In December we shared information on proposed changes at the federal level which might limit the tax-saving benefits of charitable deductions. President Obama previously suggested limiting certain charitable tax breaks for high earning individuals. This possible change was just one part of large ideas about re-writing significant portions of the U.S. tax code. Many are hoping to simplify the code in an effort to increase transparency.
The charitable deduction change proposal in particular drew the ire of many when first suggested. Now a large group of sitting U.S. Senators are adding their names to the effort to protect the charitable deduction status quo.
The Senate Letter
Late last month a total of thirty three Senators from both parties sent a letter to the chairman and ranking member of the United States Senate Committee on Finance. The letter reiterated that tax deductions for charitable giving has been a staple of the national tax code for a century. The underscored their support for "protecting the full value and scope of the charitable deduction."
The Senators explained that while the tax code re-write is driven in part by a desire to eliminate "loopholes," the charitable deduction is not a loophole. Instead, the letter refers to the deduction (and charitable donations themselves) as a "lifeline for millions of Americans in need." Research is referenced which argues that any limitation in tax benefit for charitable deductions will correlate into billions in fewer charitable donations annually, ultimately hurting the vulnerable individuals and non-profit organizations that rely on such support.
Referencing the overall reasons for the possible change, the open letter suggested that any federal revenue benefit from changing the deduction would be offset by the consequences. In other words, federal tax revenues may tick up slightly as a result of the change, but the decrease in charitable contributions that result would actually lead to an increase in public spending to make up the difference. At the end of the day, the Senators argue, the change would be a net negative for all involved (including the government).
The letter ended by arguing that "the federal government must affirm its long-standing dedication to encouraging private acts of charity and compassion, especially when our charities and the people they serve are facing so many challenges."
These potential changes in tax savings for charitable giving are just one part of many possible tax code edits that could impact New York estate planning. Be sure to keep abreast of any alterations that could affect your or your family. Speak with a qualified NY estate planning lawyer for tailored guidance.