Report Issued on Proposals to Increase Charitable Giving

• DOI: http://doi.org/10.1002/npc.30629
• Date: 01 August 2019
• Published date: 01 August 2019

Bruce R. Hopkins’ NONPROFIT COUNSEL

August 2019 7

THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc

amount — be limited to $100,000 of contributions over

a six-year period — the applicable period — prior to or

during the child’s attendance at the institution of higher

education. Deductions claimed for gifts in excess of that

amount during the applicable period would be recap-

tured (taken into gross income).

Full deductibility of gifts to colleges and universities

would thus turn on whether or not the contribution is

a specified contribution. The term specified contribu-

tion would mean, with respect to a specified college

or university at which an applicable child of a restricted

contributor is enrolled during a year, a contribution that

would otherwise be deductible if made to the institu-

tion or a related organization by a restricted contributor

or by another entity at the contributor’s direction, or

otherwise by means of a donor-advised fund or pri-

vate foundation or in satisfaction of the contributor’s

pledge.

The concept of the specified contribution would

therefore depend on whether or not the institution is

a specified one. A specified college or university would

be an institution of higher education other than an

institution that (1) has a written policy that prohibits

as a factor in admissions decisions consideration of

contributions from an applicant or family member of

an applicant and the financial ability of an applicant or

family member to make a contribution, and (2) demon-

strates to the satisfaction of the IRS that the policy is

properly enforced.

Rounding out the parade of definitions, an applicable

child would be, with respect to a restricted contributor,

an individual who is a child of the restricted contributor

or a descendant of such a child (existing IRC § 152(c)(2)

(A)). A related organization is defined in this proposal as

an organization that (1) controls or is controlled by the

specified college or university involved, (2) is controlled

by one or more persons who also control the specified

institution, or (3) is a supported organization or a sup-

porting organization with respect to a specified college

or university.

This legislation would amend the Higher Educa-

tion Act to require any institution that receives federal

financial aid to establish this type of policy and report

the number of applicants, admitted students, and

enrolled students who are the children of donors. The

Department of Education would make the data publicly

available. Institutions would be required to include this

information on their annual information returns.

The press release quotes Sen. Wyden: “While mid-

dle-class families are pinching pennies to pay tuition and

graduates are buried under tens of thousands of dollars

in student debt, wealthy families are greasing the skids

to get their children into elite schools on the backs of

those same families and graduates. It’s absurd that the

tax code subsidizes the top 1% buying their way into

school.” ◆

REPORT ISSUED ON

PROPOSALS TO INCREASE

CHARITABLE GIVING

Independent Sector commissioned a report exploring

policy proposals to offset the potentially negative impact

on charitable giving that is anticipated, largely due to

enactment of the Tax Cuts and Jobs Act. This report

analyzed five tax policy proposals involving amounts of

charitable giving and the number of households that

contribute. These proposals are:

• a nonitemizer charitable deduction without

limitations,

• a nonitemizer charitable deduction with a cap

($4,000 for single filers and $8,000 for married

couples filing jointly),

• a nonitemizer charitable deduction with a floor

(allowing a deduction of 50 percent of the value of

charitable gifts under 1 percent of AGI and a full

deduction for gifts over 1 percent of AGI),

• an enhanced nonitemizer charitable deduction pro-

viding a higher-value deduction for low- and middle-

income households, and

• a nonrefundable charitable giving tax credit (25

percent).

The key findings of this report are:

• The tax credit option has the largest positive impact

on the amount that would be contributed ($37 bil-

lion) and the number of participating households

(10.6 million). This proposal would reduce federal tax

revenues by $33 billion.

• The unlimited nonitemizer charitable deduction

could generate up to $26 billion in additional chari-

table contributions and induce up to 7.3 million addi-

tional households to donate. The federal revenue loss

would be as much as $22 billion.

• The nonitemizer charitable deduction with a cap

would generate fewer additional charitable dollars

than is lost to the federal fisc.

• The nonitemizer charitable deduction with a floor

could bring in up to $7 billion more in charitable giv-

ing than is lost in federal revenue.

• The nonitemizer with a cap has the largest impact on

donors per dollar cost to the Treasury. This option

would bring in as many as 352 new donor house-

holds per million lost in federal revenue.

This report was researched and written by the Indi-

ana University Lilly Family School of Philanthropy. It was

funded by the Charles Stewart Mott Foundation and the

Fidelity Charitable Trustees’ Initiative. [1.4] ◆