Washington
Nonprofit organizations and their lobbyists are preparing for a showdown in Congress over legislation that many groups have long sought to encourage charitable giving and to cut down on abuses of charity tax laws.
The battle officially begins when a conference committee of members of the Senate and House of Representatives meets -- possibly as early as this week -- to work out differences between vastly different comprehensive tax bills recently passed by each chamber of Congress.
The Senate bill is chock-full of provisions for charities while the House bill has none at all. So nonprofit organizations face the steep challenge of helping Senators persuade House members to include in a final bill incentives for charitable giving and provisions for cracking down on abuse of charity tax laws.
Nonprofit officials who approve of the charity elements in the Senate bill worry that House members may balk at accepting them in a final bill, or accede to provisions that are designed to fight charity tax-law abuses -- which would bring revenue to the Treasury -- while rejecting provisions that are aimed at promoting charitable giving -- which would lose money for the federal government.
Nonprofit organizations will be lobbying for support from the representatives on the influential House Committee on Ways and Means, which writes tax legislation, whether or not committee members end up being named to the Senate-House conference panel.
The Senate legislation's chief method to spur donations would allow people who do not itemize deductions on their tax returns -- about 74 percent of Americans -- to write off a portion of their charitable donations. Individuals could deduct the sums above $210 that they donate each year to nonprofit organizations; couples filing jointly could write off the amount that exceeds $420.
The provision would be in effect for two years -- 2006 and 2007 -- unless Congress voted to extend it, and would cost the federal government an estimated $2-million.
But the Senate bill worries some nonprofit leaders who fear that a key provision could put a damper on giving by Americans with modest incomes who itemize on their tax returns. Under the Senate bill, donors who itemize deductions would no longer be able to claim deductions for cash and noncash gifts of $210 or less -- $420 for couples filing jointly -- but only for gifts above that figure.
Others praise the Senate for acting to help people who do not itemize on their returns get a break, even if some donors must cope with a limited deduction as part of the deal.
Another provision in the Senate bill would try to stimulate charitable giving by allowing older people to withdraw money from their individual retirement accounts and donate the sums to charity tax-free, a provision that charity fund raisers say could provide significant contributions to their organizations.
The bill also would allow many people to donate their own literary, musical, artistic, or scholarly compositions while claiming tax deductions at the fair market value of their works rather than at the cost of producing the works, as required under current law.
Several provisions in the Senate bill are aimed at cutting down on what senators say are abuses of charity tax laws.
To deal with concerns that many donors are taking overly generous tax deductions for gifts of clothes, household items, and other noncash goods, one section of the measure directs the Internal Revenue Service to publish a list of such items and assign a value to each one.
People would not be allowed to take a deduction for an item that was higher than the value listed, unless they got an independent appraisal showing the value of the item donated.
For a description of all the provisions in the Senate bill, known as the Tax Relief Act of 2005, go to the Web site of the Senate Finance Committee, http://finance.senate.gov.