Legislation the Senate passed Tuesday to avoid the fiscal cliff? would place limits on how much wealthy people could claim in deductions for charitable contributions and other spending when they itemize their tax returns.
The House still needs to approve the deal passed by the Senate; otherwise the tax increases and spending cuts that took effect today will stay in effect.
The Senate legislation would raise the top tax rate to 39.6 percent on household incomes above $450,000 but maintain current rates for everyone else, or about 98 percent of all Americans. It also delays for two months the $110-billion in federal spending cuts scheduled for 2013.
Throughout December nonprofits have been lobbying Congress and President Obama not to impose limits on the tax savings wealthy donors get when they make charitable contributions.
The Senate plan enacts limits that charities have opposed. It reinstates a provision eliminated in 2010? that reduces the value of itemized deductions by 3 percent for household incomes over $300,000. Write-offs grow more limited the more taxable income a person has, and could reduce the value of deductions by up to 80 percent for the highest-income taxpayers, according to the Tax Policy Center.
The 2010 limits have long been opposed by charities. Independent Sector noted that the limit could reduce giving in its February analysis of the idea, which was included in President Obama?s 2013 budget proposal.
The organization, which represents about 600 nonprofits, also signed a letter this summer from the Charitable Giving Coalition?to Sen. Harry Reid, the Democratic majority leader in the Senate, stating its opposition to the deduction limits.
The letter, signed by nearly a 30 of the nation?s largest nonprofit organizations, said the limits would ?result in fewer contributions flowing to America?s charities which are now being asked to provide even more services to the most vulnerable among us.?
The Senate measure also called for a serious overhaul of the tax code. If the House goes along with the legislation, that means charities could spend much of 2013 fending off tax changes they fear would deter giving.
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