You are viewing a preview version of this site. The live site is located at: https://jfnacommunications.org
H.R. 1: Protect & Expand Charitable Giving Incentives
The Jewish Federations of North America ("JFNA") is the national organization that represents 148 Jewish Federations, their affiliated Jewish community foundations, and more than 300 independent network communities. In their individual communities, Jewish Federations are the umbrella fundraising organization as well as the central planning and coordinating body for an extensive network of Jewish health, education, and social service agencies.
Fundamental Tax Reform, the Importance of Giving Incentives and the Operations of America’s Charities: Our perspective on H.R. 1, the Tax Cuts and Jobs Act, currently under debate in Congress, as well as the income tax code, charitable giving incentives, and the efficient operation of charitable organizations, is grounded in over 100 years of real-world experience. As government funding for social service programs continues to decrease, we are concerned that any diminution in support of charitable contributions and changes in the ground rules for America’s charities will hamstring the operations of Jewish Federations and their affiliated agencies in their mission to help the most vulnerable among us.
Our most important concerns regarding provisions in H.R. 1 include the following:
Charitable Giving: JFNA applauds the House and Senate for preserving the existing charitable contribution deduction, retaining this vital giving incentive as one of the few remaining itemized deductions. We further applaud the modification of the current annual gross income limitation on cash gifts to public charities. However, we are deeply concerned that the interaction of several provisions contained in H.R. 1, the Tax Cuts and Jobs Act, could result in a detrimental impact on charitable giving. A substantial increase in the standard deduction, combined with the elimination or limitation on a number of other “itemized deductions” will have the effect of greatly reducing the number of taxpayers who will claim itemized deductions, effectively removing the charitable contribution tax incentive for such taxpayers. It is beyond dispute that a dramatic decrease in the number of taxpayers who claim the charitable contribution deduction, combined with a decrease in individual income tax rates will have a profound negative impact on dollars given to charity. Indeed, a recent study conducted by the Indiana University School of Philanthropy confirms that the contemplated changes discussed above would result in a decrease in annual giving of over $13 billion. Other studies conclude the loss could be as high as $20 billion a year.
Our recommendation: We join a united charitable sector in endorsing a proposal to expand charitable giving by providing a “universal” deduction to taxpayers who do not itemize. A universal (or “above-the-line”) charitable deduction would increase giving, in terms of both donors and dollars, increase fairness by incentivizing all taxpayers to make contributions, and provide modest tax relief to middle and lower-income taxpayers as charitable contributions would not be subject to income tax.
State and Local Tax and Medical Expense Deductions: Proposed changes to the itemized deductions for medical expenses and state and local taxes will negatively impact segments of the population already at-risk, running counter to the public policy. Elimination of the medical expense deduction will adversely affect those who have significantly high out-of-pocket medical expenses, such as nursing home costs, long-term care insurance premiums, as well as the cost for caregivers and other support needs for those who age-in-place. The medical expense deduction is of particular importance to those with disabilities, seniors, and others suffering from chronic illness. An unintended consequence of eliminating the deduction could force more individuals and families to rely on Medicaid, a program already fiscally challenged. Similarly, repealing state and local tax deductions could result in a dramatic cut in critical state-funded community services such as Medicaid and other health-related services, transportation, and meals programs, among others. Such services are often the only programs touching the most vulnerable segments of our population, including seniors and the disabled.
Our recommendation: We urge that the medical expense be retained as it is in the Senate version of H.R. 1. Further, we also recommend that the deduction for state and local taxes also be retained in the final version of the legislation.
Political Intervention: The House-passed version of H.R. 1 contains language that weakens the “Johnson Amendment,” which currently prohibits public charities and religious organizations from endorsing or opposing candidates for public office. This provision shields charities from the rancor of politics and enables individuals to come together to solve community problems free from partisan divisions. The House provision would permit charities to endorse or oppose candidates when communicating “in the ordinary course of the organization’s regular and customary activities,” and when spending “not more than de minimis incremental expenses,” both of which are ill-defined terms. If enacted, the inevitable result would politicize charities, encourage creation of sham organizations, and divert contributions to fund partisan organizations, undermining public trust and confidence in the charitable community.
Our recommendation: We urge that the final version of H.R. 1 drop the House language and retain the current absolute prohibition on political campaign intervention by public charities.
Private Activity Bonds: The elimination of private activity bonds will remove a cost-effective source of funds that charitable organizations currently utilize to finance facilities and other infrastructure that is necessary to fulfill their mission. Tax-exempt bond financing generated through qualified Section 501c3 private activity bonds is a proven tool with a decades-long record of successful capital financing in the charitable sector. Such bond financing is typically overseen by a unit of state or local government or municipal bond authority. Federations and the affiliated agencies have utilized private activity bonds as an alternative to lower the cost of access to capital. When charities are able to keep infrastructure expenditures low, additional resources can be used for charitable programs.
Our recommendation: The repeal of private activity bonds is only in the House version of H.R. 1. We urge the House and Senate to drop this provision from the final bill.
Private School Education: Qualified tuition savings programs (so-called “529 plans”) allow earnings to grow tax-free and are not subject to tax when funds are withdrawn to pay for college expenses. We support the provision in H.R. 1 that expands such plans to cover expenses for tuition for public, private or religious elementary or secondary school, grades K-12. There is an increasing recognition of the important role that Jewish day school education plays in a vibrant Jewish community. Although local Jewish communities provide financial support to such schools, day school education is growing more and more costly, often making it unaffordable or a hardship, even for families with comparatively high incomes. A federal tax incentive such as the proposed expansion of 529 plans will help ameliorate this growing problem.
Our recommendation: Both the House and Senate bills provide for the expansion of 529 plans to cover K-12 education, and we urge that it be included in the final version of the legislation.