Charitable Contributions for Haiti’s
Earthquake Victims

Molly F. Sherlock
Analyst in Economics
January 22, 2010
Congressional Research Service
7-5700
www.crs.gov
R41036
CRS Report for Congress
P
repared for Members and Committees of Congress

Charitable Contributions for Haiti’s Earthquake Victims

Summary
On January 12, 2010, a magnitude 7.0 earthquake struck Haiti. As of January 20, 2010, 72,000
had been confirmed dead with hundreds of thousands more in need of assistance. The earthquake
has left an estimated 1.5 million Haitians homeless. Congress has passed legislation with the goal
of promoting charitable donations for the earthquake victims in Haiti. Similar action was taken
following the 2004 Indian Ocean tsunami and the 2005 Gulf Coast Hurricanes, when Congress
enacted legislation to promote charitable giving to organizations providing aid to victims of these
natural disasters.
On January 20, 2010, the House passed the Haiti Assistance Income Tax Incentive Act (HAITI
Act; H.R. 4462), a bill to accelerate the income tax benefits for charitable cash contributions for
the relief of earthquake victims. The Senate introduced companion legislation (S. 2936) on
January 20, 2010, but passed the identical House legislation H.R. 4462 on January 21, 2010. If
enacted, the HAITI Act would allow taxpayers making charitable contributions of cash made to
organizations providing aid to earthquake victims after January 11, 2010, and before March 1,
2010, to take the associated charitable deduction on their 2009 income tax returns. A similar
provision, discussed in greater detail below, was adopted under P.L. 109-1 following the 2004
Indian Ocean tsunami. The Joint Committee on Taxation (JCT) estimates that the HAITI Act
would result in revenue losses of approximately $2 million over the 10-year budget window
spanning FY2010 through FY2019.
Under current law, charitable contributions to 501(c)(3) charitable organizations from individuals,
corporations, and estates and trusts are tax deductible in the year they are made. Individuals can
deduct up to 50% of their adjusted gross income (AGI), phased-out for higher income individuals.
Corporations can deduct up to 10% of their taxable income. Individuals and corporations can
carry forward any unclaimed charitable deductions for up to five years. Total charitable giving in
2008 was $307.65 billion.
In the past, Congress has passed legislation to encourage charitable giving following natural
disasters. Following the 2004 Indian Ocean tsunami, legislation was passed that allowed
taxpayers making charitable contributions to aid tsunami victims in January 2005 to take the
charitable deduction on their 2004 tax return. This provision is similar to the one proposed in the
HAITI Act. In September 2005, following Hurricane Katrina, individual and corporate giving
limits were suspended. The rules surrounding charitable contributions of food inventory and
books were also relaxed to encourage in-kind giving.
The HAITI Act, like other tax policies, can be evaluated along the dimensions of efficiency and
equity. Efficiency is greatest when the policy’s marginal impact, the giving induced by the
program, is large relative to the policy’s inframarginal impact, the benefits given to those whose
behavior was not directly caused by the tax policy. Using this framework, the HAITI Act is
unlikely to be economically efficient. In general, tax benefits for charitable giving do not appear
to significantly increase donations. Furthermore, tax deductions violate principles of vertical
equity in that the benefits of tax deductions accrue disproportionately to higher income groups
and provide larger benefits to those with a greater ability to pay.

Congressional Research Service

Charitable Contributions for Haiti’s Earthquake Victims

Contents
Current Law................................................................................................................................ 2
Natural Disasters and Charitable Contributions ........................................................................... 3
The Indian Ocean Tsunami.................................................................................................... 3
Hurricane Katrina ................................................................................................................. 4
Charitable Giving in 2005 ..................................................................................................... 5
Assessment of the HAITI Act...................................................................................................... 6
Economic Efficiency............................................................................................................. 6
Equity ................................................................................................................................... 8
Complexity ........................................................................................................................... 9

Figures
Figure 1. Trends in Giving: 1987 - 2008 ...................................................................................... 6

Tables
Table 1. Tax Expenditure Estimates for the Charitable Giving Deduction..................................... 3
Table 2. 2005 Natural-Disaster-Related Giving............................................................................ 5
Table 3. Distribution of Taxpayers, Itemizers, and Charitable Tax Deduction Benefits by
Income..................................................................................................................................... 8

Contacts
Author Contact Information ...................................................................................................... 10

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Charitable Contributions for Haiti’s Earthquake Victims

n January 12, 2010, a magnitude 7.0 earthquake struck Haiti. As of January 20, 2010,
72,000 had been confirmed dead. The earthquake and resulting aftershocks affected
O approximately 3 million people and caused significant damage to buildings and
infrastructure.1 The earthquake has left an estimated 1.5 million Haitians homeless. Congress has
passed legislation with the goal of promoting charitable donations for the earthquake victims in
Haiti. Similar action was taken following the 2004 Indian Ocean tsunami and the 2005 Gulf Coast
Hurricanes, when Congress enacted legislation to promote charitable giving to organizations
providing aid to victims of these natural disasters.
On January 20, 2010, the House passed the Haiti Assistance Income Tax Incentive Act (HAITI
Act; H.R. 4462), a bill to accelerate the income tax benefits for charitable cash contributions for
the relief of earthquake victims. The Senate introduced companion legislation (S. 2936) on
January 20, 2010, but passed the identical House legislation H.R. 4462 on January 21, 2010. If
enacted, the HAITI Act would allow taxpayers making charitable contributions of cash made to
organizations providing aid to earthquake victims after January 11, 2010, and before March 1,
2010, to take the associated charitable deduction on their 2009 income tax returns. A similar
provision, discussed in greater detail below, was adopted under P.L. 109-1 following the 2004
Indian Ocean tsunami. The Joint Committee on Taxation (JCT) estimates that the HAITI Act
would result in revenue losses of approximately $2 million over the 10-year budget window
spanning FY2010 through FY2019.
In the days following the earthquake in Haiti, many donors made $10 donations to earthquake
victims via text message. The HAITI Act would clarify the recordkeeping requirements for
contributions by stating that a telephone bill satisfies the recordkeeping requirement so long as
the bill states the name of the donee organization, the date of the contribution, and the amount of
the contribution.
Senator Max Baucus, in a January 20, 2010, floor statement, stated “This is simple legislation that
would make a big impact. It will make it a little easier for Americans to contribute to the victims
of the Haiti disaster.”2 Senator Baucus went on to acknowledge that most Americans want to
contribute in absence of this legislation, but noted that the HAITI Act would provide an additional
incentive to give.
On January 20, 2010, Senators Charles E. Schumer and Kirsten Gillibrand introduced separate
legislation in the Senate to encourage charitable donations to the earthquake victims of HAITI (S.
2937). This legislation, if enacted would suspend the individual and corporate charitable giving
tax deduction limitations for cash donations directed toward Haitian earthquake victims. Similar
provisions were enacted following Hurricane Katrina in 2005, discussed in further detail below.
Additionally, S. 2937 would extend the enhanced deduction for food inventory, that was allowed
to expire at the end of 2009. The enhanced deduction for food inventory provision is also part of
Tax Extenders Act of 2009 (H.R. 4213), which passed the House on December 9, 2009. The
Senate has not taken up the Tax Extenders Act of 2009.

1 Internal Revenue Service, “IRS Announces Qualified Disaster Treatment for Haiti,” IR-2010-11, January 22, 2010.
2 Committee on Finance, “Floor Statement of Senator Max Baucus (D-Mont.) Regarding Assistance Income Tax
Incentive Act,” press release, January 20, 2010, http://finance.senate.gov/press/Bpress/2010press/prb012010b.pdf.
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Current Law
Under current law, charitable contributions from individuals, corporations, and estates and trusts
are tax deductible in the year they are made. Tax-exempt 501(c)(3) organizations, which include
religious, educational, social welfare, health, international, and environmental organizations, are
eligible to receive tax deductible charitable contributions. Contributions made to foreign agencies
are generally not deductible.3
Individuals may claim deductions up to 50% of their adjusted gross income for qualified
contributions to 501(c)(3) charitable organizations.4 Itemized deductions are phased-out for high
income individuals.5 Individuals may carry forward unused charitable deductions for up to five
years. In order to satisfy recordkeeping requirements, cash contributions can only be deducted if
accompanied by a bank record (a cancelled check, bank statement, or credit card statement), a
receipt, or payroll deduction documentation.
Corporations can deduct up to 10% of their taxable income for qualified charitable donations.
Corporations can also carry forward unused charitable deductions for up to five years.
In 2008, individuals gave $229.28 billion. Corporations gave $14.5 billion, while bequests from
estates totaled $22.66 billion in 2008. Grant making foundations gave $41.21 billion in 2008.
Total charitable giving in 2008 was $307.65 billion.6 Overall, giving between 2007 and 2008 fell
by 5.7%, reflecting poor economic conditions.
Giving varies by the type of recipient organization. In 2008, religious organizations received 35%
($106.89 billion) of all gifts. Organizations focusing on human services received 9% ($25.88
billion) of all gifts, public society benefit organizations 8% ($23.88 billion), and organizations
focusing on international affairs received 4% (13.30 billion) of all gifts in 2008.7
Table 1 provides the Joint Committee on Taxation’s estimated tax revenue loss associated with
the charitable contribution deduction for 2008 and 2009.8 For 2008, tax expenditures for the
charitable giving deduction were estimated to be $47 billion. Tax revenue loss from the charitable

3 Generally, charitable donations made to foreign charitable organizations cannot be deducted on U.S. income tax
returns (tax treaties with Mexico, Canada, and Israel allow charitable contributions to Mexican, Canadian, and Israeli
charities to be tax deductible under some circumstances). Deductions that are made to a U.S. organization that transfers
funds to a foreign charitable organization are deductible so long as the U.S. organization maintains control over the use
of the funds. For more information see http://www.irs.gov/publications/p54/ch05.html#en_US_publink100047565.
4 Gifts of appreciated property are subject to a 30% limit. Gifts to foundations are further limited.
5 In practice, the itemized deduction phase-out works as an income tax surcharge. Specifically, Δ(tax liability) = t *
0.01*(AGI – Threshold), where t is the marginal tax rate and the threshold is set annually under Pease. For details on
the limitations on itemized deductions see CRS Report R40508, Personal Exemption Phaseout (PEP) and Limitation
on Itemized Deductions (Pease)
, by Maxim Shvedov, p.9.
6 Giving USA Foundation, Giving USA 2009: The Annual Report on Philanthropy for the Year 2008 (Indianapolis, IN:
Giving USA Foundation, 2009), p. 210.
7 CRS Report R40919, An Overview of the Nonprofit and Charitable Sector, by Molly F. Sherlock and Jane G.
Gravelle.
8 Tax revenue losses attributable to tax provisions that allow for special exclusions, exemptions, or deductions from
income or provisions that provide special tax credits, preferential tax rates, of defer tax liability are called tax
expenditures.
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deduction is estimated to be $39 billion in 2009.9 The reduction in estimated revenue loss is due
to the weak economy.
Table 1. Tax Expenditure Estimates for the Charitable Giving Deduction
billions of dollars
Year Individual
Corporate Total
2008 44.3 3.1 47.4
2009 36.2 3.0 39.2
Source: U.S. Congress, Joint Committee on Taxation, Estimates of Federal Tax
Expenditures for Fiscal Years 2008 - 2012, committee print, prepared by Joint
Committee on Taxation, 111th Cong., 1st sess., October 31, 2008, JCS-2-08 and
U.S. Congress, Joint Committee on Taxation, Estimates of Federal Tax Expenditures
for Fiscal Years 2009 - 2013, committee print, prepared by Joint Committee on
Taxation, 111th Cong., 2nd sess., January 11, 2010, JCS-1-10.
Natural Disasters and Charitable Contributions
The Indian Ocean Tsunami
Following the 2004 Indian Ocean tsunami, changes in the laws governing charitable giving were
made in the act to accelerate the income tax benefits for charitable cash contributions for the
relief of victims of the Indian Ocean tsunami (P.L. 109-1). The Indian Ocean tsunami struck on
December 26, 2004. P.L. 109-1, enacted on January 7, 2005, allowed taxpayers that gave to
nonprofit agencies aiding the victims of the tsunami in January 2005 to treat the donations as if
they had been made during 2004, allowing such donations to be deducted by itemizing taxpayers
on 2004 tax returns.10 In the absence of this legislation, charitable deductions made in January
2005 would have been claimed on 2005 tax returns, filed in early 2006.
Under P.L. 109-1, only charitable contributions made in cash to charities providing aid to tsunami
victims qualified for the accelerated deduction. Charitable contributions made in the form of
property, capital assets, or in-kind contributions did not qualify for the accelerated deduction.
Contributions made by credit card, check, or money order are generally considered cash
contributions. The cash donation requirement was made to be consistent with requests made by
organizations coordinating relief efforts that specifically requested monetary donations. Similar
requests were made in January 2010 in response to the Haiti earthquake. Monetary donations
reportedly reduce shipping costs associated with transporting relief items.11

9 The Joint Committee on Taxation had previously estimated 2009 charitable giving tax expenditures for individuals to
result revenue losses of $46.2 billion and $3.2 billion of revenue losses for corporations, for total revenue losses of
$49.4 billion. The downward revision reflects the deterioration of the U.S. economy, where both income and asset
values declined. See U.S. Congress, Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal
Years 2008 - 2012
, committee print, prepared by Joint Committee on Taxation, 111th Cong., 1st sess., October 31, 2008,
JCS-2-08.
10 This measure was enacted quickly. After being proposed on January 4, 2005, the measure was introduced in both the
House and the Senate on January 6, 2005, and signed into law by the President on January 7, 2005.
11 Kurt Ritterpusch, “Congressional OK Expected for Bill to Extend 2004 Tsunami Relief Deductions,” The Daily Tax
(continued...)
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Accelerating the deductibility of charitable contributions has quantifiable benefits. For example,
assuming a marginal tax rate of 35%, a taxpayer who made a $1,000 contribution in January 2005
to a charity providing aid to tsunami victims, has a tax deduction for that gift worth $350 if
claimed on the 2004 tax return. If the donor waits and claims the tax deduction on their 2005
return, assuming an interest rate of 5%, the present value of the future tax deduction is $333.12
Hence, the taxpayer saved $17 by claiming the charitable deduction on their 2004 tax return.13
Hurricane Katrina
On September 23, 2005, President George W. Bush signed into law the Katrina Emergency Tax
Relief Act of 2005 (KETRA; P.L. 109-73). Congress’s intent when passing this legislation was to
provide temporary tax relief to assist the victims of Hurricane Katrina. Included in this legislation
were a number of provisions designed to encourage charitable giving.
Under KETRA, individual and corporate giving limits were temporarily suspended. Prior to
KETRA, individuals could not claim charitable deductions that exceeded 50% of their AGI, while
corporations’ deductions were limited to 10% of their taxable base. Following KETRA,
individuals could deduct cash contributions made between August 27, 2005, and January 1, 2006,
up to 100% of their AGI. Further, charitable contributions were exempt from the Pease
limitations.14 For corporations, the deduction limit for cash contributions used for Hurricane relief
was increased to 100%.
Provisions enacted under KETRA expanded charitable deductions available for inventory made
between August 28, 2005, and January 1, 2006. Specifically, the enhanced deduction for food
inventory, previously only available to C corporations, was extended and made available to other
businesses, specifically S corporations and partnerships. C corporations were also allowed to take
an enhanced deduction for donations of book inventory.15
Additional provisions under KETRA increased the mileage rate deduction for individuals using
personal vehicles for charitable purposes, excluded mileage reimbursements received from
hurricane relief charities from a volunteer’s gross income, and allowed individuals providing free
housing to displaced Katrina victims to claim a personal exemption for such persons. The mileage

(...continued)
Report, January 7, 2005, p. G1.
12 The present value, or value today, of a future payment is calculated by multiplying the value today by [1/(1+r)],
where r is the interest rate.
13 Givers do have the potential to reduce this loss in the absence of an accelerated deduction provision by adjusting
their withholdings. Taxpayers that make large donations can reduce withholding estimated tax payments at the time of
the donation rather than waiting until their taxes are filed to receive the benefit.
14 For a discussion of the Pease limitations see CRS Report R40508, Personal Exemption Phaseout (PEP) and
Limitation on Itemized Deductions (Pease)
, by Maxim Shvedov.
15 Both provisions, now part of the “tax extenders,” were extended through 2007 by the Pension Protection Act of 2006
(P.L. 109-280) and through 2009 by the Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343). Both
provisions are now expired. If enacted, the Tax Extenders Act of 2009 (H.R. 4213) would extend these provisions
through 2010. For more information see CRS Report RL32367, Certain Temporary Tax Provisions Expiring in 2009
(“Extenders”)
, by Pamela J. Jackson and Jennifer Teefy and CRS Report RL34608, Tax Issues Relating to Charitable
Contributions and Organizations
, by Jane G. Gravelle and Molly F. Sherlock.
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rate deduction and mileage reimbursement provisions were temporarily enacted for relief efforts
between August 24, 2005, and January 1, 2007.16
Charitable Giving in 2005
Relief efforts following the December 2004 Indian Ocean tsunami, the August and September
2005 Gulf Cost Hurricanes, and the October 2005 Pakistan earthquake were aided by U.S. based
charitable donations. It is estimated that giving for natural disaster relief in 2005 was $7.37
billion (or 2.8% of total giving, which was $260.28 billion). Individuals were responsible for
$5.83 billion (79%) of the gifts. Among the individual contributions, $4.25 billion (73%) went to
hurricane relief, $1.54 billion (26%) went to tsunami relief, and $40 million (1%) went to
Pakistan earthquake relief. Corporate donors gave $936 million in 2005 (13% of total disaster
giving). Much of the corporate giving was in the form of in-kind donations and services. Table 2
summarizes giving to aid the victims of natural disasters in 2005.
Table 2. 2005 Natural-Disaster-Related Giving
billions of dollars
Individuals
Corporations
Foundations
Total
Katrina 4.25
0.94
0.11
5.30
Tsunami 1.54
0.34
0.04
1.92
Earthquake 0.04 0.10
0.01
0.15
Total 5.83
1.38
0.16
7.37
Source: Giving USA Foundation, Giving USA 2006: The Annual Report on Philanthropy for the Year 2005
(Indianapolis, IN: Giving USA Foundation, 2006), pp. 57-65.
Donations following natural disasters was also concentrated among certain charitable sectors.
More than half of the giving for hurricane victims went to human services charities. For tsunami
related giving, 36% of contributions went to charities serving the international community, while
31% went to human services charities.17
Aggregate measures reflect increased giving in 2005. Overall, inflation adjusted giving increased
by 9.2% between 2004 and 2005 (see Figure 1). Between 2005 and 2006 overall giving fell by
2.4%. Giving as a percentage of GDP was 2.4% in 2005, 0.2 percentage points higher than the
2004 level of 2.2%. After 2005, giving as a percentage of GDP has remained below 2005 levels
(see Figure 1).

16 For further information see CRS Report R40434, Charitable Standard Mileage Rate: Considerations for the 111th
Congress
, by Nonna A. Noto.
17 Giving USA Foundation, Giving USA 2006: The Annual Report on Philanthropy for the Year 2005 (Indianapolis, IN:
Giving USA Foundation, 2006).
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Figure 1. Trends in Giving: 1987 - 2008
350
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iv 100
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0.5
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50
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0
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
Total Giving
Giving as % of GDP

Source: CRS calculations based on data from Giving USA Foundation, Giving USA 2009: The Annual Report on
Philanthropy for the Year 2008 (Indianapolis, IN: Giving USA Foundation, 2009).
Assessment of the HAITI Act
The accelerated deduction proposed in the HAITI Act, like deductions for charitable contributions
generally, reduces the net cost of contributing, and is intended to encourage donations to disaster
relief agencies that provide assistance to victims of the earthquake in Haiti. Like all tax benefits,
the provision can be evaluated by assessing the impact on economic efficiency, equity, and
complexity.
Economic Efficiency
The efficiency of the accelerated deduction depends on how much additional giving is induced by
the provision, or the marginal impact of the program. The marginal impact of a tax break can be
evaluated relative to the inframarginal impact. The inframarginal impact of a tax subsidy is the
benefits given to individuals whose behavior is unchanged by the policy. In the case of the
accelerated deduction, the inframarginal impact is the tax savings given to those who would have
donated if the accelerated deduction had not been adopted. Efficient tax incentives are ones where
the marginal impact is large relative to the inframarginal impact.
Since accelerated deductions reduce the price of charitable giving, empirical evidence on the
price elasticity of charitable giving can provide insight regarding the expected marginal impacts.
If charitable giving is price elastic, with a price elasticity greater than one, a $1 tax incentive
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would be expected to generate more than $1 in charitable giving.18 If charitable giving is price
inelastic, a $1 tax incentive would be expected to generate less than $1 in charitable giving.
Empirical evidence suggests that the price elasticity for charitable giving is considerably less than
one.19 Since charitable contributions are relatively unresponsive to changes in the price of giving,
the marginal impact of the accelerated deduction is likely to be small relative to the inframarginal
impact. In general, theoretical models and empirical evidence suggest that tax benefits for
charitable giving do not appear to significantly increase donations.20
There are also efficiency concerns surrounding the impact of accelerating the charitable deduction
on the timing of giving. The provision is said to be efficient if it causes charitable giving to aid
organizations to increase, without crowding-out donations to other charitable organizations. If
charitable giving for disaster relief crowds-out other forms of charitable giving, altering the
distribution of charitable giving across organizations or across time, the provision may not be
efficient. Empirical evidence using individual-level data from the 2004 tsunami suggests that
tsunami donations given in 2005 did crowd-out future charitable giving.21 Other evidence,
discussed in the context of donor fatigue below, suggests that donations for disaster relief did not
contemporaneously crowd-out charitable giving to other organizations.
Evaluating the efficiency of accelerating the charitable donations deduction involves
understanding both the timing and the nature of the contributions. From a timing perspective, the
accelerated deduction is designed to encourage giving in early 2010, by allowing taxpayers to
claim the charitable contributions on their 2009 tax returns. However, to the extent that these
donations were made without an expectation of an accelerated deduction provision, they are
inframarginal. In the seven days following the earthquake in Haiti, $275 million was donated to
U.S. nonprofits providing aid to victims (this compares to $475 million in the six days following
hurricane Katrina and $163 million
in the nine days following the Indian
Text Message Donations and the 2010
Ocean tsunami).22 Corporate giving
Earthquake in Haiti
in the 72 hours following the
Donations made via text message make up a significant portion of
earthquake topped $43 million.23
early giving to earthquake victims in Haiti. In the seven days following
This immediate outpouring of
the earthquake, $275 million was contributed to U.S. nonprofit
support was not likely the result of
organizations providing aid to earthquake victims. The American Red
Cross raised $24 million over the same time period through their
expected changes to the tax code.
text HAITI to 90999 campaign. Mobile phone users wishing to
Nonetheless, itemizers who made
donate $10 to the American Red Cross can text “90999.” Their $10
deductions during this time will
donation is added to their mobile phone bill which can be used at tax
benefit from the accelerated
filing time as a receipt.

18 The price elasticity of charitable giving is the percentage change in giving divided by the percentage change in the
price of giving, where the price of giving is (1-t), and t is the marginal tax rate. While the price elasticity is negative, it
is quoted in absolute value.
19 For a review of the literature see CRS Report R40518, Charitable Contributions: The Itemized Deduction Cap and
Other FY2010 Budget Options
, by Jane G. Gravelle and Donald J. Marples.
20 Thomas L. Hungerford, “Tax Expenditures: Good, Bad, or Ugly?,” Tax Notes, October 23, 2006, p. 329.
21 Sarah Brown, Mark N. Harris, and Karl Taylor, Modeling Charitable Donations to an Unexpected Natural Disaster:
Evidence from the U.S. Panel Study of Income Dynamics
, Institute for the Study of Labor (IZA), IZA DP No. 4424,
Bonn, Germany, September 2009.
22 Caroline Preston and Nicole Wallace, “Donations to Aid Haiti Exceed $275-Million, Chronicle Tally Finds,” The
Chronicle of Philanthropy
, January 19, 2010
23 Chris Herring and Dana Mattioli, “Companies Send Aid to Haiti,” The Wall Street Journal, January 19, 2010.
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deduction provision if enacted.
Donors making small donations to the victims of Haiti’s earthquake may be enticed to donate by
convenience, rather than by the tax code. Many text-message donors may also be non-itemizers.
Nearly 20% of all donations made to the American Red Cross were made via text message in the
seven days following the earthquake. Even for text message donors that do itemize, the value of
the accelerated deduction is relatively small (17 cents for a taxpayer in the 35% bracket), and it
seems unlikely that the prospect of such a donation would be driving behavior.
Congressional concern that hurricane-related giving may cause other forms of giving to fall
(donor-fatigue) led to post-Katrina tax breaks for hurricane relief related charitable giving. The
concept of donor fatigue rests on the notion that households set aside a fixed amount for
charitable giving each year, and give until the funds are exhausted. Survey evidence following
Hurricane Katrina suggests that donor fatigue did not cause donations to other charities to fall in
2005.24 Given that disaster related giving was a relatively small part of overall giving in 2005
(less than 3%), it is unlikely that donor fatigue, if present, was large. Nonetheless, it is possible
that donor fatigue was mitigated by Congressional action enhancing incentives for charitable
contributions.
Equity
Provisions expanding the existing charitable deduction may raise equity concerns. First, only
taxpayers who itemize deductions can take advantage of the accelerated deduction. Second,
deductions violate vertical equity principles, as greater benefits accrue to higher income
individuals.
The charitable contribution deduction can only be claimed by taxpayers who itemize deductions.
In both 2006 and 2007, 35% of taxpayers itemized deductions.25 Non-itemizing taxpayers claim
the standard deduction ($5,700 for single filers in 2009). The logic behind the standard deduction
is that it accounts for the tax-deductable activities of individuals choosing not to itemize
deductions and simplifies tax compliance. As illustrated Table 3, the proportion of taxpayers who
itemize increases for higher income taxpayers. The benefits associated with the charitable
contribution deduction are also skewed towards higher income taxpayers. Just over 13% of
taxpayers have an AGI between $100,000 and $200,000. Of these taxpayers, 81% itemize
deductions. Nearly 25% of tax expenditures associated with the charitable deduction go to the
$100,000 to $200,000 AGI group.
Table 3. Distribution of Taxpayers, Itemizers, and
Charitable Tax Deduction Benefits by Income
2008
Adjusted Gross
% Charitable Tax
Income (AGI)
% of All Returns in
% in AGI Group that
Expenditure Benefits
Group
AGI Group
Itemize
Received by AGI Group

24 The Conference Board, “Consumer Confidence Survey,” April, 2006.
25 Internal Revenue Service (IRS), Statistics of Income (SOI), Individual Income Tax Returns Preliminary Data, 2007.
Available at http://www.irs.gov/pub/irs-soi/09sprintaxreturn.pdf.
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Adjusted Gross
% Charitable Tax
Income (AGI)
% of All Returns in
% in AGI Group that
Expenditure Benefits
Group
AGI Group
Itemize
Received by AGI Group
Below $10,000
17.1%
2.5%
0.0%
$10,000 - $20,000
13.4%
5.7%
0.2%
$20,000 - $30,000
10.1%
12.7%
0.8%
$30,000 - $40,000
9.2%
21.5%
1.7%
$40,000 - $50,000
8.3%
32.9%
2.5%
$50,000 - $75,000
15.0%
45.2%
8.8%
$75,000 - $100,000
10.0%
59.8%
9.1%
$100,000 - $200,000
13.2%
80.9%
24.8%
Above $200,000
3.7%
94.0%
52.1%
Source: CRS calculations using data from U.S. Congress, Joint Committee on Taxation, Estimates of Federal Tax
Expenditures for Fiscal Years 2009 - 2013, committee print, prepared by Joint Committee on Taxation, 111th
Cong., 2nd sess., January 11, 2010, JCS-1-10.
That charitable contributions violate vertical equity principles is a consequence of a progressive
tax system. The value of a deduction to a taxpayer is based on their marginal tax rate. Take, for
example, two taxpayers both donating $2,000 to victims of natural disasters. One taxpayer is in
the 10% income tax bracket, while the other is in the 35% income tax bracket. Assuming both
taxpayers itemize deductions, the value of the deduction to the first taxpayer is $200 while the
value of the deduction to the second taxpayer is $700. The taxpayer with the higher income in the
35% tax bracket receives a larger tax benefit from the deduction than the lower income taxpayer.
Complexity
Accelerating charitable deductions adds complexity to the tax code and increases administrative
burdens. Taxpayers have the option of claiming earthquake related charitable contributions on
either their 2009 or 2010 income taxes. Since the 2009 forms have been printed and mailed to
taxpayers, some taxpayers may not be aware of this change or understand the option to accelerate
deductions.
It is also possible that accelerating charitable contributions increases the monitoring burden on
the Internal Revenue Service. Since taxpayers would be allowed to claim earthquake related
charitable contributions in either 2009 or 2010, there may be an increased monitoring burden on
the IRS to ensure that deductions are only claimed in one year, and not both. In practice, it is
likely that the tax revenue loss associated with taxpayers accidentally or intentionally claiming
contributions in both 2009 and 2010 is less than the cost to the IRS of monitoring contributions.

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Charitable Contributions for Haiti’s Earthquake Victims

Author Contact Information

Molly F. Sherlock

Analyst in Economics
msherlock@crs.loc.gov, 7-7797


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