Legislation Introduced to Increase the Universal Charitable Deduction

Expanding the charitable deduction has become even more important and pressing since the enactment of the Tax Cuts and Jobs Act. That legislation nearly doubled the standard deduction and reduced the number of itemizers to between 12 and 14 percent of taxpayers.

The Coronavirus brought us the $300 above-the-line charitable deduction in the CARES Act—a benefit for taxpayers who do not itemize their deductions. The $300 deduction is limited to contributions made in 2020 and most observers agree that the $300 deduction is unlikely to meaningfully change donor behavior.

On June 22, Senators James Lankford (R-OK) and Chris Coons (D-DE) led a bipartisan group of Senators to introduce the Universal Giving Pandemic Response Act (S. 4032). The group includes Senators Jeanne Shaheen (D-NH), Mike Lee (R-UT), Tim Scott (R-SC), and Amy Klobuchar (D-MN).

Like the CARES Act’s new $300 universal charitable deduction, the Universal Giving Pandemic Response Act would apply to cash donations made in 2020. In addition, the Act would:

  • Raise the cap on the universal charitable deduction from $300 to one third of the standard deduction. In 2020, this would allow non-itemizing married couples to deduct up to $8,267 in charitable contributions and non-itemizing individuals to deduct up to $4,133.
  • Allow taxpayers making 2020 charitable contributions by July 14 to elect to deduct those contributions on their 2019 tax returns. If they have already filed, they may amend their 2019 returns to claim this deduction.

While the CARES Act’s universal charitable deduction was an excellent first step, the Charitable Giving Pandemic Response Act is a huge improvement.

During testimony at a Joint Economic Committee hearing two weeks ago, Dr. Una Osili cited a finding from the Indiana University Lilly Family School of Philanthropy that expanding the universal charitable deduction could “increase charitable giving available to nonprofits by up to $26 billion, an increase of about 7.7 percent.” The study also found that an expanded universal charitable deduction could increase the number of American households giving to charity by 7.3 million (8.2 percent).

In addition to boosting 2020 charitable giving, this solid bipartisan Senate support for the Universal Giving Pandemic Response Act is an important step toward making a robust universal charitable deduction a permanent feature of the tax code.

Stay tuned to ECFA’s In the News for the latest information on the status of this bill and other potential legislation impacting charitable giving.

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.