Charitable Tax Reform

An important way that the ultra-rich avoid paying taxes is through tax deductions and loopholes associated with charitable gifts. Philanthropy by the wealthy is an important way to support nonprofit organizations, hospitals, and educational institutions, however, it comes at a high cost. For every $100 donation that a wealthy donor makes, they can get $40 in tax breaks and as much as $90 if they donate stock. Regular Americans get far less for their charitable giving, if they itemize it at all.

This system is particularly lucrative for private foundations, which have amassed more than $1.3 trillion in assets thanks in large part to charitable tax breaks and a booming stock market.

We need charitable tax reform to address this wealth hoarding by private foundations and wealthy donors. For serious reform, we need the following three things to happen:

• Step up foundation payout requirements for large foundations.
• End loopholes that allow the wealthy to use charitable contributions to evade taxes.
• Increase charitable tax incentives for everyone else.

A good first step for wealthy donors and private foundations is to increase their giving overall – they can start by making the Crisis Charitable Commitment and giving at a higher Charitable Standard.

The Emergency Charitable Stimulus proposed by Scott Wallace, the Institute for Policy Studies, Patriotic Millionaires, and other donors would require private foundations and donor-advised funds (DAFs) to give away 10 percent of their assets for three years during the ongoing crises. Currently, private foundations are required only to give 5 percent of their assets, including administrative expenses, and DAFs have no payout requirement.