Pennsylvania charities and nonprofits are seeking the help of the state’s congressional delegation in maintaining the federal charitable tax deduction. The deduction is critical to charitable initiatives to help the commonwealth’s most vulnerable citizens.
Several proposals have been floated in Washington to impose either a dollar limit or percentage cap on charitable deductions as a potential short-term revenue solution to avoid the fiscal cliff.
We are concerned about these proposals that may ultimately produce policies that disproportionately impact Pennsylvanians in need.
Research suggests that a cap on charitable deductions could reduce giving by as much as
$7 billion a year. This would come on top of the nearly $20 billion decrease in giving since the economic downturn began in 2007. From 2005 to 2010, charitable giving in the state has declined from $181 billion to $169 billion, which is a 6.2 percent decrease.
More than 80 percent of the 46 million Americans who itemized their tax returns in 2009 claimed the charitable deduction, and these individuals and families, who represent barely one-quarter of all taxpayers, were responsible for more than 76 percent of individual contributions to charitable organizations.
In 2010, 1.9 million Pennsylvanians (31 percent) filed itemized returns with over $5.8 billion in charitable deductions. The average contribution was $3,048.
Moreover, the power of the incentive can be seen in the timing of charitable gifts.
According to CharityNavigator.org, an organization that rates American nonprofits, most people wait until the holiday season and the end of the year to donate.
The organization’s 2011 year-end giving survey found that charitable groups, on average, receive 41 percent of annual contributions during the last few weeks of the year.
Remarkably, more than 22 percent of online donations between 2003 and 2009 were made on Dec. 30 and 31, underscoring the extent to which tax implications guide donor behavior.
Nonprofits across the commonwealth rely heavily on the financial support of their community to accomplish their mission.
Charitable donations are especially critical in light of continual federal and state budget cuts that have further overburdened and diminished the capacity of nonprofits and disproportionately affected those least able to help themselves.
According to a recent United Way of Pennsylvania statewide survey, nearly 70 percent of the 800 nonprofit groups reported feeling the effects of state budget cuts in 2012, and some indicated the cuts have been going on for five years or more. Nearly half of the groups (49 percent) also experienced funding reductions from federal budget streams.
Locally, nonprofits have a double whammy of sorts with the decrease of funding along with increase in the number of people in need. We have seen demands on our food pantry system increase nearly 50 percent, a rise in domestic violence, and many basic needs.
In this critical time, we urge Pennsylvania’s congressional delegation to avoid cuts in programs that help meet basic needs and provide educational and employment opportunities while preserving the charitable deduction’s powerful incentive for giving.
Bill McKinney is president and chief executive officer of United Way of the Laurel Highlands with headquarters in Johnstown.