The Issue: Charitable Tax Deduction
Tax reform debates and mounting federal deficits have put charitable tax deductions onto the chopping block as possible way to increase revenue for the federal government. This would negatively impact nonprofits who rely on the deductions as an incentive for donors to give generously. Similarly, artists and writers have lost their ability to claim the full value of works of arts donated which has resulted in a sharp decline in such donations. Proposed legislation is tracked closely to rally for the prevention of further loss in deductions and the re-instatement of artists and writers ability to claim deductions for donated works of art.
Focus Forward Toward Solutions
Keeping Charitable Tax Deductions
This year, 2017, marks the 100th anniversary of the charitable contribution deduction! Since 1917, contributions made to 501(c)(3) nonprofits have been tax-deductible, in part as result of wide recognition of nonprofits’ benefit to the public good.
As the momentum for tax reform increases and the federal deficit mounts, there have been proposals to curtail or eliminate the income tax deduction for gifts to 501(c)(3) organizations, including the nonprofit arts, in order to increase revenue for the federal government. For instance, each of former President Obama's annual budgets proposed a 28-percent cap on all itemized deductions for individuals in the top three tax brackets, and former U.S. House Ways and Means Chairman Dave Camp's draft bill included a two-percent floor of an individual’s Adjusted Gross Income (AGI) in order to take deductions for charitable giving.
Such proposals are short-sighted and are often made on the basis of false assumptions, helping fuel the deduction as a key topic in tax policy discussions.
In President Trump's latest proposal, he indicates support for the charitable deduction, but his outline released in April 2017 is short on further details.
Americans for the Arts will oppose policies that remove incentives for charitable giving or limit the full scope and value of the tax deduction—for all forms of charitable gifts (arts, religion, education, environment, etc.). Americans for the Arts has also joined the Giving100 campaign that seeks to allow charitable tax deductions for all Americans, both itemizers and non-itemizers. Read more in our issue statement on our Mobilization Center.
Tax reform continues to be an item of consideration in the current Congress. Comprehensive tax reform hasn't occurred since 1986!
Regaining Fair Deductions for Artists and Writers Making Gifts
Prior to 1969, artists, writers, and composers were allowed to take a fair-market value deduction for their works donated to a museum, library, or archive. In 1969, Congress changed the law, and artists could only deduct the cost of materials used. The number of works donated by artists dramatically declined. The impact was immediate and drastic:
- The Museum of Modern Art in New York received 321 gifts from artists in the three years prior to 1969; in the three years after 1969 the museum received 28 works of art from artists—a decrease of more than 90 percent.
- The biggest loser was the Library of Congress, which annually received 15–20 large gifts of manuscripts from authors. In the four years after 1969, it received one gift.
The Senate has passed artists deduction legislation five times in previous years to allow taxpayers who create literary, musical, artistic, and scholarly compositions or similar property a fair-market value tax deduction for contributions to certain tax-exempt organizations, if such properties are properly appraised and are donated no sooner than 18 months after their creation.
In 2017, Rep. John Lewis (D-GA) reintroduced the Artist-Museum Partnership Act (HR 1830), which would allow artists to take an income tax deduction for the fair market value of their work when they donate it to charitable collecting institutions. A "companion" bill has also been introduced in the Senate by Sen. Patrick Leahy (D-VT). Americans for the Arts supports these bills!
Preparing for Federal Overtime Rule Change
Related to payroll, the previous Obama Administration finalized changes to the rules governing eligibility for overtime pay. The labor change would have more than doubled the salary threshold (from $23,660 to $47,476 per year) under which employees can receive overtime pay. It was expected to bring millions more workers under overtime protections.
However, eight days prior to its scheduled date to take effect (December 1, 2016), U.S. District Court Judge Amos L. Mazzant III issued a temporary injunction. His injunction prevents the rule from going into effect for now, nationwide. The delay buys time for further legal consideration of the rule. For more background on the rule change prior to the court action, read this memo to the field.
Update: The last action in the litigation over the overtime federal court decision was the U.S. Department of Labor's request for more time to file a brief, a request that was granted and a deadline set of June 30, 2017.
- Find more details in the Tax Policy (pdf) and Artist-Museum Partnership Act (pdf) Issue Briefs in the 2018 Congressional Arts Handbook.
- Key Senate and House Committees for tax reform
- Read recent coalition letters delivered to congressional tax policy working groups: Independent Sector and Charitable Giving Coalition. Americans for the Arts is a member of these organizations.