Nonprofit Charitable Giving Incentives

Background on Charitable Giving Advocacy

Charitable Giving Incentives

Many performing arts organizations are classified as 501(c)(3) tax-exempt organizations just like thousands of other nonprofits in education, human services, and the full array of organizations. Without this exemption and the deductibility of private donations, nonprofit performing arts organizations and many other charitable organizations will now be unable to serve community needs.

Talking Points

  • Charitable giving incentives are an investment in the public good. These incentives encourage donors to give more, benefitting millions of people who access services provided by nonprofit arts organizations.
  • Approximately 40% of nonprofit performing arts organizations’ revenue comes from  comes from charitable giving. This support is vital as ticket sales alone do not cover the costs of artistic presentations and educational and community programming.
  • Recent changes (please see our December 2017 Action Alert, regarding proposed budget) to the charitable tax deduction will reduce giving, limiting core services and public access. Tax law impacts what, when, and how much donors give.

See the Charitable Giving Issue Brief for more details

IRA Charitable Rollover

The IRA Rollover allows donors age 70 ½ and older to make tax-free charitable gifts directly from their Individual Retirement Account (IRA) funds to charitable organizations. Donors may give up to $100,000. Known as an “extender,” Congress has been extending this tax incentive on a year-by-year basis, resulting in uncertainty for both donors and charities.

In December 2015, Congress passed the Protecting Americans from Tax Hikes (PATH) Act making the IRA Charitable Rollover a permanent charitable giving incentive along with other tax extenders. President Obama signed the PATH Act into law on December 18, 2015.

Artists Fair Market Deduction

The artist fair market deduction bill, also known as the Artist Museum Partnership Act, would allow artists to take a fair-market value deduction for works donated to nonprofit institutions. Currently, artists (including writers, musicians, visual artists, and scholars) only receive a deduction based on the cost of materials even though posthumous donations of the very same work are eligible for a fair-market deduction.

What We're Asking For Right Now

  • Reinstate and expand incentives for charitable giving by enacting a universal charitable deduction available for all tax payers.
  • Ensure that tax policy changes will ensure nonprofit nonpartisanship and strengthen the capacity of the arts sector to support communities. 
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Recent Activity

House Passes Charitable Giving Legislation

On Thursday, February 12, the House passed H.R. 644, the America Gives More Act of 2015, which would permanently reinstate a set of charitable giving incentives that includes the IRA Rollover. The IRA Rollover allows donors age 70½ to make tax-free distributions of up to $100,000 per year from an IRA to a qualifying charitable organization. The final vote was 279-137. Many of you wrote to your Representatives sharing stories of how this giving incentive has supported the important work of your arts organization. Your voices were heard in this step for the legislation, and PAA thanks you for your advocacy.

Next, the bill will be considered in the Senate. The the timing isn’t certain, but the Senate Finance Committee has recently created tax reform working groups to start addressing comprehensive reform. While there is strong bipartisan support for these charitable giving incentives, the President has issued a veto threat over concerns of how to pay for the provisions.

PAA continues to meet with Congressional offices urging them to support this important measure.

CGC Welcomes New Members of Congress

To welcome new members and begin advocacy on tax policy, the Charitable Giving Coalition (CGC) recently sent a letter to new members of Congress introducing the coalition and its work and also explaining the importance of maintaining the full scope and value of the charitable deduction. PAA has signed this letter, and likewise, we encourage you to introduce your organization and its work to your legislators. Start building relationships by writing a letter, making a phone call, or scheduling a meeting–especially if your Representative or Senator is new to office. Use the PAA advocacy toolkit for tips on connecting with your leaders.

Advocacy Update: IRA Charitable Rollover

PAA and other charitable giving advocates have been urging Congress this year to reinstate the IRA Charitable Rollover; recently, there has been much activity in Congress on this issue:

Rollover Not Made Permanent:

On December 11, the House voted on H.R. 5806-the Supporting America’s Charities Act-which would make the IRA Charitable Rollover permanent along with two other charitable giving incentives. This bill did not succeed.

Rollover Reinstated and Extended

On December 3, the House passed H.R. 5771, the Tax Increase Prevention Act of 2014, which retroactively renews and extends the rollover and other charitable giving incentives through the end of 2014. The Senate passed the same legislation on Dec. 16 and the bill now awaits the President’s signature.

House Votes to Reinstate IRA Rollover

The House voted to pass H.R. 5771-the Tax Increase Prevention Act of 2014-which would reinstate and extend the IRA Charitable Rollover along with other expired incentives through the end of 2014. As you recall, this provision expired at the end of 2013; PAA and other charitable giving advocates have been urging Congress this year to reinstate this important incentive. Unlike H.R. 4719 which the House passed in July, this bill does not extend the deadline through April 15 for making charitable contributions that can be included on the previous year’s tax return.

CGC Thanks Rep. Paul Ryan

PAA signed on to a letter from the Charitable Giving Coalition (CGC) to Rep. Paul Ryan thanking him for his recent favorable comments regarding the value of charitable giving: “Charities ought to be a tax expenditure that is still preserved because civil [society] is one of the most important components of American life, of getting people involved in our communities and philanthropies.”  His comments came a few weeks after the House passed legislation that would reinstate and make permanent the IRA rollover.

PAA joins CGC, Independent Sector, and other non-profit stakeholders in advocating for favorable tax treatment for the important private donations that support the work of the sector.

Victory for IRA Rollover in the House

The House of Representatives passed legislation (H.R. 4719) that would reinstate and make permanent the IRA charitable rollover. This legislation would also extend the deadline through April 15 for making charitable contributions that can be included on the previous year’s tax return. The final vote was 277-130.

PAA, fellow arts advocates, and the greater charitable sector have been active on this issue, visiting Congressional offices, urging lawmakers to reinstate this provision, and sharing stories with representatives of how arts organizations have benefitted from this tax provision. Next, the legislation moves on to the Senate.

IRA Rollover Bill Advances in the House

The House Committee on Ways and Means approved H.R. 4619 which would make the IRA rollover a permanent tax provision. The rollover expired at the end of 2013. The bill was introduced by Rep. Aaron Schock (R-18th IL). Next, the bill advances to the House floor for a vote.

Rep. David Camp Releases Tax Reform Act of 2014

On February 26, Rep. David Cam (R-4th MI) unveiled his legislation to lower tax rates, simplify the tax code, and encourage economic growth. The “Tax Reform Act of 2014” also has provisions for the charitable deduction, such as setting a floor rather than a cap to the amount of donations that can be deducted. 

Independent Sector has submitted comments on Rep. Camp’s changes to the charitable deduction. It states that some of the provisions in the Tax Reform Act may have a negative impact on the incentive, possibly causing charitable giving to decrease. 

Senators Voice Support for Preserving the Charitable Deduction

One third of the Senate signed a letter in support of preserving the charitable deduction as it currently exists in any future re-writes of the nation’s tax code. The letter, authored by Senators John Thune (R-SD) and Ron Wyden (D-OR), is addressed to Senate Finance Committee Chair Max Baucus (D-MT) and states that: “[t]he charitable deduction is unique . . . the only provision that encourages taxpayers to give away a portion of their income for the benefit of others. For this reason, it is not a loophole, but a lifeline for millions of Americans in need.” The letter began circulating in the Senate in November during the Charitable Giving Coalition’s “Protect Giving Day.” You can read the full text of the letter and the list of the 33 signatures here.

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