at least possible-for private foundations to own and operate taxable businesses that pour their earnings into various charitable foundations.

Finally, the CHARITY Act bill includes a “Sense of the Senate” section, which states, in part, “encouraging charitable giving should be a goal of tax reform, and Congress should ensure that the value and scope of the deduction for charitable contributions is not diminished during a comprehensive reform of the tax code.”

With the healthcare debate on pause, it’s expected that much of Congress’s attention will soon move to tax reform. Although it is unlikely the CHARITY Act legislation will be enacted separately from other, more comprehensive tax code reforms, the “Sense of the Senate” section of the CHARITY Act should be encouraging for the charitable non-profit sector and anyone who cares about charitable tax deductions.

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