Congressional leaders met their deadline to put a major tax policy bill on President Donald Trump’s desk by July 4. While the bill has received mixed reviews in the charitable sector, ECFA is pleased with two improvements made by the Senate that were incorporated into the final law – an enhanced charitable deduction for non-itemizing taxpayers and the deletion of the infamous “nonprofit parking tax.”

The nonprofit parking tax, which would add employee parking costs to the unrelated business income tax (UBIT) liability of many ministries, was considered such a failure after its first run in 2017 that Congress repealed it in full two years later. So, it was surprising that the House of Representatives decided to resuscitate the tax in its version of the “One Big Beautiful Bill Act” this spring. Members of Congress anticipated the government would take in more than $2.6 billion over ten years from nonprofits if the policy was enacted.?

ECFA then rallied more than 650 leaders in faith-based organizations to join a letter urging senators to expunge this “logically flawed and burdensome proposal.” ECFA President & CEO Michael Martin and his fellow signatories pointed out that new language intended to exempt certain church organizations from the parking tax did not actually lift the burden off of many religious nonprofits, nor did it solve the underlying problem of taxing a tax-exempt group for an expense as if it were income.

 “American givers intended those dollars for charitable missions serving communities in our nation and around the world, not for government coffers,” they said.

Thankfully, policymakers took note and removed the nonprofit parking tax from the final legislation that landed on the President’s desk for approval on Independence Day.

ECFA also expressed appreciation for the Senate’s strengthening of a charitable deduction for taxpayers who don’t itemize. The House had also included such a proposal, but the Senate improved on it significantly by allowing up to $1,000 in an above-the-line benefit for donations ($2,000 for married couples filing jointly). Moreover, the Senate changes made this deduction permanent.

“I thank Senate Finance Committee Chairman Mike Crapo for including a nonitemizer charitable deduction in this legislation, and I greatly appreciate the work of leaders like Senator James Lankford and Senator Chris Coons to urge that this common-sense provision be made more robust and permanent,” said Martin. “America is well-served by supporting habits of giving among all taxpayers—regardless of whether they itemize on their tax forms or not.”

Unfortunately, the final tax legislation did continue to include provisions of concern for nonprofits, including limits on charitable giving incentives. For example, the bill retained the House-passed one-percent-of-taxable-income floor for corporations before they can claim a charitable deduction—a policy that recent research from Independent Sector suggests could result in $4.5 billion less in donations annually. Similarly, the Senate also included a new 0.5-percent-of-AGI floor for individual taxpayers who itemize their giving. This means a married couple with a joint AGI of $100,000 will find their first $500 in donations is newly taxable if they itemize. In addition, the bill generally caps the value of itemized deductions at 35 percent, potentially affecting givers in the highest tax bracket.

Martin added, “Tax policy shouldn’t inhibit giving. ECFA will continue to support efforts honoring and encouraging open-handed generosity of Americans as they donate selflessly to empower acts of charity in local communities and around the world.”

ECFA will continue to be a voice for charitable giving incentives and public policies that do no harm to the important work of ECFA members.