Читать книгу The Tax Law of Charitable Giving - Bruce Hopkins R., Bruce R. Hopkins, David Middlebrook - Страница 20

The federal income tax charitable contribution deduction is now more than 100 years of age. Enacted in 1917, it has evolved significantly, with changes in its contours ranging from major to minor over the ensuing decades. In a remarkable understatement, one observer wrote that, over the years, “[a]lthough the basic premise remains the same,” the charitable deduction has changed from a “short statutory provision into a complex set of rules.”¹³¹

The major changes in the charitable deduction for individuals over the period generally entail the limitations on the amount that can be deducted by donors in a year (increasing from 15 to 60 percent), the creation of “preferred” categories of charitable donees, the differing treatment of gifts to public charities and private foundations, the rules concerning the deductibility of property that appreciated in value, the addition of substantiation and appraisal rules, and codification of the concept of the donor-advised fund.¹³² This aspect of the law is also informed by the breadth of the range of organizations that are considered charitable entities for purposes of the deduction.¹³³

The federal income tax charitable contribution deduction was enacted as part of the War Income Tax Revenue Act of 1917.¹³⁴ That body of law increased federal income tax rates for the purpose of paying for the United States' involvement in World War I. This deduction, however, was not enacted for lofty purposes such as incentivizing giving for charitable and like causes. Rather, it was created to “offset the potential negative effects of increased income taxes on charitable giving among the wealthy.”¹³⁵ Some legislators “feared that the [tax] increase would reduce individuals' income ‘surplus’ from which they supported charity,” in that “[i]t was thought that a decrease in private support would create an increased need for public support and even higher tax rates, so the [charitable] deduction was offered as a compromise.”¹³⁶ In short, “some policymakers were concerned that without the charitable deduction, wealthy taxpayers subjected to these higher tax rates would no longer contribute to charities or institutions of higher education (or would contribute less).”¹³⁷ The overall amount of giving that could be deducted was set at 15 percent of a donor's net taxable income.

The Individual Income Tax Act of 1944¹³⁸ revised the maximum amount that could be deducted, by changing the measuring base from net taxable income to adjusted gross income, and introduced the standard deduction. The maximum amount deductible was increased in 1952 when the percentage limitation on deductible giving was upped to 20 percent.¹³⁹ In 1954, Congress raised this limitation to 30 percent but only for certain specified categories of eligible organizations.¹⁴⁰ A commentator stated that this was the “first time that Congress encouraged certain charitable giving by granting more generous deductions for donations to certain charitable organizations than to others . . . [to] encourage additional contributions to these organizations to offset their rising costs and modest returns on endowment funds.”¹⁴¹ This list was expanded by the Revenue Act of 1964,¹⁴² along with the introduction of an unlimited charitable contribution deduction for certain high-giving taxpayers.

The Tax Reform Act of 1969¹⁴³ brought substantial changes in this area. The list of “preferred” charities was expanded, as was the scope of the charitable deduction with respect to them. The unlimited charitable deduction was phased out. Many other substantive provisions were introduced, such as the private foundation rules (with their attendant lesser deductibility limitations), various rules by which the charitable deduction for gifts of certain properties had to be reduced, a basis allocation rule for bargain sales, and the law concerning charitable remainder trusts.

The Economic Recovery Act of 1981¹⁴⁴ introduced an above-the-line charitable deduction—a charitable deduction for those who also utilized the standard deduction. This deduction expired in 1986. At the time of its enactment, it was controversial. For example, the then-Assistant Secretary of the Treasury for Tax Policy argued that this deduction “would go, in very large measure, to those who are already giving with respect to their existing gifts,”¹⁴⁵ providing them with a windfall gain, adding that the deduction “would result in a large revenue loss to the Treasury and little increased giving for the charities.”¹⁴⁶ Congress disagreed, “[b]elieving that allowing a charitable deduction to nonitemizers stimulates charitable giving, thereby providing more funds for worthwhile nonprofit organizations, many of which provide services that otherwise might have to be provided by the Federal government.”¹⁴⁷

The Deficit Reduction Act of 1984¹⁴⁸ increased the contribution limit on contributions of cash or ordinary income property to standard grantmaking private foundations. That legislation also introduced substantiation requirements, for claimed deductions of property in excess of $2,000, and penalties for overvaluation of property. The Technical and Miscellaneous Revenue Act of 1988¹⁴⁹ introduced rules by which a charitable contribution deduction could arise for payments providing a right to purchase athletic tickets (repealed in 2017) and for corporate gifts of inventory when used in particular instances.

In 1993, Congress passed the Omnibus Budget Reconciliation Act of 1993,¹⁵⁰ which revised the substantiation rule by reducing the value of the gift amount to $250 and introduced the $75 quid pro quo contribution rule. The Small Business Job Protection Act, adopted in 1996,¹⁵¹ introduced the qualified appreciated stock rule for private foundations; that rule was made permanent on passage of the Tax and Trade Relief Extension Act of 1998.¹⁵²

The Pension Protection Act of 2006¹⁵³ brought a series of rules adversely impacting the extent of charitable contributions to certain supporting organizations and codified the concept of the donor-advised fund. This latter law change led to considerable and ongoing controversy about deductible charitable giving to vehicles where the money and property are not always put to immediate programmatic charitable use (as is also the case with, for example, endowment funds and charitable remainder trusts).

The Tax Cuts and Jobs Act,¹⁵⁴ enacted in 2017, had a minor direct impact on charitable giving and a major indirect impact on giving. As to its direct impact, the law was changed to increase the AGI limit for cash gifts by individuals to public charities from 50 percent to 60 percent. The indirect impact came in the form of enactment of provisions outside the ambit of the charitable deduction itself: lowering of individual tax rates, doubling of the standard deduction, and adjustments in the estate tax rules, which seem to be leading to a decline in charitable giving by individuals.¹⁵⁵

Although the federal income tax charitable contribution deduction has endured criticisms over the years, and continues to do so, the “charitable contribution tax incentive has continued vitality insofar as it encourages people to make charitable donations throughout the year.”¹⁵⁶