Charitable Tax Reform For the 21st Century

Abstract

The article identifies two goals of the charitable giving tax incentives: promoting actual charitable work and fostering a strong culture of charitable giving with broad participation. The recent increase to the standard deduction and the rise of donor-advised funds compromise both goals. The article outlines reform proposals to bolster the charitable sector, including expanding the giving incentive to all taxpayers in the form of a credit (subject to a giving floor), allowing some tax benefits to DAF donors upon contribution but delaying the income tax deduction until DAF funds are released from advisory privileges, closing loopholes that enable foundations and donors to skirt long-standing legal requirement, and modifying incentives to foundations to foster more spending.

Keywords: charitable giving incentives, dafs, donor advised funds, charitable credit, foundation payout, public support test

JEL Classification: H2, H4, H5, K34, L3, L38