Encouraging Charitable Contributions

A History

In late 2013, the 126th Maine Legislature passed Governor LePage’s Biennial Budget which included a $27,500 cap on itemized deductions including the charitable giving deduction.  Our conservative estimates found that this cap will cost Maine nonprofits $20 million annually in decreased charitable giving.

Working with legislative leadership MANP introduced and passed LD 1664: An Act To Encourage Charitable Contributions to Nonprofit Organizations, carving out the charitable giving deduction from the overall cap, preserving a tax deduction that benefits the greater good much more than it benefits the tax-payer.

In early January 2015, the Governor presented his Biennial Budget to the Legislature, including the repeal of LD 1664. The legislature ultimately passed a budget which reinstated the itemized deduction cap, undoing the work of LD 1664.

The posts below chronicles MANP’s ongoing efforts to encourage charitable contributions.  The most recent updates appear at the top.

2016 Updates

LD 1519 – An Act To Amend the Tax Laws To Strengthen Charitable Institutions, Encourage Home Ownership and Manage Medical Expenses, would have removed the cap on charitable deductions, along with a host of other items. The bill attracted bipartisan co-sponsorship, but its fiscal note would have a huge impact on its passage and what the final version looks like. MANP and several members testified on behalf of the charitable giving deduction portion of the bill, but the Taxation Committee unanimously voted on February 29th that the bill Ought Not to Pass.

The newly elected 128th legislature will convene in January of 2017 and MANP will continue to work on this issue.

2015 Updates

#9 (June 18, 2015)

The Governor has decided to line item veto each amendment in the budget document which was passed by 2/3 majority in the legislature early Tuesday morning. The legislature will have to vote again on each amendment to override the Governor’s line item vetoes. While we do not think that this will compromise the nonprofit sector, anytime that the floor takes up a vote on a piece of legislation, there is always the chance that it can be further amended.

Last night the legislature voted on a joint order to extend the session by 5 days, which will take the session into Wednesday June 24th.  They have the right to take an additional 5 day extension, and it remains to be seen if this will be necessary.

#8 (June 17, 2015)

The Legislature passed their leadership budget late last night/early this morning. While the Legislature still works on a few additional  items prior to their adjournment, it is evident that MANP has safely protected the nonprofit sector relative to taxes, however, it also evident that the work MANP had done relative to LD 1664 and charitable giving in the 126th Legislature, has been repealed.

# 8 (June 8, 2015)

Budget deliberations continued over this past weekend, with the Appropriations Committee voting 7 – 4 in favor of a compromise which was brokered by Senate Republicans and House Democrats. The Committee will ultimately release a divided report out of Committee, which will give way to floor debate and possible amendments to each report. While the Appropriations Committee did not include any apparent threats to the Nonprofit sector, such as taxing nonprofits or imposing PILOTS, the House floor debate and possible amendments may include these initiatives.

#7 (June 1, 2015)

The Appropriations Committee is continuing to work toward a final budget document, but has not yet crafted a final document and have not yet addressed itemized deductions and charitable giving.

#6 (May 18, 2015)

The Appropriations Committee continues work components of the governor’s budget. It is evident that they are continuing to tackle the larger issue of tax reform, however, they have not yet crafted a final document and have not yet addressed itemized deductions and charitable giving.

In addition to the Democrats’ alternative tax plan, the Republicans now have an alternative budget plan which maintained itemized deductions inclusive of charitable giving, medical deductions and mortgage interest and also protects nonprofit property tax exemptions.

#5 (April 21, 2015)

The Democrats’ alternative tax plan includes broadening the income tax base and simplifying the income tax by eliminating of itemized deductions, however their plan does not referenced charitable giving. MANP will continue to meet with legislative leaders to determine how their plan will affect charitable giving.

The Appropriations Committee continues to hold work sessions with committees of jurisdiction relative to the Governor’s budget, however, they have not yet crafted a final document as it would related to charitable giving. MANP will continue to monitor the budget document and will provide additional information as we receive it.

#4 (April 10, 2015)

The Taxation Committee provided the Appropriations Committee with their report on the Governor’s budget earlier this week. The Committee was divided in their report concerning itemized deductions. Six Committee members recommended adopting the Governor’s budget proposal to eliminate itemized deductions. This would include one’s ability to deduct charitable giving. Six other members recommended retaining the itemized deductions, but lowering the current cap from $27,500 to $15,000 and carving out charitable giving and medical expenses.

The Taxation Committee UNANIMOUSLY recommended adopting the Governor’s proposal to expand the sales tax base to certain services; however, they did agree to pull museums from this expanded list. We presume that historical sites would be included with museums, and the committee did not weigh in on summer camp tuition, as the Maine Revenue Services (MRS) had not provided the committee with clarification on summer camps. MANP expects that the Appropriations Committee will get this information form MRS and take this into consideration.

Our friends at the Maine Philanthropy Center submitted a letter and data on individual giving to the Taxation Committee last month.

MANP is very much interested in learning how these proposed policies would impact your nonprofit organization, and has launched a very short survey to gather additional information about donations and PILOTS. If your organization has not already participated, we hope your CEO, Finance Director or other appropriate staff member will take a few minutes to complete the survey. The results of this survey will better position MANP to be an effective advocate on your behalf in the legislature.

# 3 (March 27, 2015)

The Taxation Committee is continuing to work through components of the Governor’s budget proposal which includes the elimination of charitable giving deductions from itemized deductions. The Committee is expected to report to the Appropriations Committee on the entire budget bill as it relates to taxes by April 1st, however, MANP has learned that this date may be pushed back. You can still contact members of the Taxation Committee. Let the Committee know that it is preferable to carve out charitable giving from the elimination of itemized deductions, just as it has been done for medical deductions. This will provide Mainers from all income levels further incentives to donate to charitable organizations.

#2 (March 23, 2015)

Repeal of LD 1664 is still on the table. During their work sessions, the Taxation Committee has been collecting information about the implications from ME Revenue Services. MANP has been working with our friends at the Maine Philanthropy Center (MPC) on this component of the budget. MPC crafted a letter for the Taxation Committee outlining their concerns.  MANP will continue to follow this issue and its implications for the sector.

#1 (March 2, 2015)

The Governor is proposing to repeal LD 1664 (See Sec K-22 of the budget proposal). This proposal appeared in a separate section of the budget document from the other proposals to eliminate itemized deductions, making it a challenge to find. MANP offered testimony in opposition of the repeal of LD 1664 at the Appropriations Committee February 19th Public Hearing.  MANP is continuing to seek clarification on the practical implications should the repeal of LD 1664 go into effect.

2014 Updates

Update #17 (April 30, 2014)

Today LD 1664 became law without the Governor’s signature.  Please see update #15 for the summary of the final version of the bill.

Thank you to the many, many supporters of this effort from the bill’s sponsor, Senator James Boyle, and many co-sponsors, to members of the Taxation Committee and the Appropriations Committee, who spent the most time with this bill, to all the nonprofit leaders and philanthropists who made phone calls, testified, sent e-mails, and lobbied in the State House.  Without these efforts, the bill would not have cleared even the first of many hurdles it passed to become law.

We are not done yet.  Next year, we will be working to for an even better solution and we look forward to working with all of you again.

Update #16 (April 17, 2014)

LD 1664 has passed both the House and Senate.  We are now awaiting the Governor’s signature.

Update #15 (April 16, 2014)

After several twists and turns, including a letter from several members of the Taxation Committee, LD 1664 was amended one more time by Senator Emily Cain in a work session of the Appropriations Committee.  The amendment was the result of many conversations between members of both the Taxation Committee and the Appropriations Committee, advocates and the Governor’s office.  With funding extremely tight, and many competing priorities for the limited funds, we had to let go of any relief in tax year 2015 to save the bill as a whole.  The amendment proposed last night looks like this:

  • for tax years 2013, 2014 + 2015 – donors receive no relief from the cap
  • for tax year 2016 – tax payers will be able to deduct and additional $18K in charitable donations above the itemized cap
  • for tax year 2017 and beyond – all charitable deductions, allowed on the federal return, will be exempt from the cap

At around 11 pm last night, the Appropriations Committee voted unanimously to support the passage of LD 1664 as amended above.  The next stop is the Senate and then the House and finally the Governor’s desk.  We are optimistic that this bill will be passed and signed before the end of the month.

Update #14 (April 2, 2014)

The Taxation Committee voted unanimously to pass a compromise version of LD 1664.  The compromise looks like this:

  • for tax years 2013 & 2014 – donors receive no relief from the cap
  • for tax year 2015 – tax payers will be able to deduct an additional $10K in charitable donations above the itemized cap
  • for tax year 2016 – tax payers will be able to deduct and additional $18K in charitable donations above the itemized cap
  • for tax year 2017 and beyond – all charitable deductions will be exempt from the cap

The bill should have no trouble in the House + the Senate; however, it will face another uphill battle when it lands on the Special Appropriations Table.  In the Taxation Committee’s negotiated compromise, the intent was to create a revenue neutral bill when coupled with another bill that raises some additional revenue through enhanced tax-collection processes.

Our job is to now make sure the Appropriations Committee understands that intent.  We have been working on this today and will continue through this week.  The decision should be made no later than next week.

Update #13 (March 27, 2014)

At yesterday’s work session, there was general consensus that the cap on charitable deductions must go away. This is good news. However, there were at least two competing solutions, neither of which would have gotten unanimous support.

  1. Senator Haskell offered to amend her amendment to include just the sunset provision to lower the cost of the proposal to the state treasury.
  2. Representative Tipping-Spitz presented a distributional analysis, prepared by Maine Revenue Services, of a version of the Mills Amendment which would lower the overall cap on itemized deductions to the revenue neutral spot.This analysis shows that if the cap is reduced to $19,500, 4% of tax payers would see increased tax liability over the current $27,500 cap; however, the overall tax collection would be reduced by about $2.5 million a year. Again, almost revenue neutral, but not quite. 

The bill was tabled so that members of the committee will have time to coalesce around one of the solutions – and it may be a hybrid of the two. Our goal is to still get a bill passed unanimously out of committee and if it is revenue neutral, we have the best chance of that happening.

We believe the next work session will be on Friday at 1pm. You can listen online here: http://www.maine.gov/legis/audio/taxation_cmte.html

Update #12 (March 23, 2014)

On Friday, March 21st, the Taxation Committee held another work session on the bill.  Senator Haskell presented her proposed committee amendment which would sunset the cap on charitable deductions on December 31, 2015 and allow for a carry forward for excess donations given during 2014 & 2015.

The Taxation Committee adjourned before having a chance to vote on the bill, but it was clear that there was not unanimous support for either the bill as written, or the amended version.

The bill is tentatively scheduled to be worked again on Wednesday, March 26th at 1 pm.  You can listen online.

We are working to secure a unanimous Ought To Pass vote out of committee.  If you would like to join the effort, please contact Brenda Peluso.

Update #11 (March 19, 2014)

On Monday, March 17th, the Taxation Committee worked the bill.  Senator Anne Haskell – Taxation Committee Chair – opened the work session noting that LD 1664 has been one of the thornier bills this session.  She went on to say that all nonprofits are impacted by the decision that was made last year to cap itemized deductions and she wondered aloud if they had done more harm than good in instituting the cap.  She acknowledged that that there is no money to fix this immediately and offered the following:

  • Sunset the cap on the charitable deduction, making it a temporary tax.
  • Allow for a “carry forward” provision that would allow donors to deduct contributions made in 2013 & 2014 in future years.

Representative Knight approved of Senator Haskell’s suggestion and a few other members of the Taxation Committee weighed in.  Representative Brooks said “If this hurts the nonprofit sector, then darn it, let’s do something about it,” however, he was not sure if the sunset was the correct solution.  Representative Adam Goode also indicated that he needed a little more time to digest the idea.

The bill was tabled and will be worked again on Friday, March 21st at 1 pm.

Many people have made phone calls and sent e-mails and it has really made a difference.  We knew that in this difficult economy, this bill faced a very uphill climb, but we are very close to a compromise that will minimize the harm to the nonprofit sector and those we serve.   There is still time to reach out to your legislators and let them know you support the sunset with a carry forward compromise.  Download this document with more contact information and more details on the issue.

Update #10 (March 4, 2014)

Tomorrow’s work session has been postponed until after the public hearing on the Governor’s bill (see below).

Phone calls and e-mails are making a difference!  If you have not yet had a chance to reach out to your legislators, now would be the time to do so.   Download this document with legislator contact information and details on the issue.

Update #9 (February 27, 2014)

This week, the Governor introduced his own bill, LD 1795, which may make the passage of LD 1664 even more difficult.  LD 1795 carves medical expenses out of the itemized cap on deductions and will create a $3 – 4 million hole in the budget.  Furthermore, this cost to the treasury has been added to the list of items for consideration in the supplemental budget for FY 2014-15.

The next work session on LD 1664 will be Wednesday, March 5 @ 1pm.  The Public Hearing on LD 1795 has not yet been scheduled.

Update #8 (February 25, 2014)

The Taxation Committee has tentatively scheduled the next work session for Wednesday, March 5th at 1:00 PM.  In the meantime, we need to contact key members of the legislature and let them know how critical preserving the charitable giving incentive is to Maine nonprofits and the communities we serve.

Channel 6, WCSH, put together a good piece on the bill and you can watch it online.

Contact Brenda Peluso if you would like to be added to the interested parties list.

Update #7 (February 19, 2014)

The Taxation Committee tabled the bill for now.  We heard at the last work session that the Governor has proposed a bill that would carve the medical deduction out of the itemized cap and NOT the charitable deduction.  Based on this information, the Committee will wait until a public hearing has been had on the Governor’s bill before re-working LD 1664.  Passing LD 1664 during this legislative session is becoming more unlikely; however we are continuing to press for the preservation of the one tax incentive that benefits the common good more than the individual tax payer.

If you are in Portland tomorrow night, February 20th, Senate President Justin Alfond is hosting a meeting on LD 1664.  All are welcome.

  • WHAT: Tax Deduction Meeting
  • WHERE: Greater Portland Chamber of Commerce, 443 Congress St, Portland
  • WHEN: Thursday, February 20th, 4:00pm to 5:30pm

Update #6 (February 4, 2014)

At yesterday’s work session things took a decidedly different turn.  Here is a brief summary of the proceedings.

Dr. Allen with the Maine Revenue Services was asked how low the itemized deduction cap would need to be lowered in order to keep the bill revenue neutral.   He stated that the cap would have to be lowered to $15,300 from the current cap of $27,500 in order to make the legislation revenue neutral.  Our assumption was he based his calculation on the Mills alternative proposal, outlined in Update #5 below; however, it is not clear if medical expenses were included in his calculation, based on his response to questioning.

A couple of legislators stated that they would prefer to see an increase in the cap and not exclude any deductions from the cap.  Dr. Allen was asked to calculate the cost to the treasury should the cap be raised from $27,500 to $30,000.  After a quick recess, he was able to give $2.1 million as the answer.

The committee tabled the bill until February 10th and it is unclear where other members of the committee stand.  Senator Douglas Thomas and Representative L. Gary Knight both stated that they would like to see this legislature start the process of repealing the cap altogether, but recognize there isn’t the money to do it all in one year.  They also noted that they believed the Governor would support this direction and would not support a bill that lowered the cap in order to exempt charitable giving and medical expenses.

Our concerns with this approach include:

  • Charitable giving would remain capped, costing the sector critical contributions at a time when demand for services are up and the resources to meet those demands have been in decline for years.
  • Subsequent legislatures are not required to follow this legislature’s lead or desire to slowly remove the cap.
  • The fact that this is the one tax provision that benefits communities more than it benefits individual tax payers does not seem to be motivating legislators to preserve this long-standing incentive for charitable giving.

If you have questions or concerns or would like to be added to our sign-on letter, please contact Brenda Peluso

Update #5 (January 31, 2014)

At the bill’s first work session on Wednesday, it was clear that while there is some support for the bill among the Taxation Committee members, there is considerable concern about the impact passing LD 1664 as written would have on the state budget.

The next work session will be Monday, February 3rd at 1:00 PM in room 127 of the State House.  They may vote on the bill at this time, but it isn’t clear whether or not they will have all the information they need to be able to make a decision.  You may listen to the proceedings online.

We expect the discussion to center around an amendment to the original bill that would:

  • exclude medical expenses as well as charitable donations from the itemized deduction cap
  • lower the itemized deduction cap to a level where the bill would be revenue neutral
  • potentially remove the retroactivity

We will be attending the work session and urging committee members to vote out a bill that preserves the incentive for charitable giving in Maine.  Maine is currently very near the bottom in the country for per capita charitable giving so we need to increase incentives for charitable people, not decrease them.

Contact Brenda Peluso, if you have questions or would like to be added to the letter in support of LD 1664.

Update #4 (January 27, 2014)

Wednesday is the first work session for the bill and it is possible that the Taxation Committee will vote the bill’s fate at this time.  Now would be a great time to contact members of the committee and let them know how important preserving the charitable giving deduction is to the mission you serve.

They have posted the testimony presented at the public hearing and you can view it here.

Update #3 (January 22, 2014)

We had a great turn out for today’s Public Hearing on LD 1664!  Thank you to the almost 20 individuals who testified in support of this bill and spent a long afternoon in the committee room.  Thank you also to the bill’s sponsor and co-sponsors who also testified in favor:

Because of this initial great showing of support, the uphill climb we face will be a little less steep.

We presented our own testimony and were pleased to also deliver written testimony from our partners at the National Council of Nonprofits, several nonprofits who could not be there in person, and our sign-on letter which had garnered 83 signatories before the deadline.

Shortly, all the testimony will be published on the State’s website along with scheduling and status information.  The first work session is tentatively scheduled for 10 AM on Wednesday, January 29th.

During a work session, the members of the Committee talk about the bill, ask questions of the committee’s analyst and potentially members of the audience, if they are recognize as an expert in the subject matter.  This is also the first opportunity for the committee to vote.

Our goal is a unanimous Ought To Pass (OTP) vote out of the committee which gives it the best chance of passing the full House & Senate votes and garnering the Governor’s signature.

This bill still has a long road to travel, but we’re off to a great start.  If you would like to add your name to the sign-on letter, it is not too late.  E-mail Brenda Peluso with the following information:

  • Name of the organization or individual;
  • Town of headquarters or residence;
  • Regions served if applicable; and
  • A statement that you are authorized to sign if applicable.

Update #2 (January 14, 2014)

There are several ways you can help us reach our first goal in the legislative process, a unanimous Ought To Pass recommendation out of the Taxation Committee.

  • Add your organization’s name to our sign-on letter to be presented to the Taxation Committee.   To add your name, e-mail Brenda Peluso with the name of the organization, the regions that your organization serves, and a brief statement that you are authorized to endorse the letter.
  • Plan to present spoken or written testimony at the public hearing on Wednesday, January 22nd.  A public hearing gives members of the public an opportunity to address members of the Joint Standing Committee in charge of the bill.  View the State’s helpful information about public hearings and e-mail Brenda Peluso if you plan to participate.
  • Contact members of the Taxation Committee directly if you have a prior relationship or serve members of their district.
  • Join our “interested parties” e-mail list by e-mailing Brenda Peluso.

Update #1 (January 8, 2014)

Public Hearing is set for LD 1664: An Act To Encourage Charitable Contributions to Nonprofit Organizations.

  • Wednesday, January 22, 2014
  • 1:00 PM
  • Room 127 State House, Taxation Committee Hearing Room

Read our recent blog post on the issue for more information about the bill, the harm it seeks to mitigate, and the experience in other states..