LD 1664: An Act To Encourage Charitable Contributions to Nonprofit Organizations
The Biennial Budget passed by the 126th Maine Legislature late this past spring contained a $27,500 cap on itemized deductions including the charitable giving deduction. LD 1664 would carve the charitable giving deduction out of the overall cap, preserving a tax deduction that benefits the greater good much more than it benefits the tax-payer.
While tax deductions are not the only reason itemizers give to charity, they do allow for larger and more gifts to charity. In fact, a recent report by the U.S. Trust reports that 45 percent of high net-worth donors said they would reduce giving if the income tax deduction were changed.
Another report just released by the PEW Charitable Trust chronicles the harm done to the nonprofit sector in at least seven states where charitable giving incentives were removed. These states’ experiences show that the decline in giving to Maine’s nonprofit sector will be real if LD 1664 does not succeed.
According to the IRS Statistics of Income Data, 2010, the $27,500 cap would eliminate the charitable giving incentive for all Maine itemizers with income over $200,000. This group of taxpayers accounts for 36% of $433 million in reported contributions and their average deductions for mortgage & taxes alone exceed $54,000. If this cap caused an 8% reduction in giving by this group of people and a 2% reduction from the rest of the itemizers, the sector could lose approximately $20 million annually in charitable giving.
Maine is already very near the bottom of the country in individual and private foundation philanthropy, this cap would further plunge Maine’s private philanthropic giving at a time when nonprofits are being asked to pick up more of the duties formerly provided by local, state and federal governments.
This $20 million loss in annual charitable giving would be significant to a sector that is struggling to meet increased demand for services at a time when all sources of revenue are already declining.