• September 23, 2014

N.Y. Governor Signs Charitable-Gift Limits Into Law

NY Law

Abigail E. Disney, a New York philanthropist and filmmaker, says New York's limits on the charitable tax break wealthy residents can claim will hurt giving.

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Abigail E. Disney, a New York philanthropist and filmmaker, says New York's limits on the charitable tax break wealthy residents can claim will hurt giving.

New York Gov. David A. Paterson has signed into law a revenue bill passed by the state’s legislature that limits charitable deductions for “high earners”—a move that has nonprofits and a prominent New York philanthropist worried about a related significant loss in contributions to charity.

The law puts new limits on tax deductions for people with state- adjusted gross income above $10-million annually—about 3,500 taxpayers in New York. Those residents are now able to write off only 25 percent of their charitable contributions on their state income taxes rather than the previous 50 percent.

The provision in the budget plan runs for three years, including the current 2010 tax year.

The charitable-deduction pro­vision could provide up to $100-million in revenue during the current fiscal year for the state, which has had a budget crisis and has sought additional funds. But nonprofit organizations and donors think the change will lead many wealthy people to give less money to charity.

“Charities have been hit from every side in the last three years, including seeing decreases in public funds,” said Abigail E. Disney, a New York philanthropist and film maker.

“The last thing on earth charities need is a disincentive from the government to people who are their donors, especially their biggest donors. Because the biggest donors are the people who are least hurt by this economic downturn and more likely to be there every year with the kind of general- support money and reliable money that these organizations need.”

Ms. Disney—the grandniece of Walt Disney—said she would not be directly affected by the new state budget law because her annual state adjusted gross income falls beneath the provision’s threshold. But she said she understands the situation of colleagues, friends, and others who will be affected.

“There is no question that tax consequences do affect people’s decision -making about giving,” she said. “It’s not the primary reason anyone does it. But it’s right there in second place, and it’s a big piece of the equation for any donor, for anybody, at any level. So to throw a disincentive into this particular mix at this particular moment just seems counterproductive and ill advised.”

Ms. Disney said the new limit on deductions imposed by the New York law is significant. “It’s not a small amount, they are reducing it by half.”

Other money-starved states are likely to see New York’s action and consider following along, she said. “New York is a leader in philanthropy, so what New York does I can’t imagine other states won’t follow,” she said, adding: “Congress could go looking at it, too.”

Ms. Disney is co-founder and co-president of the Daphne Foundation in New York City, a family fund that makes grants to “grass-roots and emerging organizations” that fight poverty in New York City.

In 2008 she started a charity, Peace Is Loud, to encourage women around the world who seek to end conflicts using non-violent methods. The charity grew out of Ms. Disney’s first film, “Pray the Devil Back to Hell,” a documentary about Liberian women who worked to end the civil war.

Ms. Disney was in the headlines last month when she joined the philanthropist Julian Robertson and other high-wealth individuals, through an organization called United for a Fair Economy, in asking Congress to move quickly to immediately reinstate and strengthen the federal estate tax.

Comments

1. shybear309 - August 10, 2010 at 02:26 pm

With all due respect to Ms. Disney, what about all of evidence that tax incentives play a small role in the decisions of the wealthy to make charitable gifts? It is not helpful for individuals like her--she acknowledges the new law won't even impact her--saying how provisions like this will hurt nonprofits. Even if this tax law were a disincentive to give, it would just mean than nonprofits would need to revisit their cases for support and make them really meaningful instead of treating donors like ATM's.

2. dbroussard27 - August 10, 2010 at 02:48 pm

Shybear,

Yes, the decision to give (yes/no) is not based on tax deductions. But how much to give is very much rooted in that for wealthier donors who have assets in a variety of places. Why do CGAs or other more creative philanthropic tools? Why not just sell your stock rather than giving it to a charity?

It's because the decision to give is based primarily on the vision/case for support/understanding and caring about the people who will beneift (heart) while the amount is strongly rooting in tax shelters, etc. That's why most people go to talk to their accountant before making a major gift...

I hope no other state does this until we see and analyze the effect of this decision 2 years out. If it doesn't affect philanthropy so much the better but I think some individuals will be giving less...

3. ppcllc - August 10, 2010 at 03:10 pm

shybear309,

There is NO such evidence. You are referring to meaningless surveys quoted by absolutely clueless pundits. The empirical evidence proves exactly the OPPOSITE. Charitable giving by the wealthy consistently tracks changes in tax law.

This isn't the forum for an exhaustive treatise on the matter, but one illustration is the temporary suspension of full fair market value deduction when appreciation for tangible personal property (such as artwork) became subject to the AMT. Just ask any art museum what happened.

If I knew as little about the subject that I was opining on, I suppose that I, too, would be shy about signing my posts.

Jeff Steele

4. mjaneb - August 10, 2010 at 03:14 pm

This law affects 3,500 people whose state-adjusted gross income is $10 million or higher, repeat, $10 million or higher. If a hypothetical donor was giving $1 million to charity, she/he previously could write off $500,000. Now she/he can "only" write off $250,000, with the other $250,000 treated as taxable income. At the highest federal tax bracket (35% - not sure what the New York brackets are), this is $87,500, or .875% of a $10,000,000 income and even less of a higher income. This might be a disincentive to give to charity for merely rich people, but if mega-rich people balk, I say raise the highest tax bracket to 50% and let government get back to providing the safety net it once did, instead of placing all on the onus on charities.

5. ppcllc - August 10, 2010 at 04:05 pm

mjaneb AKA bonehead,

50% tax bracket? Why bother with the pretense of taxation? Just stick a gun in the faces of the "mega-rch" if they "balk" at the confiscation of the fruits of their labor, take their house keys, car keys and bank passbooks, and divvy everything up among those who you think deserve it more.

Margaret Thatcher said that the problem with Socialism is that you eventually run out of other people's money.

6. jameyc - August 11, 2010 at 11:56 am

First New York....next will be the Feds. And it will likely impact far more people than just the "Mega Rich." Remember the $250k threshold for new taxes the current administration promised? I suspect you will start seeing diminished deductions at that level as well if there is a second term for President Obama. They see the nonprofit community as competition when it comes to tax dollars.

7. mansefeldt - August 11, 2010 at 03:30 pm

Those of you who read this publication on a regular basis will recognize that this is just one more attempt to control private philanthropy. First they will take away the incentives to give, then there will be an outcry about both the lack of giving and the allegation that the wealthy are giving only to "elite institutions" like universities and museums. The next step will be to directly, or indirectly through tax regulation, control to whom and by what means the "wealthy" make their charitable contributions. The goal here is to make all of us dependent on the government for our every need. As one who would be subject to this New York statute, I guarantee I would move or give less.

8. mjaneb - August 12, 2010 at 11:46 am

ppcllc -

If a free society cannot help the many who are poor, it cannot save the few who are rich.
John F. Kennedy

The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.
Franklin D. Roosevelt

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