Tax Issues Relating to Charitable Contributions and Organizations

September 19, 2019 – August 4, 2020 R45922

Tax Issues Relating to Charitable Contributions August 4, 2020
and Organizations
Jane G. Gravelle
The federal government supports the charitable sector by providing charitable organizations and
Senior Specialist in
donors with favorable tax treatment. Individuals itemizing deductions may claim a tax deduction
Economic Policy
for charitable contributions. Estates can make charitable bequests. Corporations can deduct

charitable contributions before computing income taxes. Further, earnings on funds held by
Donald J. Marples
charitable organizations and used for a related charitable purpose are exempt from tax. In
Specialist in Public Finance
FY2019, projected tax subsidies for charities, not including the value of the tax exemption on

earnings of charities or the estate tax deduction, totaled $51.6 billion. If investment income of
nonprofits were taxed at the 35% corporate tax rate in 2016, revenue collected is estimated at
Molly F. Sherlock
$31.3 billion (this amount excludes religious organizations). The cost of deducting bequests on
Specialist in Public Finance
estates is estimated at $5 billion to $8 billion.

Charitable organizations include both operating charities (including religious institutions) and

organizations that tend to hold assets and make grants to operating charities, most notably private
foundations, but also donor-advised funds (DAFs) and supporting organizations. The tax code treats different types of
organizations differently. For example, foundations and certain supporting organizations have minimum payout
requirements, while DAFs do not. Limits on charitable giving also differ across gifts to different types of organizations .
Changes in the tax revision enacted in late 2017, popularly known as the Tax Cut and Job s Act (TCJA; P.L. 115-97), while
not generally aimed at charitable deductions, reduced the scope of the tax benefit for charitable giving. A higher standard
deduction and the limit on the deduction for state and local taxes caused more individuals to take the standard deduction, as
opposed to itemizing deductions. As a result, many individuals who were able to deduct charitable contributions no longer
claim this itemized deduction. Other changes exempted more estates from the estate tax, eliminating the benefit of deducting
charitable contributions in these cases. Concerns have arisen that these changes are expected to lead to a reduction in
charitable contributions.
In 2019, charitable contributions were estimated at $449.6 billion, or 2.1% of gross domestic product (GDP). Charitable gifts
come from four sources: individual contributions (accounting for 68.9%), foundations (accounting for 16.8%), bequests
(accounting for 9.6%), and corporations (accounting for 4.7%). In 2018, estimates suggest approximately 54% of individual
contributions are expected to have received a tax subsidy. Aggregate data on giving shows a decline between 2017 and 2018
and 2019, which could reflect the effects of the TCJA, but the effect appears small when compared to historical fluctuations
in giving as a share of GDP.
A number of policy options could be considered with respect to the tax treatment of charitable giving or the tax treatment of
charitable entities. The charitable deduction could be modified in ways that could extend charitable giving incentives to
taxpayers not itemizing deductions, or with the intent of making charitable giving tax incentives more effective (inducing
more giving for each dollar of lost federal tax revenue). There are also options related to the type of treatment of certain types
of gifts, such as appreciated property or charitable miles driven. Some proposals have also been made to address concerns
about aspects of certain charitable organizations, such as payouts by DAFs and university endowments. Some proposals
would reverse certain changes made by the 2017 tax revision to the unrelated business income tax (UBIT) or impose
administrative reforms.
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Introduction
The federal government supports the charitable sector by providing charitable organizations and
donors with favorable tax treatment. A primary source of support is al owing a tax deduction for
charitable contributions made by individuals who itemize deductions, by estates, and by
corporations. For charitable organizations, earnings on funds held by such organizations are
exempt from the federal income tax.
The tax revision enacted in late 2017, popularly known as the Tax Cuts and Jobs Act (P.L. 115-
97), made some temporary changes that, while not specifical y aimed at charitable deductions,
reduced the scope of the tax benefit for charitable giving. These changes have caused more
individuals to take the standard deduction, rather than itemizing deductions, and exempted more
estates from the estate tax, eliminating the benefit of deducting charitable contributions in these
cases. These changes are expected to lead to a reduction in charitable giving. There were other
more minor changes, some enhancing the charitable deduction and some imposing more taxes on
charitable organizations.
A temporary above-the-line charitable giving deduction of up to $300 is al owed in 2020. This
change and other temporary enhancements to the charitable deduction for 2020 were part of the
Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136).
The report begins with a description of the charitable sector and tax provisions affecting the
sector. The following sections discuss the magnitude of charitable deductions, including sources
and beneficiaries, with historical data. The report then discusses the incentive effects of the
deductions and the consequences for charitable giving, including potential effects of the 2017 tax
revision. The report concludes with a discussion of policy options.
The Charitable Sector
Definitions and Overview
The focus of this report is the charitable sector. Charities are one type of tax-exempt
organization. Specifical y, they are organizations with 501(c)(3) public charity status.1 As
il ustrated in Figure 1, most 501(c) organizations are 501(c)(3) “religious, charitable, and similar
organizations.” Charitable organizations fal within the broader nonprofit sector. In public policy
discussions, the term nonprofit sector is often intended to include al organizations with federal
tax-exempt status.2

1 IRC §501(c)(3) describes organizations “organized and operated exclusively for religious, charitable, scientific,
testing for public safety, literary, or educational purposes, or to foster national or international amateur sports
competition … or for the prevention of cruelty to children or animals.” Among other requirements, “no part of the net
earnings of” the organization may “inure to the benefit of any private shareholder or individual.” In the United States,
501(c)(3) organizations are commonly understood to comprise the charitable sector.
2 While the terms tax-exempt organization and nonprofit organization are often used interchangeably, it might not be
appropriate in certain contexts. T he term tax-exempt organization refers to organizations with federal tax-exempt
status. T he term nonprofit organization is often used to refer to an entity that is not intended to be a profit -making
corporation. The term can be more precisely understood to mean an entity organized under the laws of a state, with its
status and privileges determined under state law. Because the qualifications for nonprofit status vary among states, it is
possible for the term nonprofit organization to be broader than, narrower than, or identical to the term tax-exempt
organization. For a nonprofit organization to be exempt from federal income taxes, it must meet the statutory
requirements found in the Internal Revenue Code and usually must file an application with the IRS. Some
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Tax Issues Relating to Charitable Contributions and Organizations

The Internal Revenue Code (IRC) describes approximately 30 types of tax-exempt organizations.
Other types of tax-exempt organizations, in addition to charities, include social welfare
organizations, labor unions, trade associations, chambers of commerce, fraternal societies, and
political organizations. Within the nonprofit tax-exempt sector, the bulk of organizations are
exempt from tax under IRC Section 501(c)(3) (they are “religious, charitable, or similar
organizations”). Most of the tax-exempt sector’s financial activity also takes place in 501(c)(3)
organizations.
Figure 1. Tax-Exempt Organizations by Type, 2018

Source: Internal Revenue Service, IRS Data Book Table 25, at https://www.irs.gov/statistics/soi-tax-stats-tax-
exempt-organizations-and-nonexempt-charitable-trusts-irs-data-book-table-25.
Notes: Religious, charitable, and similar organizations are exempt from federal income tax under IRC
§501(c)(3). The “Religious, charitable, and similar organizations” category includes private foundations. Social
welfare organizations are exempt under IRC §501(c)(4). Labor and agriculture organizations are exempt under
§501(c)(5). Business leagues are exempt under §501(c)(6). Social and recreation clubs are exempt under
§501(c)(7). Fraternal beneficiary societies are exempt under §501(c)(8). Veterans’ organizations are exempt
under §501(c)(19).
Every 501(c)(3) organization is classified as either a “public charity” or “private foundation.”
Public charities have broad public support and tend to provide charitable services directly to the
intended beneficiaries. Private foundations often are tightly controlled, receive significant
portions of their funds from a smal number of donors or a single source, and make grants to other
organizations rather than directly carry out charitable activities. 501(c)(3) organizations are
presumed to be private foundations unless they qualify for public charity status based on support
and control tests.

organizations, including small 501(c)(3) organizations and qualifying religious organizations, are exempt from the
application requirement.
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Tax Issues Relating to Charitable Contributions and Organizations

IRS Filing Requirements for 501(c)(3) Charities and Foundations
In 2015, there were 1,088,447 registered 501(c)(3) public charities.3 Of this total, 314,744 were
reporting public charities, and filed a Form 990.4 Form 990 collects information about the
organization’s finances, assets, and activities. Organizations with gross receipts of $50,000 or
more are general y required to file a Form 990 or Form 990-EZ. Private foundations file a Form
990-PF. Smal er organizations are not required to file an annual return, but may be required to file
an annual electronic notice, the “e-postcard.”5 Churches and other qualifying religious
organizations are exempt from the annual information-reporting requirements.6 The informational
returns (i.e., Form 990s) of exempt organizations are public, unlike individual and corporate
income tax returns.7
In addition to the information return, there are situations when tax-exempt organizations must file
an income tax return. For example, tax-exempt organizations are subject to tax on income from
business activities unrelated to their exempt purpose.8 Organizations subject to this tax, known as
the unrelated business income tax (UBIT), must file a tax return using the Form 990-T. Two
recent changes to UBIT became effective in 2018 (see the shaded box “UBIT Changes for 2018”
below), although the second one was subsequently repealed. Additional y, tax-exempt
organizations must general y pay the same employment taxes (i.e., withhold income and payroll
taxes of their employees) as for-profit employers. Final y, an organization’s activities might
require it to file other returns, such as an excise tax return.

3 Brice S. McKeever, The Nonprofit Sector in Brief, 2018, Urban Institute: National Center for Charitable Statistics,
December 13, 2018, at https://nccs.urban.org/publication/nonprofit-sector-brief-2018#the-nonprofit-sector-in-brief-
2018-public-charites-giving-and-volunteering. T his group does not include organizations that had their tax -exempt
status revoked for failing to file a return for three consecutive years. T he Pension Protection Act of 2006 ( P.L. 109-280)
added automatic revocation of tax-exempt status for organizations that repeatedly fail to file information returns.
Before P.L. 109-280, small tax-exempt organizations were exempt from filing altogether. A goal of requiring
information returns from all organizations was to identify active organizations, as it was unclear how many registered
organizations had ceased operations.
4 Brice S. McKeever, The Nonprofit Sector in Brief, 2018, Urban Institute: National Center for Charitable Statistics,
December 13, 2018, at https://nccs.urban.org/publication/nonprofit-sector-brief-2018#the-nonprofit-sector-in-brief-
2018-public-charites-giving-and-volunteering.
5 T he “e-postcard,” also called the Form 990-N, requires eight pieces of information: (1) the employer identification
number (EIN) or taxpayer information number (T IN); (2) the tax year; (3) legal name and mailing a ddress; (4) other
names used by the organization; (5) name and address of the principal officer; (6) web address (if applicable); (7)
confirmation that gross receipts are $50,000 or less; and (8) if applicable, a statement that the organization has or
intends to terminate operations.
6 For more information on organizations not required to file a Form 990, see Internal Revenue Service, Instructions for
Form 990 Return of Organization Exem pt From Incom e Tax (2018) , at https://www.irs.gov/instructions/i990.
7 Some information, such as the names and addresses of contributors to organizations other than a private foundation, is
not subject to public disclosure.
8 For example, if an exempt organization operates a bakery in a commercial district, where business activity is regularly
carried on, the income from this bakery may be considered unrelated business taxable income (UBT I). Specifically,
income from this type of activity is UBT I if it is substantially unrelated to the exempt organization’s exempt purpose.
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UBIT Changes Effective for 2018
The 2017 tax revision (P.L. 115-97), commonly cal ed the Tax Cuts and Jobs Act (TCJA), made two permanent
changes to UBIT; the second has been repealed. Both changes were effective for the 2018 tax year.

Tax-exempt organizations are required to compute unrelated trade or business income for
each trade or business separately. The rules were designed to prevent losses from one unrelated trade
or business from offsetting income from another unrelated trade or business. Net operating loss (NOL)
deductions and carryovers are permitted, but only within each specific trade or business. This treatment
differs from for-profit businesses, as for-profits can general y aggregate income and expenses across different
trades or businesses.

Unrelated business taxable income increased by amount of certain fringe benefit expenses. For
for-profit businesses, the TCJA disal ows deductions for certain fringe benefits, including transportation-
related benefits and parking benefits. Since for-profit businesses are no longer al owed to deduct these
expenses as a result of other changes in the TCJA, in an effort to create parity, tax-exempt organizations are
required to add the value of these fringe benefits provided to employees to their unrelated business taxable
income. Increasing unrelated business taxable income by the amount of fringe benefits effectively requires
tax-exempt entities to pay the corporate tax rate of 21% on the value of these benefits as provided. For
some organizations that did not previously file Form 990s, particularly churches, this change could require
that information returns be filed. The Taxpayer Certainty and Disaster Tax Relief Act, enacted as Division Q
of the Further Consolidated Appropriations Act, 2020 (P.L. 116-94), repealed this provision.
Current Tax Treatment
Federal statute includes multiple tax preferences for nonprofit and charitable organizations.
Donations to charitable organizations may be tax deductible, which subsidizes charitable giving.
Additional y, nonprofit and charitable organizations are general y exempt from tax on most
income, including investment income.
Some of the tax benefits are considered “tax expenditures” by the Joint Committee on Taxation
(JCT), meaning the JCT provides an estimate of the amount of forgone revenue associated with
the provision.9 Other tax benefits confer financial benefits to the sector, although the value of
those benefits is not regularly estimated by the JCT.
In addition to the federal tax benefits discussed here, there may also be state and local tax benefits
associated with nonprofit or charitable status. For example, in addition to income tax benefits that
mirror federal income tax benefits, state and local governments may provide property or sales tax
exemptions.
The Tax Deduction for Charitable Contributions
The primary tax expenditure for charities is the charitable deduction.10 Individual taxpayers who
itemize their deductions can—subject to certain limitations—deduct charitable donations to
qualifying organizations.11 The JCT estimated that in 2019, approximately 13% of taxpayers wil

9 T ax expenditures are revenue losses resulting from tax provisions that grant special tax relief designed to encourage
certain kinds of behavior or aid taxpayers in special circumstances.
10 T o be deductible as a charitable contribution, the gift must generally meet the following requirements. First, the gift
must be made to a qualifying organization. Second, the gift must be made without the expectation of a benefit in return.
T hird, the donor is generally required to transfer their entire interest in the contributed property. Forth, a deduction can
be claimed only for gifts of money and property —services are not deductible (because the value of forgone earnings is
not included in income, which is equivalent to a deduction for the value of labor). T here are a number of substantiation
and recordkeeping requirements associated with the charitable deduction.
11 For more on how individuals claim a deduction for charitable contributions, and the rules associated with claiming
the deduction, see IRS Publication 526, Charitable Contributions, March 12, 2019, at https://www.irs.gov/forms-pubs/
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itemize deductions.12 Corporations may also be able to deduct charitable contributions. The
CARES Act provided an above-the-line deduction for up to $300 for nonitemizers for 2020.
Organizations qualified to receive tax-deductible charitable contributions include public charities
and private foundations; federal, state, or local governments; and other less common types of
qualifying organizations.13 Contributions to civic leagues, labor unions, most foreign
organizations, lobbying organizations, political contributions, and contributions directly made to
individuals are not deductible as charitable contributions.
There are limits on the deduction for charitable contributions for both individuals and
corporations. For individuals, the deduction for cash contributions given to a public charity;
private operating foundation; or federal, state, or local government is 60% of the taxpayer’s
adjusted gross income (AGI) (these limitations are summarized in Table 1).14 The limit for
noncash contributions is 50% of AGI. Gifts of cash or short-term capital gain property to private
nonoperating foundations or certain other qualifying organizations are general y limited to 30%
of AGI. The CARES Act increased the limit to 100% for 2020 for cash contributions to public
charities (not to private foundations, supporting organizations, or donor-advised funds).
Table 1. Limitations on Individual Charitable Contributions
Valuation Rules
Limitation
Type of Donation
Recipient
for Property
Public charity; private operating foundation;
Basis of the property
50% or 60% of
Cash or short-term
federal, state, local government
AGIa
capital gain property
Private nonoperating foundation; otherb
Basis of the property
30% of AGI
Public charity; private operating foundation;
Fair market value
30% of AGI
Long-term capital
federal, state, local government
gain property
Private nonoperating foundation; otherb
Basis of the property
20% of AGI
Source: Internal Revenue Code (IRC) §170.
Note: These are general rules, and there are exceptions.
a. Temporarily increased from 50% to 60% for cash contributions through 2025, and to 100% for cash
contributions for 2020.
b. Includes qualifying contributions to veterans organizations, fraternal societies, and nonprofit cemeteries.
Not al nonoperating foundations are subject to the 30% limit.
The contribution of appreciated assets has particularly beneficial treatment, as the value of most
appreciated assets can be deducted without including the capital gains in income that would be
subject to tax. Thus, gifts of appreciated property are general y subject to lower deduction limits.
Donations of long-term capital gain property to public charities; private operating foundations; or
federal, state, or local government are limited to 30% of AGI, while contributions to private
nonoperating foundations or certain other qualifying organizations are general y limited to 20%
of AGI. Individuals are al owed to carry forward charitable contributions that exceed the
percentage limits for up to five years.

about-publication-526.
12 Joint Committee on T axation, Overview of the Federal Tax System as in Effect for 2019, JCX-9-19, March 20, 2019.
13 Less common organizations are veterans’ organizations, domestic fraternal societies, and cemetery companies.
14 P.L. 115-97 temporarily increased this limit from 50% to 60% from 2018 through 2025. Due to a possible drafting
error, all of the 60% must be in cash, whereas for the 50% limit a portion can be in appreciated assets up to their limits.
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Corporate charitable contributions are general y limited to 10% of a corporation’s taxable
income. For a corporation, transfer of property to a charity might qualify as a deductible
charitable contribution or a deductible business expense, but cannot be both. Like individuals,
corporations are al owed to carry forward charitable contributions that exceed the percentage
limits for up to five years. The CARES Act increased the limit for charitable contributions to 25%
of taxable income for corporations for 2020.
Valuation Rules for Charitable Contributions
There are several rules related to the valuation of charitable contributions (also summarized in
Table 1). For cash contributions, the value is simply the amount donated. However, when
property is donated, the charitable deduction may be limited to the fair market value of the
property, the taxpayer’s tax basis in the property, or some other amount. General y, as noted
above, taxpayers can deduct the full fair market value of long-term capital gain property.
Taxpayers may also be able to deduct the full fair market value of tangible personal property
donated to a charity whose use of the property is related to their tax-exempt purpose.
In some cases, the amount that can be deducted is limited to the donor’s tax basis in the property.
Specifical y, deductions for contributions of property may be limited to basis for contributions of
inventory or short-term capital gain property, contributions of tangible personal property that are
used by a recipient organization for a purpose unrelated to the recipient’s exempt purpose, or
contributions to private foundations (other than certain private operating foundations).15
Donations of appreciated stock to private nonoperating foundations are not subject to this limit,
and may be deducted using fair market value. Contributions of patents or other intel ectual
property may also be limited to the donor’s basis in the property. Deductions are general y limited
to the fair market value of the donated property, if the fair market value is less than the tax basis.
Special Rules for Certain Types of Contributions
There are a number of special rules related to donations of certain types of property, not al of
which are discussed here. Contributions of inventory are limited to the lesser of basis (cost) or
fair market value, with inventory reduced by the contributions (so that cost in excess of fair
market value can be deducted as the cost of goods sold). Special rules provide an enhanced
deduction equal to the basis plus half the difference between the fair market value and basis, not
to exceed twice the basis for C corporations contributing inventory to 501(c)(3) organizations for
the care of the il , the needy, or infants. There is a similar enhanced deduction for businesses
(both corporate and noncorporate) for contributions of food inventory for the care of the il ,
needy, and infants. This deduction is limited to 15% of income (temporarily increased to 25% for
2020 by the CARES Act). Cash basis taxpayers who do not keep inventories are al owed to
deduct half the fair market value.16 There are special rules associated with donations of vehicles,17

15 Short-term capital gain property is a property that, if sold at its fair market value on the day it was donated, would
have generated a short -term capital gain. Short -term capital gains are realized when an asset has been held for less than
12 months.
16 T his provision was enacted in the Katrina Emergency T ax Relief Act of 2005 (P.L. 109-73), extended multiple times
as part of “tax extenders,” and expanded and made permanent in t he Protecting Americans from T ax Hikes Act of
2015, enacted as Division Q in the Consolidated Appropriations Act, 2016 ( P.L. 114-113). See CRS Report R43517,
Recently Expired Charitable Tax Provisions (“Tax Extenders”): In Brief, by Jane G. Gravelle and Molly F. Sherlock.
17 If a recipient charity sells the donated vehicle, a donor’s deduction is generally limited to the gross proceeds from the
sale. A deduction may be claimed at fair market value if the charity uses the vehicle or gives (or sells at a significant
discount) the vehicle to a needy individual. See IRS Publication 4303, A Donor’s Guide to Vehicle Donations, at
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intel ectual property,18 and clothing and household items.19 Another special provision al ows for
tax-free distributions from individual retirement accounts (IRAs) for charitable purposes.20 The
IRA distribution provision is especial y beneficial to nonitemizers because it excludes the
distribution from income, which is equivalent to receiving the distribution and making a
charitable deduction.
General y, a charitable deduction can be claimed only if the donor transfers their full interest in
the property to a qualified recipient organization. This partial interest rule general y prohibits
charitable deductions for contributions of income interests, remainder interest, or rights to use
property. There is an exception to the partial interest rule for conservation contributions.
Conservation contributions al ow for charitable donations of conservation easements, where land,
natural habitats, open space, or historical y important sites are protected from development
without the owner having to give up ownership of the property. Additional y, special rules
increase the limit for appreciated property contributed for conservation purposes to 50% of AGI
for individuals.21 For farmers and ranchers, including individuals and corporations that are not
publicly traded, the limit is increased to 100% of income. Conservation contributions that exceed
the 50% or 100% of income giving limits can be carried forward for 15 years, instead of the usual
5 years.
Individuals can take a deduction for donations of property in the future with rights to the income
stream for themselves or others, through a charitable remainder trust. In a charitable remainder
trust, assets are transferred to a trust and a deduction taken for the present value of the future
donation. The donor or other designated individual can receive a stream of income from the trust,
for example, until death. Appreciated assets can be donated to the trust, which is tax exempt and
pays no tax on the gain from the sale of assets.
Recent Changes to Charitable Giving Tax Incentives
Due to the 2017 tax revision (TCJA), the tax expenditure associated with the charitable deduction
has fal en. Under TCJA, however, there were limited direct changes in tax policies affecting
charities. The one change to the charitable deduction expanded the deduction, raising the AGI
limit for individual cash contributions to public charities from 50% to 60% through 2025.
However, other changes that reduced the number of itemizers, such as the expanded standard

https://www.irs.gov/pub/irs-pdf/p4303.pdf; and IRS Publication 4302, A Charity’s Guide to Vehicle Donations, at
https://www.irs.gov/pub/irs-pdf/p4302.pdf.
18 While contributions of patents and intellectual property are generally limited to a taxpayer’s basis at the time of the
contribution, additional deductions may be claimed for income allocable to the intellectual property.
19 Clothing and household items are required to be in good used or better condition for a charitable deduction to be
claimed.
20 T his provision was enacted in the Pension Protection Act of 2006 (P.L. 109-280), extended multiple times as part of
“tax extenders,” and made permanent in t he Protecting Americans from T ax Hikes Act of 2015, enacted as Division Q
in the Consolidated Appropriations Act, 2016 (P.L. 114-113). See CRS Report R43517, Recently Expired Charitable
Tax Provisions (“Tax Extenders”): In Brief, by Jane G. Gravelle and Molly F. Sherlock; and CRS Report RS22766,
Qualified Charitable Distributions from Individual Retirem ent Accounts: Features and Legislative History , by John J.
T opoleski and Gary Sidor.
21 T his provision was enacted in the Pension Protection Act of 2006 (P.L. 109-280), extended multiple times as part of
“tax extenders,” and made permanent in t he Protecting Americans from T ax Hikes Act of 2015, enacted as Division Q
in the Consolidated Appropriations Act, 2016 (P.L. 114-113). See CRS Report R43517, Recently Expired Charitable
Tax Provisions (“Tax Extenders”): In Brief, by Jane G. Gravelle and Molly F. Sherlock .
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deduction and the limit on state and local tax deductions, reduced the number of itemizers and
reduced the marginal incentive to give to charity for many taxpayers.22
At times, Congress had passed legislation eliminating the percentage of AGI limit for charitable
contributions made for disaster relief purposes. Recently, the Disaster Tax Relief and Airport and
Airway Extension Act of 2017 (P.L. 115-63) eliminated the limit for charitable contributions of
cash for Hurricane Harvey, Irma, or Maria disaster relief. The Bipartisan Budget Act of 2018 (P.L.
115-123) eliminated the limit for charitable contributions of cash associated with the 2017
California wildfires.23 The CARES Act provided temporary enhancements for 2020, including
creating an above-the-line deduction of up to $300 for nonitemizers, eliminating the percentage of
individual income limits for cash donations to charities (excluding gifts to private foundations
and donor-advised funds), increasing the deduction limit for businesses (both corporate and
noncorporate) from 10% to 25% of taxable income, and increasing the limit on contributions of
food inventory from 15% to 25% for al businesses’ contributions.
Charitable Tax Expenditures
JCT’s tax expenditure budget includes several charitable tax expenditures: the deduction for
charitable giving, tax expenditures for certain tax-exempt bonds, and the exclusion for ministers
housing al owance. The JCT provides charitable deduction tax expenditure estimates separately
for contributions to 501(c)(3) educational institutions and health organizations. In FY2019, the
tax expenditure for charitable deductions associated with giving to organizations other than
education institutions or health organizations was $34.5 bil ion, while the tax expenditures for
giving to educational institutions and health organizations were $7.7 bil ion and $4.5 bil ion,
respectively (see Table 2).
Table 2. Charitable Tax Expenditures, FY2019
(in bil ions of dol ars)
Provision
Individual
Corporate
Total
Deduction for Charitable Contributions (total)
43.1
3.6
46.7

Educational Institutions
6.6
1.1
7.7

Health Organizations
3.6
0.9
4.5

Other than Education and Health
32.9
1.6
34.5
Tax-Exempt Bonds (total for educational facilities and hospitals)
4.3
0.9
4.2

Private Nonprofit and Qualified Public Educational Facilities
2.0
0.6
2.6

Private Nonprofit Hospitals
1.3
0.3
1.6
Ministers Housing Al owance Exclusion
0.7
—
0.7
Source: Joint Committee on Taxation, Estimates of Federal Tax Expenditures, FY2019-FY2023, JCX-55-19,
December 18, 2019.

22 For more on the $10,000 limit on state and local tax deductions, see CRS In Focus IF11098, 2019 Tax Filing Season
(2018 Tax Year): The State and Local Tax Deduction , by Grant A. Driessen and Joseph S. Hughes.
23 For additional background on tax incentives for charitable giving to support disaster relief, see CRS Report R45864,
Tax Policy and Disaster Recovery, by Molly F. Sherlock and Jennifer T eefy .
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Tax expenditures for the charitable deduction
have recently declined. For FY2019, it is
estimated that the charitable deduction wil be
Figure 2. Charitable Deduction Tax
associated with $46.7 bil ion in forgone
Expenditures, FY2008–FY2023
revenue (see Figure 2).24 This is down from
the estimated $61.0 bil ion in forgone revenue
for FY2017, and $58.1 bil ion for FY2018.25
The decline in the charitable deduction tax
expenditure is the result of (1) fewer
taxpayers itemizing deductions following the
2017 tax revision (P.L. 115-97); and (2) lower
tax rates following the 2017 tax revision.
The projections do not reflect the effect of the
coronavirus pandemic and subsequent

economic slowdown on charitable giving.
Source: Joint Committee on Taxation.
The provisions in the CARES Act are
Notes: Al tax expenditure estimates are projections.
projected to reduce federal tax revenues by
$1.4 bil ion in FY2020 and $5.0 bil ion in FY2021, followed by an increase in tax revenues of
$2.4 bil ion in FY2022 and $0.7 bil ion in FY2023, reflecting the reduction in carryover
deductions.26
Most of the forgone revenue associated with the charitable deduction is from individual giving, as
opposed to corporate giving. The charitable deduction does not reflect forgone revenue associated
with giving from bequests (which is discussed further below).
There are also revenue effects associated with al owing nonprofit educational institutions and
hospitals to issue tax-exempt bonds, and for the provision exempting the housing al owance of
ministers from tax. Tax expenditures for charities in FY2019 are reported in Table 2.
The Tax Treatment of Investment Income
For charities, most investment income is exempt from tax (there is a tax on the investment
income of certain endowments, which is discussed below). The JCT does not consider the
exemption of charities’ investment income from tax a tax expenditure, and thus does not provide
an estimate of the forgone revenue associated with this tax treatment.
Data from IRS Form 990 informational returns can be used to understand the magnitude of
501(c)(3)s’ exemption for investment income. In 2016, charities had $36.8 bil ion in investment
income, $45.1 bil ion in net capital gains (mostly from the sale of securities), $3.9 bil ion in net
rental income, and $3.5 bil ion in royalties.27 If this income had been subject to a 35% income tax

24 T ax expenditure estimates are projections for each fiscal year, as published in JCT ’s annual tax expenditure
publication. T hese annual publications are available at https://www.jct.gov/publications.html?func=select&id=5. T ax
expenditure estimates are forgone revenue associated with a tax provision, and may be viewed as the budgetary cost of
the provision.
25 FY2018 includes the end of calendar year 2017. T hus, changes in the value of the charitable deduction tax
expenditure resulting from the 2017 tax revision (T CJA) are not fully realized until FY2019.
26 Joint Committee on T axation, Estimated Revenue Effects Of The Revenue Provisions Contained In An Amendment In
The Nature Of A Substitute To H.R. 748, The “Coronavirus Aid, Relief, And Economic Security ('CARES’) Act,” JCX-
11R-2020, April 23, 2020.
27 See IRS, Statistics of Income T ax Stats—Charities & Other T ax-Exempt Organization Statistics, Form 990—Balance
Sheet and Income Statement Items for 501(c)(3) Organizations, at https://www.irs.gov/statistics/soi-tax-stats-charities-
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(the corporate income tax rate in 2015), nearly $31.3 bil ion in revenue would have been raised.28
This number does not include religious organizations.29
IRS data for 2016 reported assets of $4.0 tril ion held by charities, with about $1.1 tril ion of that
amount in land, buildings, and equipment.30 Private foundations had $0.8 tril ion in assets, with
$0.7 tril ion in investment assets.31 A significant share of investment assets held in charities is
held in university endowments, with an estimated value of $0.6 tril ion in FY2019.32 Assets do
not include assets of nonreporting religious organizations.
Private Foundations
Most private foundations differ from operating charities in that they often have a single donor or
smal group of donors. In addition, while a gift to a foundation is deductible for income (and
estate and gift) tax purposes, the donated funds are not immediately used for active charitable
purposes. Rather, funds are invested and donations are often made to charitable organizations
from earnings that may al ow the corpus of the foundation to be maintained and grow.
Contributions to foundations benefit from both the charitable deduction, when the contribution is
made, as wel as the exemption on investment earnings, as earnings accrue on invested
contributions over time.
To address concerns that foundations could retain earnings and grow indefinitely, and because
foundations are often closely tied to a family or specific group of donors, tax laws require a
minimum payout rate (5% of assets) and restrict activities that may benefit donors. The tax code
imposes taxes and/or penalties for self-dealing, for failure to distribute income on excess business
holdings, for investments that jeopardize the charitable purposes, and for taxable expenditures
(such as lobbying or making open-ended grants to institutions other than charities).
As of December 20, 2019, private foundations are subject to a 1.39% excise tax on their net
investment income.33 Before December 20, 2019, the excise tax rate was 2%. However, the rate

and-other-tax-exempt-organizations-statistics.
28 Looking at other types of tax-exempt organizations (those exempt from tax under IRC §§501(c)(4) through
501(c)(9)), investment income was $11.6 billion, net capital gains were $6.0 billion, royalties $2.0 billion, and net
rental income $0.5 billion in FY2016. If this income had been taxed at a rate of 35%, an additional $7.0 billion would
have been raised in tax revenue. See IRS, Statistics of Income T ax Stats—Charities & Other T ax-Exempt Organization
Statistics, Form 990—Balance Sheet and Income Statement Items for 501(c)(3) T hrough 501(c)(9) Organizations, at
https://www.irs.gov/statistics/soi-tax-stats-charities-and-other-tax-exempt-organizations-statistics. More revenue would
have been raised had this investment income been subject to the top individual income tax rate of 39.6% in 2016. Less
revenue would be raised if the tax rate were lower, like the 21% corporate tax rate that applied after 2017.
29 One estimate suggests that religious organizations have a substantial benefit from tax exemption, at $35.3 billion in
2012. Ryan T . Cragun et al. “How Secular Humanists (and Everyone Else) Subsidize Religion in the United States,”
Free Inquiry, June/July 2012, pp. 39-46, at https://www.ryantcragun.com/how-secular-humanists-and-everyone-else-
subsidize-religion-in-the-united-states/.
30 Internal Revenue Service, Statistics of Income T ax Stats—Charities & Other T ax-Exempt Organizations Statistics,
Form 990 Balance Sheet and Income Statement, T able 1, at https://www.irs.gov/statistics/soi-tax-stats-charities-and-
other-tax-exempt-organizations-statistics.
31 Internal Revenue Service, Statistics of Income T ax Stats—Charities & Other T ax-Exempt Organizations Statistics,
Domestic Private Foundations, T able 1, at https://www.irs.gov/statistics/soi-tax-stats-domestic-private-foundation-and-
charitable-trust-statistics.
32 National Association of College and University Business Officers (NACUBO), 2019 NACUBO-TIAA Study of
Endowm ents, Number of U.S. Institutional Respondents to the 2019 NT SE and Respondents’ T otal Endowment Market
Value, by Endowment Size and Institution T ype, at https://www.nacubo.org/Research/2020/Public-NT SE-T ables.
33 Certain operating foundations are exempt from the tax. T his change was made as part of the T axpayer Certainty and
Disaster T ax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropria tions Act, 2020 (P.L.
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was reduced to 1% if qualifying charitable distributions are increased.34 In FY2018, excise taxes
on private foundations generated $643.2 mil ion in revenue.35
Donor-Advised Funds (DAFs) and Supporting Organizations
Donor-advised funds (DAFs) al ow individuals to make a gift to a fund in a sponsoring
organization. Sponsoring organizations are charities that are al owed to receive tax-deductible
donations. The gift is irrevocable, as in the case of a gift to a foundation or any other charity. The
donor does not legal y oversee the payment of grants to charities from the fund, which is
determined by the sponsoring organizations. Donors make recommendations for grants (hence
donor advised), and there is general agreement that these recommendations determine, with few
exceptions, the contributions.36 DAFs, like private foundations, can accumulate assets and earn a
return tax free, but they are not subject to many of the restrictions on foundations, including the
minimum payout rate.37
These funds have been growing rapidly, in part through funds set up by major financial
institutions.38 According to the National Philanthropic Trust, in 2018 there were 728,563
individual DAFs, with contributions of $37.1 bil ion, assets of $121.4 bil ion, and recommended
grants of $23.4 bil ion. The DAFs were managed by 54 national charities, 603 community
foundations, and 332 single-issue charities.39 In 2019, more than 229,000 donors had accounts at
Fidelity Charity, with grants of over $7.3 bil ion.40
Supporting organizations are organized for the benefit of public charities, and they provide grants
to these charities. There are several types of supporting organizations (DAFs are themselves
supporting organizations). Type I and Type II organizations support a single charity and are
supervised or controlled by the supported charity (with Type I similar to a parent-subsidiary
relationship and Type II similar to a brother-sister relationship). A Type III organization supports
more than one charity and fal s into the category of a functional y integrated supporting
organization, or FISO (either through performing certain activities directly or exercising
governance and direction) and nonfunctional y integrated (non-FISO). A Type III non-FISO has a
number of additional restrictions, including a requirement to distribute the greater of 85% of net
income or 3.5% of nonexempt-use assets.41

116-94).
34 Specifically, to qualify for the reduced excise tax rate, a foundation must pay out (1) an amount equal to its assets
times the average payout rate during the base period (usually the past five years), plus (2) 1% of net investment income.
35 See IRS, Statistics of Income T ax Stats, Historical T able 20, at https://www.irs.gov/statistics/soi-tax-stats-historical-
table-20.
36 See CRS Report R42595, An Analysis of Charitable Giving and Donor Advised Funds, by Molly F. Sherlock and
Jane G. Gravelle, for an analysis of some of the issues surrounding DAFs.
37 T he ability to accumulate assets without paying them out has been criticized by some. See Will Hobson, “ Zombie
Philanthropy: T he Rich Have Stashed Billions in Donor-Advised Charities—But It’s Not Reaching T hose in Need,”
Washington Post, June 24, 2020, https://www.washingtonpost.com/lifestyle/style/zombie-philanthropy-the-rich-have-
stashed-billions-in-donor-advised-charities—but-its-not-reaching-those-in-need/2020/06/23/6a1b397a-af3a-11ea-856d-
5054296735e5_story.html.
38 Large donor-advised fund sponsors include Fidelity Charitable, Vanguard Charitable, and Schwab Charitable.
39 National Philanthropic T rust, The 2019 DAF Report, at https://www.nptrust.org/reports/daf-report/.
40 Fidelity Charitable, 2020 Giving Report, at https://www.fidelitycharitable.org/content/dam/fc-public/docs/insights/
2020-giving-report.pdf.
41 Restrictions on T ype III supporting organizations were adopted in the Pension Protection Act of 2006 (P.L. 109-280).
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College and University Endowments
A college or university endowment fund—often referred to simply as an endowment—is an
investment fund maintained for the benefit of the educational institution. University endowments
have been the subject of some scrutiny, in part because of the juxtaposition of growing
endowment sizes with increasing tuition at private universities.42 The 2017 tax revision, P.L. 115-
97, added a 1.4% excise tax on net investment income of nonprofit colleges and universities with
assets of at least $500,000 per full-time student and more than 500 full-time students. The
revenue gain was projected to be $0.2 bil ion per year.43
Tax-Exempt Hospitals
For private nonprofit hospitals to be eligible for tax-exempt status, to be able to receive tax-
deductible charitable contributions, and to be eligible for tax-exempt bond financing, they must
meet a community benefit standard. Health care is not by itself a stated objective in the tax
provisions determining charitable (501(c)(3)) status. General y, the community benefit standard
requires the hospital to show that it has provided benefits that promote the health of a broad class
of persons in the community. One way hospitals may demonstrate that they have met the
community benefit standard is by providing charity care (free or discounted services to charity
patients). Other types of community benefit include participation in means-tested programs such
as Medicaid; providing health professions education, conducting health services research,
providing subsidized health services, funding community health improvement, and donating cash
or in-kind contributions to other health-related community groups.44 Community-building
activities (such as for housing and the environment) may qualify if a link to community health
can be shown. The IRS does not count shortfal s associated with Medicare or bad debts from
those not qualifying for charity care as part of the community benefit standard.
The Patient Protection and Affordable Care Act (PPACA; P.L. 111-148) added additional
requirements for 501(c)(3) tax-exempt hospitals. Specifical y, 501(r) requires these hospitals to
conduct community health needs assessments, establishing a written financial assistance policy,
limit charges to financial-assistance-eligible patients to amounts bil ed to insured patients, and not
engage in extraordinary bil ing collections until an effort is made to determine eligibility for
financial assistance. Tax-exempt hospitals report their community benefit actions on their Form
990.45 In 2014, total net community benefit expenses were $63.0 bil ion (8.84% of expenses); of
that amount, $12.7 bil ion was for charity care (1.78% of expenses) and $26.3 bil ion for
unreimbursed means-tested costs (3.7%, almost entirely Medicaid).46 One study estimated the
cost of al federal, state, and local subsidies for tax-exempt hospitals (income, sales, and property

42 See CRS Report R44293, College and University Endowments: Overview and Tax Policy Options, by Molly F.
Sherlock et al., for a further discussion.
43 Joint Committee on T axation, Estimated Budget Effects of the Conference Agreement for H.R. 1, The “Tax Cuts and
Jobs Act,” JCX-67-17, December 18, 2017, at https://www.jct.gov/publications.html?func=startdown&id=5053.
44 See IRS Revenue Ruling 69-545, at https://www.irs.gov/pub/irs-tege/rr69-545.pdf. See also CRS Report RL34605,
501(c)(3) Hospitals and the Com m unity Benefit Standard , by Edward C. Liu.
45 See CRS Report RL34605, 501(c)(3) Hospitals and the Community Benefit Standard , by Edward C. Liu, for further
discussion and a history of the evolution of this standard. See CRS In Focus IF10918, Hospital Charity Care and
Related Reporting Requirem ents Under Medicare and the Internal Revenue Code , by Marco A. Villagrana et al., for a
description of reporting requirements.
46 See Internal Revenue Service, Department of the T reasury, Report to Congress on Private Tax-Exempt, Taxable and
Governm ent-Owned Hospitals, May 2018, at https://www.grassley.senate.gov/sites/default/files/
IRS%20report%20on%20Hospitals%2C%20May%202018.pdf .
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tax benefits) to be $24.6 bil ion in 2011.47 Another study using 2012 data found that nonprofit
hospitals’ community benefit expenses were 7.63% of total expenses, while the value of nonprofit
hospitals’ tax exemption was 5.87% of total expenses.48 The study also evaluated incremental
community benefits, or community benefits beyond those provided by for-profit hospitals.
Incremental community benefits provided by nonprofit hospitals were estimated to be 5.71% of
expenses in 2012.
Tax Treatment of Charitable Bequests
Charitable donations made by an estate are general y referred to as charitable bequests.
Decedents potential y subject to the estate tax can deduct charitable contributions.49 Estates are
effectively subject to a 40% rate on amounts above the statutorily exempted value, which was set
at $11.18 mil ion per decedent for 2018. The estate tax exemption was doubled temporarily
through 2025 by the 2017 tax revision, P.L. 115-97.
Transfers to a spouse at death are also excluded from the estate tax, and any unused exemption
can be added to the exemption of the second spouse. Because of the large exemption, a smal
share of estates are subject to the estate tax, although a significant share of charitable
contributions made by bequests appear on estate tax returns. The increase in the exemption
decreased the amount of bequests that receive a benefit from the charitable deduction.
The data from decedents dying in 2013 showed $18.1 bil ion of bequests reported on al estate tax
returns, with $10.2 bil ion reported on taxable returns.50 Some of the bequests reported on
nontaxable returns may benefit from the tax deduction, indicating a range of revenue costs from
$4.0 bil ion to $7.2 bil ion.51 Returns filed in 2018 (representing deaths in 2018, 2017, and
earlier) indicated charitable deductions on gross estates of $10 mil ion or more to be $20.3 bil ion
for al estates and $12.7 bil ion for taxable estates, implying a revenue loss of $5.1 bil ion to $8.1
bil ion.52
Data Describing the Charitable Sector
The following sections describe the charitable sector. Specifical y, data are presented on the size
of the sector and the sector’s revenues (including charitable contributions). Since the potential
effect of the 2017 tax revision on charitable giving is a policy issue of interest, changes in
charitable giving between 2017 and 2018 are examined in more detail.

47 Sara Rosenbaum et al., “T he Value of the Nonprofit Hospital T ax Exemption Was $24.6 Billion in 2011,” Health
Affairs, vol. 24, no. 7 (July 2015), at https://www.healthaffairs.org/doi/10.1377/hlthaff.2014.1424.
48 T his included income, sales, and property tax benefits. Bradley Herring et al., “Comparing the Value of Nonprofit
Hospitals’ T ax Exemption to T heir Community Benefits,” INQUIRY: The Journal of Health Care Organization,
Provision, and Financing, vol. 55 (January 2018), pp. 1-11.
49 See CRS Report R42959, Recent Changes in the Estate and Gift Tax Provisions, by Jane G. Gravelle, for a more
detailed discussion of the estate tax.
50 IRS, Statistics of Income T ax Stats—Estate T ax Data, by Year of Death, Estate T ax Returns for 2013 , at
https://www.irs.gov/statistics/soi-tax-stats-estate-tax-statistics-year-of-death-table-1.
51 Estates may be made nontaxable through making charitable bequests.
52 IRS Statistics of Income Stats—Estate T ax Data by Filing Year, https://www.irs.gov/statistics/soi-tax-stats-estate-
tax-statistics-filing-year-table-1.
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The Size of the Charitable Sector
For 2016, 501(c)(3) organizations reported $4.0 tril ion in total assets ($2.5 tril ion in net assets)
and total revenues of $2.1 tril ion (or approximately 11% of GDP).53 Most of IRS Form 990 filers
are smal (assets of less than $500,000) or medium-sized (assets of $500,000 up to $10 mil ion)
charities (40.2% and 47.7%, respectively). Large organizations, those with at least $10 mil ion in
assets, were 12.0% of Form 990 filers. Assets and revenues, and to a lesser extent contributions,
are concentrated in these larger organizations. While large organizations are 12.0% of charitable
organizations filing Form 990s, 93.3% of assets are held by, 88.5% of revenues are received by,
and 72.6% of contributions are made to these large organizations.
Figure 3. 501(c)(3) Organizations: Returns, Assets, and Revenue by Organization
Size, 2016

Source: IRS Statistics of Income, Charities & Other Tax-Exempt Organization Statistics, Table 1. Form 990
Returns of 501(c)(3) Organizations: Balance Sheet and Income Statement Items, by Asset Size, Tax Year 2016, at
https://www.irs.gov/statistics/soi-tax-stats-charities-and-other-tax-exempt-organizations-statistics.
Notes: Large organizations include those with assets over $10 mil ion. Smal organizations are those with assets
under $500,000. Contributions includes al forms of gifts and grants, including charitable contributions,
government grants, as wel as contributions from related organizations and funds raised from fundraising events,
through membership dues, or from federated campaigns.
Charitable contributions are a smal share of revenues of 501(c)(3) organizations reporting to the
IRS, accounting for 13.3% of revenue in 2016 (Figure 4). The primary source of revenue (72.2%)
is program services, such as tuition paid by college and university students, payments for hospital
stays, and entry fees. Charitable organizations’ revenue sources depend on the type of charity,
with charitable giving, for example, being much less important for fee-for-service organizations
such as educational institutions and hospitals. (These data represent those filing Form 990 returns.
This excludes nonfiling religious organizations, which are likely to rely more on contributions.)

53 Internal Revenue Service, SOI T ax Stats - Charities & Other T ax-Exempt Organizations Statistics, Form 990 -
Balance Sheet and Income Statement Items, at https://www.irs.gov/statistics/soi-tax-stats-charities-and-other-tax-
exempt -organizations-statistics.
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Figure 4. Sources of 501(c)(3) Organization Revenue, 2016
(in bil ions of dol ars)

Source: IRS Statistics of Income, Charities & Other Tax-Exempt Organization Statistics, Table 1. Form 990
Returns of 501(c)(3) Organizations: Balance Sheet and Income Statement Items, by Asset Size, Tax Year 2016, at
https://www.irs.gov/statistics/soi-tax-stats-charities-and-other-tax-exempt-organizations-statistics.
Notes: Program service revenue includes fee-for-service revenue, such as tuition payments or hospital service
revenue. Hospital service revenue may come from private or public sources. Gifts and grants include private
contributions, as wel as contributions from related organizations.
Magnitude, Sources, and Beneficiaries of Charitable Giving
In absolute terms, charitable giving has increased over time. When considering the magnitude of
the charitable sector in the economy, one metric is charitable giving as a share of GDP. In 2019,
estimated total giving was $449.6 bil ion, or 2.1% of GDP.54
Charitable giving since 1978 has averaged 1.9% of GDP. However, as seen in Figure 5, this
average obscures variation over time and across business cycles. The smal est share of charitable
giving occurred in 1995 (1.6% of GDP), whereas the largest share occurred five years later in
2000 (2.2% of GDP). Although a decline appears between 2017 and 2018 (which could reflect the
effects of the TCJA), it appears smal in the context of historical fluctuations in giving as a share
of GDP.

54 Data on giving are from T he Center on Philanthropy at Indiana University, Giving USA 2020; GDP from National
Income and Product Accounts, T able 1.1.5, at https://www.bea.gov/.
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Figure 5. Charitable Giving as a Percentage of GDP, 1978-2019

Source: The Center on Philanthropy at Indiana University, Giving USA 2020.
Note: The difference between the individual and total charitable giving is the sum of charitable giving from
corporations, foundations, and bequests.
Private contributions to charitable organizations come from four different sources: individuals,
foundations, bequests, and corporate giving. As shown in Figure 6, individuals were the largest
source of charitable giving in 2019 and totaled $309.7 bil ion, or 68.9%. As estimated
subsequently in this report, 54% of 2018 giving received a tax benefit from itemized deductions.
(Given no legislative changes to the charitable deduction between 2018 and 2019, it is reasonable
to expect that a similar share of contributions received a tax benefit in 2019 as in 2018.) Grants
from foundations were the second-largest source of charitable contributions in 2019 ($75.7
bil ion, or 16.8%), followed by charitable bequests ($43.2 bil ion, or 9.6%) and corporate giving
($21.1 bil ion, or 4.7%).
Figure 6. Shares of Charitable Giving by Source, 2019

Source: The Center on Philanthropy at Indiana University, Giving USA 2020; with CRS calculations for share of
itemized and nonitemized giving based on 2018 estimates.
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As il ustrated in Figure 7, individual giving as a percentage of GDP rose by 1.4% between 2018
and 2019. Giving from bequests as a percentage of GDP increased by 5.3% between 2018 and
2019. In contrast, there was little change in corporate charitable giving as a percentage of GDP
(an increase of 0.2%). Giving from foundations as a percentage of GDP declined by 5.4%
between 2018 and 2019.
Figure 7. Charitable Giving by Source as a Percentage of GDP, 2018 and 2019

Source: The Center on Philanthropy at Indiana University, Giving USA 2020; and CRS.
Religious charities receive the largest share of charitable giving, receiving 28.5% of total giving
in 2019 (Figure 8). Education ranked next, at 14.3%, with human services 12.5%, gifts to
foundations 11.9%, and health 9.2%. Other beneficiaries each accounted for less than 9.2%.55

55 Public society benefit includes civil rights, social action, and advocacy; community improvement and capacity
building; philanthropy, voluntarism, and grantmaking foundations (including donor-advised funds); science and
technology; social science; and public and societal benefit such as public policy research, government and public
administration, transportation systems, public utilities (including telecommunications), consumer
rights/education/protection, military and veterans organizations, and financial institutions.
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Figure 8. Shares of Charitable Giving by Type of Recipient, 2019

Source: The Center on Philanthropy at Indiana University, Giving USA 2020.
Giving to many beneficiaries increased as a percentage of GDP between 2018 and 2019, as
shown in Figure 9. Giving to education (3.2%), human services (4.5%), public-society benefit
organizations (15.6%), and international affairs (22.6%) al increased as a percentage of GDP.56 In
contrast, giving to religion (-1.9%), gifts to foundations (-0.1%), and health (-3.3%) al declined
as a percentage of GDP.

56 Giving to arts, culture, and humanities (1.2%), environment/animals (5.1%), and gifts to individuals (18.0%) also
increased from 2018 and 2019.
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Figure 9. Charitable Giving by Type of Recipient as a Percentage of GDP, 2018 and
2019

Source: The Center on Philanthropy at Indiana University, Giving USA 2019; and CRS.
Giving to religion as a percentage of GDP and as a share of total giving has declined over time, as
shown in Figure 10. The decline in giving to religion from 2018 to 2019 may have just been part
of a continuing trend, while the decline in giving to foundations may have reflected effects of the
estate tax, or have been part of regular fluctuations in giving to foundations.
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Figure 10. Trends in Charitable Giving by Type of Recipient, 1978-2019

Source: The Center on Philanthropy at Indiana University, Giving USA 2020.
The Incentive Effects of Tax Benefits for Charitable
Contributions and Organizations
To understand how much charitable giving is induced by tax incentives, it is important to
understand how donors respond to tax incentives. Individuals give for a variety of reasons (e.g.,
altruism); research indicates that tax benefits may also influence charitable giving. Tax benefits
encourage charitable giving by reducing the cost of giving, with the federal government
effectively subsidizing charitable giving.
For ordinary donations during donors’ lifetimes (inter-vivos giving) and for donors not claiming
the standard deduction, their marginal income tax rate determines the incentive effect by lowering
the cost of giving. Donors who do not claim itemized deductions do not receive an incentive
effect from the tax code. For gifts of appreciated property, subsidies are affected by the capital
gains tax rate as wel , regardless of whether itemized deductions are used. For bequests, the tax
rate is the estate tax rate, but only a smal fraction of estates are subject to tax. Corporate giving is
potential y affected by the corporate tax rate.
Taxes also have income effects, which may be important for wealthy donors who donate large
shares of income or leave large shares of their estates to charity; taxes reduce charitable giving by
reducing disposable income. Deductions for charitable contributions not only provide a tax
incentive for donating or leaving bequests, but also have an income effect that increases giving.
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Tax Subsidies for Charitable Giving, Inter-Vivos Giving
Taxpayers who itemize their deductions face a lower cost of giving than other taxpayers. Prior to
the 2017 tax revision, the majority of individuals’ charitable giving was deducted. For the most
recent year of tax data available, 2017, charitable deductions of $256.1 bil ion were reported on
tax returns, although $13.6 bil ion of that number was on returns with no ultimate tax liability.57
According to Giving USA, in that same year individuals donated $286.7 bil ion,58 indicating that
approximately 89% of charitable deductions benefited from some subsidy in that year. Taxpayers
with $500,000 of adjusted gross income or more, representing 1% of returns, accounted for 39%
of charitable contributions. Taxpayers with $100,000 to $500,000 of income, slightly over 17% of
returns, accounted for 38% of itemized charitable contributions as wel .
The amount of giving that benefits from tax reductions through itemized deductions is expected
to have declined substantial y in 2018 due to provisions of the 2017 tax revision.59 (Actual data
on charitable deductions claimed from the IRS based on 2018 tax returns are not yet available.)
This legislation is expected to decrease the share of itemizers due to a significant increase in the
standard deduction60 and restrictions on itemized deductions, most importantly a $10,000 cap on
deductions for state and local taxes. The Tax Policy Center (TPC) estimated the share of
households reporting a benefit from deducting charitable contributions would fal from 21% to
9.1%.61 (This share reflects the share of the entire population, including nonfilers.)
Data from the TPC that estimate itemized charitable contributions can be used to estimate the
share of individual charitable contributions that would be claimed as itemized deductions. For
2018, TPC estimates that itemized charitable deductions would have been $212.1 bil ion without
the 2017 tax revision, with itemized deductions for charitable giving being an estimated $143.1
bil ion as a result of the 2017 tax revision.62 In other words, charitable contributions itemized on
individual income tax returns are estimated to have fal en by about one-third as a result of the
2017 tax revision. Assuming a similar level of itemized deductions in 2018 under prior law as
reflected in actual data for 2016 (80%), the share of charitable contributions itemized would be
projected at 54%.63

57 Data on charitable contributions is IRS, Statistics of Income T ax Stats—Individual Statistical T ables by Size of
Adjusted Gross Income, T able 2.1, at https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-size-of-
adjusted-gross-income. Distribution of returns is taken from T able 1.1.
58 T he Center on Philanthropy at Indiana University, Giving USA 2019.
59 Calculations based on IRS filing season statistics document the decline in the number of taxpayers claiming the
charitable deduction. For a discussion, see James Andreoni and Jon Durnford, “Effects of the T CJA on Itemization
Status and Charitable Deduction,” Tax Notes Federal, August 26, 2019, pp. 1399-1403.
60 T he tax revision eliminated the personal exemption, and the standard deduction increase slightly more than offset the
loss for personal exemptions for the taxpayer and spouse (dependent exemptions were offset by inc reased credits).
While these effects were largely offsetting for those already taking the standard deduction, they increased the benefit of
taking the standard deduction for those who were itemizing, who lost personal exemptions in any case.
61 See Urban Brookings T ax Policy Center, T able T 18-0010, at https://www.taxpolicycenter.org/model-estimates/
impact -itemized-deductions-tax-cuts-and-jobs-act-jan-2018/t18-0010-impact-tax.
62 Based on the average benefit times number of tax filing units as reported in Urban Brookings T ax Policy Center,
T able T 18-0010, at https://www.taxpolicycenter.org/model-estimates/impact -itemized-deductions-tax-cuts-and-jobs-
act-jan-2018/t18-0010-impact-tax, and the marginal income tax rates reported in T able T 17 -0324, at
https://www.taxpolicycenter.org/model-estimates/conference-agreement-tax-cuts-and-jobs-act-dec-2017/t17-0324-
effective-marginal.
63 T he calculation is ($143.1 billion / $212.1 billion) times 80%, or 54%. Note that the data on total individual
charitable contributions were not available to T PC when it prepared its projection, so that using actual giving levels
would likely lead to a less reliable estimate.
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The tax savings from charitable contributions reflecting both the decline in itemizing and the
smal decline in tax rates also fel by about a third. The steepest declines were in the middle and
upper middle of the income distribution (the benefit fel by 62% in the fourth quintile, while the
benefit fel by 1.4% in top 0.1%). The TPC reported that taking into account al returns (including
those not itemizing before the tax change), the average marginal tax rate across al donations fel
from 20.7% to 15.2%.64
Gifts of Cash
About two-thirds of charitable contributions in 2017 were in cash, and high-income taxpayers
have a smal er share of cash contributions (51% in 2017 for taxpayers with income greater than
$1 mil ion).65 The price of charitable contributions for itemizers is (1-t), where t is the taxpayer’s
tax rate at which contributions are deducted.66 For example, if the individual is in a 25% tax
bracket, every dollar the taxpayer donates and deducts from their income reduces their taxes by
25 cents. Hence, the tax price is 0.75, indicating that a taxpayer has to give up 75 cents for each
dollar of charitable contributions. That is, if the taxpayer in that bracket contributes a dollar, he or
she saves 25 cents in taxes and loses 75 cents that could have been used for other purposes.
Charitable giving is concentrated at higher income levels, and the effect of the incentive depends
on the tax rate. Consider the top tax rate (applicable for taxpayers with very high income levels),
which has fluctuated substantial y since the income tax was introduced in 1913, beginning at rates
as low as 7% and rising as high as 92%. Starting in the mid-1960s, the top rate was 70% for many
years (although it rose slightly with the Vietnam War surcharge). Beginning with legislation in
1981, the top tax rate has been reduced substantial y. Effective in 1982, it was reduced from 70%
to 50%. In 1986, it was further reduced to 28%. Rate increases occurred in 1990 and 1993,
decreases in 2001, increases in 2013, and decreases in 2017. Table 3 compares the magnitude of
those past changes in tax price. Importantly, as marginal tax rates fal , the tax price of giving
increases—in effect, the subsidy from the charitable deduction is reduced. Conversely, when
marginal rates increase, the tax price of giving fal s, and the subsidy of the charitable deduction
increases. There were very large percentage changes in the 1981 and 1986 tax cuts, with much
smal er changes subsequently. The effect of the top rate change in 2017 is relatively smal
compared to these earlier changes.
The TPC estimated that across al taxpayers the tax price rose by 6.9%, to reflect the change in
itemized deductions as wel as the smal change in tax brackets.

64 Urban Brookings T ax Policy Center, “ How Did the T CJA Affect Incentives for Charitable Giving?” at
https://www.taxpolicycenter.org/briefing-book/how-did-tcja-affect -incentives-charitable-giving.
65 Deductions for charitable contributions in a given tax year exceed the sum of cash and noncash contributions, as
some of the deduction is a carryover of deductions for contributions that were made in previous tax year s. Limitations
on charitable deductions make it such that, for some donors, the full value of the deduction cannot be claimed in the
year the contribution is made. T he share of cash contributions computed here is cash contributions as a share of total
cont ributions, excluding carryovers from previous tax years.
66 One provision that is not considered in calculating tax price changes is the now-repealed phase-out of itemized
deductions. Despite the term used to describe it, the phase-out of itemized deductions did not reduce the value of
itemized deductions at the margin. It was triggered by an increase in adjusted gross income, and, if itemized deductions
grow with income, as is commonly the case, its effect is to increase the effective marginal tax rate by 3 % in a way that
does not affect the subsidy. A simple model with the phase-out, L = t(y+.003(Y-Yb)–D), where L is liability, t is the
tax rate, Y is income, Yb is the point at which the phase-out begins, and D is deductions, illustrates that the change in
taxes with a change in D is t. Generally, state income taxes are enough to cause deductions to grow by 3% of income,
but there may be occasional circumstances where deductions do not grow fast enough. In that case the itemized
deduction phase-out would reduce the value of charitable deductions. No data are available on the size of this effect,
but it is likely to be small.
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Table 3. Percentage Change in Tax Price, Top Tax Rate, Gifts of Cash
Original Tax Rate
Enacted Tax
Percentage Change

(%)
Rate (%)
in Tax Price
2017 Tax Cut
39.6
37.0
4.3
2013 Tax Increase
35.0
39.6
-7.1
2001 Tax Cut (Effective 2003)
39.6
35.0
7.6
1993 Tax Increase
31.0
39.6
-12.5
1990 Tax Increase
28.0
31.0
-4.1
1986 Tax Cut
50.0
28.0
44.0
1981 Tax Cut
70.0
50.0
66.7
Source: CRS calculations.
Gifts of Appreciated Property
The value of donating property differs from the value of cash donations; most property is
appreciated property such as stocks and other property gaining value. Taxpayers with incomes of
$500,000 or more account for 69% of these contributions. Currently, taxpayers are al owed to
deduct the entire cost of donated property, without paying the capital gains tax. Since the cost of a
dollar of consumption from sale of an appreciated asset is 1/(1-atg), where tg is the capital gains
tax rate and a is the share of value that would be taxed as a gain, the tax price of charitable giving
of appreciated property is (1-t)/(1-atg). The tax price effects in Table 3 reflect tax prices of assets
with no appreciation. Table 4 shows the effects at the top rates for cases with appreciation of 50%
of the value and 100% of the value. An appreciation approaching the full value would occur with
assets that have been held for a long time and had a faster growth rate.
Although changes in capital gains tax rates in isolation can affect the price of giving (for
example, causing an increase in the price of giving by up to 10% in 1997), they sometimes offset
the effects of a change in ordinary rates (as in 1986) and at other times exacerbate the effects. As
with cash gifts, however, the largest changes to the tax price of appreciated property occurred in
1981 followed by 1986, where the price of charitable giving increased; the largest price decrease
remains in 1993.
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Table 4. Percentage Change in Tax Price, Top Tax Rate, Gifts of Appreciated Property
Price
Price
Prior-
Change with
Change with
Year
Enacted
Prior-Year
Enacted
50% of Value
100% of
Ordinary
Ordinary
Capital
Capital
in
Value in
Tax Rate
Tax Rate
Gains Tax
Gains Tax
Appreciation
Appreciation
Year
(%)
(%)
Rate (%)
Rate (%)
(%)
(%)
2017
39.6
37.0
23.8
23.8
4.3
4.3
2013
35.0
39.6
15.0
23.8
-2.4
3.6
2003
35.0
35.0
20.0
15.0
-2.7
-5.9
2001
39.6
35.0
20.0
20.0
7.6
7.6
1997
39.6
39.6
28.0
20.0
-4.4
-10.0
1993
31.0
39.6
28.0
28.0
-12.5
-12.5
1990
28.0
31.0
28.0
28.0
-4.2
-4.2
1986
50.0
28.0
20.0
28.0
37.8
29.6
1981
70.0
50.0
28.0
20.0
74.4
85.2
1978
70.0
70.0
35.0
28.0
-4.1
-9.7
Source: CRS calculations.
Tax Incentives for Bequests
A smal share of estates are subject to the estate tax, and that share has been further reduced by
the 2017 tax revision, which doubled the estate tax exemption. According to the TPC, 0.2% of
deaths were subject to the estate tax before the change, which fel to 0.1% after the increase in the
exemption.67
The latest IRS estate tax data are for decedents dying in 2013, before enactment of the 2017 tax
revision. These data showed $18.1 bil ion of bequests reported on al estate tax returns, with
$10.2 bil ion reported on taxable returns.68 The amount potential y benefiting from the estate tax
deduction presumably fel between those two values, as the charitable deduction could have
resulted in some estates not being taxable. Giving USA reported bequests of $26.3 bil ion in 2013
and $28.1 bil ion in 2014;69 thus, between 30% and 53% of bequests received the benefits of
estate tax deductions.
The tax price of a bequest is (1-te), where te is the estate tax rate. The capital gains tax rate does
not apply because the capital gain on assets passed on at death is not recognized. The current
estate tax rate is 40%. The estate tax rate has fluctuated over time. From the post-World War II
period to 1976, the top rate was 77%, when it was reduced to 70%. In 1981, the rate was reduced
over a three-year period to 55% from 1982 to 1984, an increase in tax price of 50%. The estate
tax rate was lowered from 55% to 45% over the period from 2002 to 2007, a 22% price increase.
The estate tax was repealed for 2010, an 82% increase in the tax price (although individuals were
retroactively al owed to pay an estate tax at 2011 rates of 35% to avoid a provision that would

67 Urban-Brookings T ax Policy Center, T able T 18-0134, at https://www.taxpolicycenter.org/model-estimates/baseline-
estate-tax-tables-sep-2018/t18-0134-estate-tax-returns-and-liability-under.
68 IRS, Statistics of Income T ax Stats—Estate T ax Data, by Year of Death, Estate T ax Returns for 2013, at
https://www.irs.gov/statistics/soi-tax-stats-estate-tax-statistics-year-of-death-table-1.
69 T he Center on Philanthropy at Indiana University, Giving USA.
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have required future capital gains to be recognized on sale by heirs, cal ed carryover basis). For
those electing the 2011 tax rate, the price increase was 18%. The tax rate was reduced to 35%
temporarily for 2011 and 2012; in 2013, the rate was set at 40%, a decrease in the tax price
compared to the temporary rates of 8%. Aside from the year of repeal in 2010, the largest price
increase was 50%, and significant price changes were fewer than for inter-vivos gifts.
The benefits of the subsidy for bequests are also affected by the exemption, and the recent
increases in exemptions make the tax subsidy less applicable—reducing the tax incentive for
charitable bequests. Nevertheless, for bequests reported on estate tax returns, these bequests are
concentrated in large estates. The 2013 estate tax data report only estates of $5 mil ion or more,
since smal er estates would be exempt, but 57% of contributions on these estates were in estates
of $50 mil ion or more, and 74% were reported for estates of $20 mil ion or more. For taxable
estates, 78% were reported on estates of $50 mil ion or more, and 92% were reported on estates
of $20 mil ion or more. Thus, it appears that most charitable contributions that benefited from the
tax subsidy would continue to do so under the new exemption level.
Incentives for Corporate Giving
Corporate giving is a relatively smal share of total giving. In 2016, the last year for which tax
data were available, tax statistics indicated total contributions of $18.6 bil ion, while Giving USA
reported $20.05 bil ion in 2018.70
The incentive effects for corporate giving depend on the motivation. If charitable contributions
are an expenditure for purposes of advertising and public relations, the deduction is like any other
cost, and the corporate tax rate does not matter. If the contribution increases the welfare of
managers, the donation reduces profit, and the corporate tax matters.71
To the extent that the corporate tax price affects charitable giving, the tax price has changed
infrequently. In 1981, the corporate tax rate was 46%. The 1986 legislation phased the rate down
over two years to 34%, increasing the tax price by 22%. In 1993, the corporate tax rate increased
to 35%, for a smal tax price reduction of less than 2%. The corporate tax rate stayed at that level,
until 2018, when the rate was reduced to 21%, for a tax price increase of 25%.
Accumulating Earnings Tax Free
Numerous opportunities are available for adding to the tax benefit of a charitable contribution by
accumulating earnings that are not subject to tax. In effect, the deduction for the charitable
contribution is provided before it is actual y spent on charitable activity. An example il ustrates
this point. If the interest rate is 10%, a dollar donated today and spent a year later by a tax-exempt
charity wil provide $1.10 in resources. If a taxpayer is subject to the 37% top tax rate on the
earnings, the amount available to give to charity after paying taxes is $1.063. In the tax-exempt
case, the tax price of giving is $0.61, while the tax price of giving in the taxable case is $0.63.72
The longer the asset is held by a tax-exempt entity, the greater the benefit to the charitable

70 IRS, Statistics of Income T ax Stats—T able 2.1, Returns of Active Corporations, at https://www.irs.gov/statistics/soi-
tax-stats-corporation-complete-report; The Center on Philanthropy at Indiana University , Giving USA 2019.
71 If the charitable contribution benefits shareholders (a rationale apparently viewed less likely by most theories about
why corporations make charitable contributions), the combined corporate and individual rate matters.
72 T his assumes that the taxpayer discounts future charitable giving at the after-tax interest rate (the after-tax interest
rate is 6.3%). T hus, the value of his gift rises from $1 to $1.10/1.063. The taxpayer’s cost to give $1.10 in future
benefits in the tax-free case is $0.63. T hus, the tax price of giving is $0.63 / [$1.10 / 1.063], or $0.61. In the case where
investment earnings are taxable, the taxpayer gives $1.063 in the future, so the tax price of giving is $0.63 / [$1.063 /
1.063], or $0.63.
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organizations: after 10 years tax-exempt accumulation leads to $2.69, while the amount available
after paying tax is $1.84.
There are a number of ways to accumulate funds without paying taxes on earnings, most notably
through foundations, although they are required to pay out a minimum amount each year in
charitable purposes. Other methods of delaying the payment of taxes is through private charities’
endowment funds and supporting organizations, and wel as DAFs, none of which is subject to
payout restrictions. A DAF can act, in many ways, as a private foundation but without many of
the restrictions of a private foundation. Taxing these earnings directly at the corporate rate would
reduce the tax incentive for those subject to high individual marginal tax rates, but not eliminate
it, given the lower corporate rate now in place.
The Aggregate Effect of Tax Incentives on Giving
As previously discussed, the effect of changes in tax incentives on giving depends on the
behavioral response to changes in tax rates. The measure is a price elasticity, which is the
percentage change in charitable contributions divided by the percentage change in the tax price
(in the case of individual cash giving, the tax price is one minus the tax rate).
Given the large changes in tax price that have occurred over time, it is useful to examine some
historical data. Figure 5 above shows the pattern of giving as a percentage of GDP over the
period 1978-2019. There is little indication of significant shifts in giving due to tax rate changes.
Contributions after 1981, despite pronounced tax price increases at higher incomes, remained
relatively stable as a percentage of GDP. The smal peak around 1986 is general y attributed by
most researchers to a temporary rise in deductions reflecting a timing shift as tax cuts for 1987
and 1988 were preannounced in the Tax Reform Act of 1986 (TRA86; P.L. 99-514), but by 1989
contributions had returned to their previous levels. Contributions following enactment of the 1993
tax increase fel rather than increased. Thus, there is little in the historical record to suggest a
significant response to changes in tax incentives.
Economists have employed a variety of statistical methods to try to formal y estimate the effects
of tax incentives on charitable giving. The effects can be measured by estimating a price
elasticity, which is the percentage change in charitable contributions divided by the percentage
change in tax price. Since increasing the price of giving wil reduce the amount of giving (and
vice versa), the price elasticity is a negative number. For example, if the elasticity is -0.7, a 10%
increase in the tax price (1-t) wil result in a 7% decrease in the amount of charitable
contributions.
Individual Charitable Contributions
Some early statistical estimates indicated that giving was very responsive to the tax rate. The
temporary increase in individual charitable contributions following the 1986 tax revision, where
lower tax rates were announced in advance, caused researchers to suspect that some of these
estimated effects were due to transitory changes. The most common instance of this transitory
effect would be when income fluctuated: the periods when income rises and individuals are in
higher tax brackets would be the best time to concentrate charitable giving. Thus, some of the
relationship between high tax rates and higher contributions reflected timing and would overstate
the response (i.e., the elasticity) to a permanent tax change. Statistical estimates are also made
more difficult because charitable giving responds to income, so that higher incomes lead both to
higher charitable contributions and, in a progressive tax rate system, to higher tax rates.
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Appendix A contains a review of studies of the price elasticity of charitable giving that control
for transitory effects. The elasticities in those studies range from close to 0 to -1.2. The review of
that evidence points to an elasticity of around -0.5. That elasticity would imply that the
percentage change in individual charitable contributions due to the 2017 tax revision (where the
price rose by 7%) was a 3.5% decline in individual charitable contributions. For 2017, individual
giving was $302.5 bil ion,73 suggesting a decline in charitable contributions of around $11 bil ion
as a result of the 2017 tax revision. With a current average tax rate for individual contributions of
15.2%, the tax price would rise by 9% if al charitable deductions were eliminated. These effects
would be twice as large with an elasticity of -1.0. The National Council on Nonprofits has
estimated a similar effect of the 2017 tax change for individual contributions, a decline in
charitable giving of $13 bil ion or more.74
As a percentage of GDP, individual giving declined by about 6% from 2017 to 2018. Some of that
decline might reflect a shift in giving from 2018 to later in 2017, to take advantage of the higher
tax rates or the expectation of taking the standard deduction in the following year. Contributions
as a percentage of GDP grew about 1.4% from 2016 to 2017.75 Many other factors, however,
influence giving as a percentage of GDP, and individual giving as a share of GDP in 2018 was
about the same as in 2015. Treasury data indicated that charitable giving by individuals remained
relatively constant as a percentage of GDP in 2016, 2017, and 2018 (1.3%, 1.4%, and 1.3%).76
A Note on Beneficiaries of Charitable Tax Incentives
The 2017 tax revision eliminated many charitable deductions taken for the middle and upper-
middle-income taxpayers, leaving a charitable tax incentive mostly claimed by high-income
individuals. The TPC estimates that in 2018 91.5% of the benefit for charity accrues to the top
quintile (taxpayers with incomes of $153,300 or more), 83.5% is received by the top 10%
(taxpayers with incomes of $222,900 or more), 56.4% is received by the top 1% (taxpayers with
incomes of $754,800 or more), and 35% accrues to the top 0.1% (taxpayers with income of
$3,318,600).77
The 2017 Panel Study of Income Dynamics (PSID) can be used to examine the patterns of giving
by income class to different types of charitable organizations and also to examine the share of
contributions likely to benefit low-income individuals (i.e., that go to charities and foundations
that serve the poor).78 According to CRS’s analysis of the PSID data, higher-income individuals
give a larger share of their contributions to organizations that focused on health, education, arts,
the environment, and international aid relative to contributions by lower-income individuals,
while giving a smal er share to organizations focused on religion, youth and family services,
community improvement, and directly providing basic necessities. For example, nearly two-thirds

73 T he Center on Philanthropy at Indiana University, Giving USA 2019.
74 National Council of Nonprofits, “Tax Cuts and Jobs Act, H.R. 1: Nonprofit Analysis of the Final T ax Law,” April 5,
2018, at https://www.councilofnonprofits.org/sites/default/files/documents/tax-bill-summary-chart.pdf.
75 T he Center on Philanthropy at Indiana University, Giving USA 2019.
76 U.S. Department of the T reasury, “ Treasury and IRS Release T ax Year 2018 Statistics,” press release, March 2,
2020, https://home.treasury.gov/news/press-releases/sm925.
77 Urban Brookings T ax Policy Center, T ax Benefit of the Itemized Deduction for Charitable Contributions, T able T 18 -
0179, October 16, 2018, at https://www.taxpolicycenter.org/model-estimates/individual-income-tax-expenditures-
october-2018/t18-0179-tax-benefit-itemized.
78 T he PSID is a nationally representative household panel survey that has followed families and their descendants
since 1968. T he 2017 data release collected information from 9,607 families and 26,445 individuals on a variety of
topics, including income and philanthropy.
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of contributions of those with incomes under $200,000 went to religious organizations, compared
to roughly 47% for those with incomes over $200,000. In contrast, just over 5% of giving from
families with income under $200,000 was directed to education purposes, compared to almost
19% for those with income over $200,000.
The PSID data can also be used to estimate the share of various charitable benefits focused on the
needs of the poor.79 Nearly 36% of charitable giving made by families with income under
$200,000 was focused on the poor, compared to nearly 33% for families with income over
$200,000. While the PSID sample sizes limit the ability to draw conclusions about charitable
giving at very high income levels (greater than $1,000,000), they are suggestive that the share
focused on the poor may further decline as income levels increase.
As the changes from the TCJA resulted in a further concentration of charitable incentives toward
high-income taxpayers, they also focused incentives on charitable giving less likely to benefit the
poor and more likely to benefit organizations that focus on health, education, arts, the
environment, and international aid.
Although it is difficult to separate various causal factors, the recipient organizations that
experienced the largest decline in giving in 2018 were foundations, although there was also
extraordinary growth in giving to foundations in 2017. Foundations may be the most likely
beneficiary of transitory giving (in this instance, making of gifts that otherwise might be made in
2018 into 2017). Other recipient organizations that saw larger declines in donations were public
society benefit (an umbrel a for many types of organizations),80 religious organizations, and
educational organizations. Beneficiary organizations that saw an increase in donations or smal er
declines were international affairs, environment and animals, arts, and health.81 Again, it is
difficult to determine any causal relationships; for example, religious giving has been declining as
a share of total giving for many years.
Bequests
Empirical estimates of the price elasticities for bequests are also reported in Appendix A. These
estimates also vary significantly, although the evidence suggests they are more responsive to
taxes than inter-vivos contributions. In the following calculations, an elasticity of -2.0 is used.
It is difficult to determine the effect of the recent changes in the exemption in the 2017 act
because the share of bequests reported on estate tax returns differs substantial y from the share
represented by taxable returns (30%) and the share represented by al returns (53%). Some returns
that would have been taxable without the charitable deduction but are not taxable without the
deduction benefit from the incentive. In addition, a much smal er share of taxable estate returns
would fal below the exemption for taxable returns. Assuming that the share with an estate of less
than $20 mil ion would no longer be subject to the estate tax, that share is 92% for taxable

79 T his analysis attributes the charitable giving amounts according to the methodology presented in Patterns of
Household Charitable Giving by Incom e Group, 2005 , Prepared for Google by the Center on Philanthropy at Indiana
University, Summer 2007, at https://philanthropy.iupui.edu/files/research/
giving_focused_on_meeting_needs_of_the_poor_july_2007.pdf .
80 Public society benefit includes civil rights, social action, and advocacy; community improvement and capacity
building; philanthropy, voluntarism, and grant making foundations (including donor -advised funds); science and
technology; social science; and public and societal benefit such as public policy research, government and public
administration, transportation systems, public utilities, including telecommunications, consumer
rights/education/protection, military and veterans organizations, and financial institutions.
81 T he Center on Philanthropy at Indiana University, Giving USA 2019.
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returns, indicating 2.4% of bequests would lose the tax incentive (8% of 30%). For al estates the
share is 74%, which suggests 13.8% of bequests would lose the benefit of the charitable
deduction (26% of 53%).
The tax price increase for those estates affected by the TCJA is 66%. Such a large price increase
does not permit the use of a point elasticity estimate, so the underlying exponential formula is
used, leading to a reduction in affected estates of 64% with an elasticity of -2.0.82 These
calculations produce a range of percentage reductions in total bequests of 1.5% (0.64 times 2.4%)
to 8.8% (0.64 times 13.8%). Bequests were $39.7 bil ion in 2017,83 suggesting a decline in
bequests ranging from $0.6 bil ion to $3.5 bil ion. This same methodology can be used to
estimate the effect on bequests of either eliminating the charitable deduction or repealing the
estate tax, which would result in a further reduction of $7.0 bil ion to $10.0 bil ion.84 These
estimates depend, however, on the elasticity. Excluding the one study that found no effect, the
smal est elasticity estimated (-0.6) would result in an effect 30% smal er, and the largest (-3.0)
would result in an effect 22% larger than these amounts.
The National Council on Nonprofits has estimated a decline in bequests of $4 bil ion as a result of
the 2017 tax revision.85 Because bequests vary considerably from year to year (and can be
affected by very wealthy decedents as wel as economic factors), examining changes from the
previous year provides a limited amount of information.
Corporate Giving
As noted above, some theories of corporate giving suggest that taxes do not affect a decision that
is made for purposes of maximizing profits by generating advertising and goodwil . Empirical
studies of the response are limited, dated, and quite mixed, including findings of large responses,
smal responses, no responses, and responses that are positive rather than negative.86 Al of these
findings make estimated effects on giving responses difficult to determine, although the corporate
rate cut in 2017 substantial y increased the tax price (by 22%) to the extent giving provided a
benefit to managers. Corporate giving constituted the smal est share of total giving, amounting to
$20.1 bil ion in 2018; therefore, the effects of the TCJA on overal corporate giving are likely
smal .
Policy Options
Some proposals to revise the tax treatment of charitable giving are aimed at increasing the
incentive to give or changing the distribution of incentives across donors, while others are aimed
at what may be perceived as abuses.

82 T he formula for the ratio of post -tax change contributions to prior ones is (1-t)^E, where E is the absolute value of the
price elasticity. T he specific calculation with a 40% tax rate is 0.6^2, which is 0.36, indicating a decline in contributions
of 64%.
83 T he Center on Philanthropy at Indiana University, Giving USA 2019.
84 T he $7.0 billion is 0.30 times 0.92 times 0.64 times $39.7 billion, and the $10.0 billion is 0.53 times 0.74 times 0.64
times $39.7 billion.
85 National Council of Nonprofits, “Tax Cuts and Jobs Act, H.R. 1: Nonprofit Analysis of the Final T ax Law,” April 5,
2018, at https://www.councilofnonprofits.org/sites/default/files/documents/tax-bill-summary-chart.pdf.
86 T his literature is summed up in Robert Carroll and David Joulfaian, “T axes and Corporate Giving to Charity,” Public
Finance Review, vol. 33, no. 3 (May 2005), pp. 300 -317. T he Carroll and Joulfaian study found very high elasticities,
but they were based on personal tax rates and included Subchapter S Corporations that are taxed as partnerships under
the personal tax. T hey also did not control for transitory effects.
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Options Related to Tax Incentives for Charitable Giving
Deduction for Nonitemizers
As mentioned previously, tax incentives for giving are largely confined to higher-income
households because these taxpayers are more likely to itemize their deductions (largely
deductions for state and local taxes, mortgage interest, and charitable contributions), which tend
to rise with income, or choose the standard deduction of a fixed dollar amount. This concentration
of tax benefits on higher-income individuals also tends to favor the charities they favor, such as
those pertaining to health, education, and the arts, while disfavoring religion and charities aimed
at human services. The concentration of charitable giving incentives to those with higher incomes
has increased as a result of the 2017 tax revision.
Nonitemizers were able to claim a deduction for charitable contributions in the early 1980s. A
temporary charitable deduction for itemizers was adopted in the Economic Recovery Tax Act of
1981 (P.L. 97-34), initial y al owing a deduction for 25% of contributions in 1982-1984, 50% in
1985, and a full deduction in 1986, with the provision then expiring. The deduction was also
capped in the first three years, at $100 in the first two years and $300 in the third year.
Over time, policymakers have continued to propose policies that would extend charitable tax
benefits to al taxpayers, either by al owing a deduction for nonitemizers (often termed an above-
the-line deduction, reflecting its position on the tax form) or by replacing the itemized deduction
with a credit available to al taxpayers.87 In the 116th Congress, Representative Danny Davis has
introduced legislation that would al ow an above-the-line deduction for charitable giving (H.R.
1260), as have Representatives Henry Cuel ar and Christopher Smith (H.R. 651) and
Representative Seth Moulton (H.R. 6408 and H.R. 6424). Bil s to al ow a nonitemizer deduction
equal to a third of the standard deduction were introduced by Representative Mark Walker (H.R.
5293 and H.R. 6490). Earlier proposals for an above-the-line charitable deduction include the
Universal Charitable Giving Act of 2017 (H.R. 3988/S. 2123) in the 115th Congress, introduced
by Representative Mark Walker in the House and Senator James Lankford in the Senate.88
Senator Lankford introduced an amendment to the CARES Act (S.Amdt. 1566) to al ow a
nonitemizer deduction of one-third of the standard deduction (over $8,000 for a joint return), but
that amendment was not adopted and the CARES Act deduction was capped at $300. Senator
Lankford and cosponsors have introduced the Universal Giving Pandemic Response Act (S.
4032), which would al ow this above-the-line deduction for tax years 2019 and 2020, with
taxpayers al owed to file an amended return for 2019. This bil would not provide an incentive for
additional 2019 charitable contributions, since the period for donations has already passed.
Different models have been used to estimate the budgetary cost of a nonitemizer deduction. The
Penn-Wharton Budget Model estimated that the effect of the $300 nonitemizer deduction in the
CARES Act, which cost $2 bil ion, would have a negligible effect on charitable giving (of $110
mil ion) because of its smal cap and because many taxpayers may not be aware of the
provision.89

87 Under this proposal, the deduction would be limited to one-third of the standard deduction that was allowed at that
time.
88 Under this proposal, the deduction would be limited to one-third of the standard deduction that was allowed at that
time.
89 Penn-Wharton Budget Model, New Charitable Deduction in the CARES Act: Budgetary and Distributional Analysis,
March 27, 2020, https://budgetmodel.wharton.upenn.edu/issues/2020/3/27/charitable-deduction-the-cares-act
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Using the Penn-Wharton Budget Model, the Indiana University Lil y Family School of
Philanthropy estimates a nonitemizer deduction would cost between $14.4 bil ion and $16.1
bil ion in 2020 (see Table 5 for a summary of the revenue and charitable giving effects of the
policy options evaluated in the study).90 Building on the Open Source Policy Center’s Tax
Calculator, Bril and Choe estimated such a change would cost $25.8 bil ion at 2018 levels (the
revenue and charitable giving effects of the policy options in the study are summarized in Table
6).91
These studies also estimated the effect of the proposals on charitable giving. One concern is
whether further encouraging charitable contributions is an efficient way of achieving the benefits
such charitable giving might bring. In general, if the price elasticity of giving is less than 1.0, the
induced charitable giving wil be less than the revenue cost, and more charitable giving could be
obtained by making direct expenditures. If the elasticity is greater than 1.0, charitable giving wil
be greater than the revenue loss. (This argument also applies to existing charitable deductions.)
Table 5. Revenue Loss and Induced Charitable Giving in Various Policy Scenarios:
Indiana University Study/Penn-Wharton Budget Model
(in bil ions of dol ars)

Estimated Increase in
Projected Revenue Loss
Charitable Giving
2020
2020-2029
2020
2020-2029

Nonitemizer Deduction

Static
-14.4
-169.3
—
—

Low Elasticity
-15.0
-176.6
8.4
77.5

High Elasticity
-15.5
-183.1
16.8
154.7

Income-Based Elasticity
-16.1
-192.0
24.9
253.0
Enhanced Nonitemizer Deduction

Static
-15.9
-191.0
—
—

Low Elasticity
-16.6
-200.5
9.2
86.1

High Elasticity
-17.3
-208.7
18.3
172.2

Income-Based Elasticity
-18.2
-221.2
27.7
287.6
Nonrefundable 25% Nonitemizer Credit

Static
-20.6
-238.4
—
—

90 T he range in estimates reflects different assumptions about how taxpayers respond to tax incentives for charitable
giving. T en-year revenue estimates are also given to provide additional information on longer -term costs and potential
for induced charitable giving. Note that this period includes years after 2025, when most of the individual provisions of
the T CJA expire, and more taxpayers would be itemizing deductions and thus claiming the charitable deduction. See
T he Indiana University Lilly School of Ph ilanthropy, Charitable Giving Tax Incentives: Estim ating Changes in
Charitable Dollars and Num ber of Donors Resulting From Five Policy Proposals, 2019, at http://hdl.handle.net/1805/
19515; and John Ricco and Mariko Paulson, Policy Options to Increase Charitable Giving Using Tax Incentives,
Wharton School at the University of Pennsylvania, June 24, 2019, at https://budgetmodel.wharton.upenn.edu/issues/
2019/6/24/policy-options-to-increase-charitable-giving-using-tax-incentives.
91 Alex Brill and Derick Choe, Charitable Giving and the Tax Cuts and Jobs Act, AEI Economic Perspectives, June
2018, at http://www.aei.org/publication/charitable-giving-and-the-tax-cuts-and-jobs-act/.
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Estimated Increase in
Projected Revenue Loss
Charitable Giving
2020
2020-2029
2020
2020-2029

Low Elasticity
-21.9
-254.0
11.4
104.0

High Elasticity
-23.2
-266.9
22.8
208.0

Income-Based Elasticity
-24.6
-285.9
35.1
349.2
Nonitemizer Deduction with Cap

Static
-13.1
-154.4
—
—

Low Elasticity
-13.8
-163.4
5.6
52.3

High Elasticity
-14.4
-171.1
11.2
104.5

Income-Based Elasticity
-14.8
-179.6
16.6
172.3
Nonitemizer Deduction with AGI Floor

Static
-11.7
-138.5
—
—

Low Elasticity
-12.3
-145.1
7.9
73.2

High Elasticity
-12.8
-151.0
15.9
146.4

Income-Based Elasticity
-13.4
-159.4
23.7
241.0
Source: The Indiana University Lil y School of Philanthropy, Charitable Giving Tax Incentives: Estimating Changes in
Charitable Dol ars and Number of Donors Resulting From Five Policy Proposals, 2019, at http://hdl.handle.net/1805/
19515; and John Ricco and Mariko Paulson, Policy Options to Increase Charitable Giving Using Tax Incentives,
Wharton School at the University of Pennsylvania, June 24, 2019, at https://budgetmodel.wharton.upenn.edu/
issues/2019/6/24/policy-options-to-increase-charitable-giving-using-tax-incentives.
Notes: The “low” tax price elasticity is -0.5. The “high” tax price elasticity is -1.0. The “income-based” elasticity
is -2.236 for tax units under $50,000 in 2017 AGI, -1.49 under $100,000, and -1.182 over $100,000.
Bril and Choe used a unitary elasticity (an elasticity of -1.0) in their study, but found a smal er
increase in charitable contributions ($21.5 bil ion) than the lost revenue (the absolute value of lost
revenue) when evaluating an above-the-line or nonitemizer deduction. Presumably some
additional revenue beyond the amount of induced giving is lost because some itemizers would
move to the standard deduction, causing a loss of revenue unrelated to the charitable incentive.
(Even very-high-income individuals who had no mortgages might be better off moving to a
standard deduction because of the $10,000 cap on state and local tax deductions; the standard
deduction for a married couple is $24,000).
Table 6. Options to Increase Charitable Giving and the Associated Revenue Loss:
Brill and Choe/Open Source Policy Center’s Tax Calculator
(in bil ions of dol ars)
Projected
Estimated Increase In
Revenue Loss,
Charitable Giving,

2018
2018
Nonitemizer Deduction
-25.8
21.5
Nonitemizer Deduction with Floor
-14.6
19.1
Nonrefundable 25% Credit for Al
-31.1
23.3
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Projected
Estimated Increase In
Revenue Loss,
Charitable Giving,

2018
2018
Nonrefundable 25% Credit with Floor
-15.4
20.0
Source: Alex Bril and Derick Choe, Charitable Giving and the Tax Cuts and Jobs Act, AEI Economic Perspectives,
June 2018, at http://www.aei.org/publication/charitable-giving-and-the-tax-cuts-and-jobs-act/.
Note: The price elasticity of charitable giving is assumed to be -1.0.
The Indiana University study looks at giving under a “low-elasticity” scenario (an elasticity of -
0.5), a high-elasticity scenario (an elasticity of -1.0), and an income-based elasticity scenario. The
increase in giving in 2020 under each scenario was $8.4 bil ion, $16.8 bil ion, and $24.9 bil ion,
respectively. Under the low-elasticity scenario, an above-the-line deduction for giving would
reduce revenues by $15.0 bil ion in 2020, while generating $8.4 bil ion in additional charitable
giving. Under the high-elasticity scenario, the revenue reduction in 2020 is estimated at $15.5
bil ion, with additional charitable giving estimated at $16.8 bil ion.92 In the income-based
elasticity scenario, the revenue reduction in 2020 is $16.1 bil ion, while additional charitable
giving is $24.9 bil ion in 2020.93 Thus, if elasticities are less than 1.0, as the survey of studies
accounting for transitional effects in Appendix A indicates, charitable deductions would likely be
smal er than the revenue cost.
In evaluating the trade-off between revenue loss and charitable contributions, the charitable
contributions from an above-the-line deduction would tend to go to charitable causes favored by
lower- and middle-income taxpayers. These include religion, youth and family services,
community improvement, and directly providing basic necessities. If the desired objective is to
increase resources devoted to these activities, additional resources could be provided directly by
the federal government, instead of induced via charitable giving incentives (which result in a loss
in federal revenue).
The Indiana University study also looks at a scenario that would provide an enhanced nonitemizer
deduction. In this policy, single filers with less than $20,000 in income ($40,000 for joint filers)
would be able to deduct 200% of their charitable contributions. Taxpayers making less than
$40,000 ($80,000 for joint filers) would be able to deduct 150% of their contributions. Under this
policy, revenue losses would be between $15.9 bil ion and $18.2 bil ion in 2020, depending on
the elasticities assumed. Charitable giving would increase by an estimated $9.2 bil ion to $27.7
bil ion, with the rise in giving greater than the loss in revenue in both the high-elasticity and
income-based-elasticity case.94 This policy would tend to encourage additional giving by lower-
income taxpayers.

92 Looking at 2020, under the high-elasticity scenario, a nonitemizer deduction would appear to generate more
charitable giving than is lost in revenue. However, over the 10 -year budget window, lost revenue would exceed induced
charitable giving.
93 T hese elasticities were -2.236 for incomes less than $50,000, -1.49 for incomes of $50,000 to $100,000, and -1.182
for incomes above $100,000. T hese elasticities were independently estimated from the Panel Study on Income
Dynamics, and showed higher elasticities for lower incomes. T hese estimates were much la rger than those reported in
Appe ndix A and probably reflected the lack of control for transitory effects. One study of the 1986 data on
nonitemizers estimated that the price response for nonitemizers was less than for itemizers, although this study was not
able to address transitory effects. See Christopher M. Duquette. “Is Charitable Giving by Non -Itemizers Responsive to
T ax Incentives? New Evidence,” National Tax Journal, vol. 52, no. 2 (June 1989), pp. 195 -206.
94 Over the 10-year budget window, the rise in charitable giving would exceed the revenue loss only in the case where
income-based elasticities were assumed under the enhanced nonitemizer deduction policy option.
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Adding a deduction for nonitemizers (or replacing the existing itemized deduction with a credit,
as discussed below) would increase the complexity of the tax code for the individuals now taking
the standard deduction. Charitable deductions require various types of substantiation and
recordkeeping, and it is difficult for the IRS to monitor these contributions, especial y with
respect to smal contributions where audit and investigation by the IRS are not cost effective.
Charitable deductions are among the items with no third-party reporting, which makes
enforcement more costly and difficult.
Al owing a charitable deduction or credit to be taken regardless of whether a taxpayer itemizes or
takes the standard deduction would further increase the share of taxpayers who take the standard
deduction rather than itemizing deductions. The remaining major itemized deductions are state
and local taxes and mortgage interest. Such a move would, for example, reduce the incentives for
owner-occupied housing even further than the effects of the 2017 tax revision, which some might
see as desirable and others as undesirable.
A Tax Credit for Charitable Giving
An alternative to a nonitemizer deduction is to provide for a nonrefundable tax credit. It could
either be as a substitute for or an addition to the current itemized deduction. Both the Indiana
University and Bril and Choe studies estimate revenue effects and increased charitable
contributions for a 25% credit. Indiana University considers a credit as an addition to the current
itemized deduction, with an estimated revenue cost in 2020 of $20.6 bil ion to $24.6 bil ion,
depending which elasticity is assumed.95 Bril and Choe consider a 25% credit that replaces the
current itemized deduction, costing $31.1 bil ion at 2018 levels.
Bril and Choe estimate the credit would (at their assumed -1.0 price elasticity) increase
charitable giving by $23.3 bil ion. The Indiana University study estimates increased contributions
in 2020 of $35.1 bil ion for the higher income-based elasticities, $22.8 bil ion for the elasticity of
-1.0, and $11.4 bil ion for an elasticity of -0.5.
The induced contributions associated with the elasticities of -1.0 and -0.5 are smal er than the
revenue losses and raises the basic concerns about the tradeoff between revenue loss and
contributions. If the credit replaced the itemized deduction, it would shift more of the incentive to
lower- and middle-income individuals by creating the same tax price for al taxpayers and thus to
their preferred beneficiaries. Expanding the scope of the benefit for charitable contributions
would, like a deduction, tend to increase complexity in compliance and tax administration, as
wel as potential y reduce the incentive for home ownership by reducing the number of itemizers.
If a credit substituted for the itemized deduction, it would be possible to set the credit so as not to
lose revenue while equalizing the treatment of the charitable contribution incentive across
taxpayers. For example, in a 2011 report by the Congressional Budget Office (CBO), an option of
a 15% credit was considered, which, compared to a 25% credit, would have cost $20.4 bil ion less
in 2006 dollars, and a larger amount at current income levels.96
In the 116th Congress, Senator Jeanne Shaheen and Representative Chris Pappas introduced the
Supporting Charitable Institutions Act of 2020 (S. 3525/H.R. 6325), which would al ow a new tax
credit for cash contributions made during 2020 to organizations supporting coronavirus disease

95 T he 10-year revenue estimates in the Indiana University study include years 2026 through 2029, after most of the
T CJA’s individual income changes expire. T he cost of a 25% charitable giving credit for nonitemizers is lower in these
years, when more taxpayers would be itemizing deductions.
96 Congressional Budget Office, Options for Changing the Tax Treatment of Charitable Giving , May 2011, at
https://www.cbo.gov/sites/default/files/112th-congress-2011-2012/reports/charitablecontributions.pdf.
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relief efforts. The credit is limited to 24% of contributions, not to exceed $4,000 for individuals
($6,000 for heads of household or $8,000 for married taxpayers filing jointly).
Modifying Charitable Giving Incentives: Caps and Floors
Some proposals would cap expanded deductions. For example, the Universal Charitable Giving
Act of 2017 (H.R. 3988/S. 2123) in the 115th Congress would have limited the nonitemizer
deduction to be one-third of the standard deduction that was available at that time. When a
nonitemizer deduction was available in the early 1980s, it was limited to a certain percentage of
contributions in the first three years of the temporary policy. Proposals have also been made to
provide a floor, either under nonitemizer deductions or al deductions.
Caps
A cap for a deduction that provides a desired incentive could be inefficient, as the cap eliminates
the incentive for those with giving above the cap while stil resulting in a revenue loss.
Nevertheless, a cap may be useful for a deduction for nonitemizers or a credit that does not
replace the itemized deduction, as it would reduce the number of current itemizers who would
switch to the standard deduction. The Indiana University study finds that imposing a cap of
$8,000 for a joint return (and $4,000 for a single return) applied only to the nonitemizer
deductions would have, depending on what giving elasticity is assumed, a revenue cost in the
range of $5.6 bil ion to $16.6 bil ion in 2020 (less than the $8.4 bil ion to $24.9 bil ion estimate
for a nonitemizer deduction without a cap). This cap is generous compared the one proposed in
the Universal Charitable Giving Act of 2017 (one-third of the standard deduction in 2017, which
was $12,700 for a married couple and $6,350 for a single return). The $8,000/$4,000 cap is about
a third of the current standard deduction under the new law ($24,000 for married couples and
$12,000 for singles in 2018).
The Indiana University study found an itemized deduction with this cap would increase charitable
giving in 2020 by $16.6 bil ion assuming their high income-based elasticities, $11.2 bil ion at the
elasticity of -1.0, and $5.6 bil ion at the elasticity of -0.5. With this cap, induced contributions are
less than the revenue loss in al but the high income-based elasticity case (induced contributions
are less than the revenue loss in al cases over the 10-year period).
Caps for itemized deductions could also be set at a certain rate, instead of a fixed dollar amount.
For example, the Obama Administration’s FY2010 and FY2011 budgets proposed limiting the
value of itemized deductions to 28% (a rate below the top individual income tax rate at the time
of 35%).97 By limiting the amount of the deduction, the value of the charitable tax incentive
would decrease for taxpayers in tax brackets above 28%. However, the subsidy would become
more equal across taxpayers in different tax brackets. The policy would also raise additional
revenue and result in a decline in charitable giving.
Floors
Floors would al ow charitable deductions in excess of a given amount, either a dollar amount or a
percentage of income. As opposed to a cap, a floor could increase the efficiency of the incentive;
to the extent that contributions are above the floor in the absence of the incentive, the floor does
not affect the incentive at the margin, even though it reduces revenue loss. The floor would also,
if applied only to the nonitemizer deduction, reduce the attractiveness of this deduc tion and thus

97 CRS Report R40518, Charitable Contributions: The Itemized Deduction Cap and Other FY2011 Budget Options, by
Jane G. Gravelle and Donald J. Marples.
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reduce the number of taxpayers who shift to a standard deduction. A 2% floor was included in the
2014 major tax reform proposal by then-chairman of the House Ways and Means Committee
Dave Camp (the Tax Reform Act of 2014, H.R. 1 in the 113th Congress).
The Bril and Choe study estimated the revenue effect of a nonitemizer above-the-line deduction
and the 25% credit with a floor of $1,000 for married couples and $500 for singles. For the
above-the-line deduction, they found a substantial fal in the revenue loss from $25.8 bil ion to
$14.6 bil ion, but a relatively smal effect on charitable contributions (at their -1.0 price
elasticity), which were estimated to fal from $21.5 bil ion to $19.1 bil ion. Thus, at their unitary
price elasticity, the induced contributions were expected to be larger than the revenue loss.
Looking at the same dollar floor for the 25% credit, the revenue loss was reduced even more,
from $31.1 bil ion to $15.4 bil ion, presumably because the floor would apply to existing
itemizers as wel . The induced contributions (at the -1.0 price elasticity) fel from $23.3 bil ion to
$20.0 bil ion.
The Indiana University study examined a modified percentage-of-income floor where
contributions below 1% of AGI would receive a 50% deduction and the remainder a full
deduction. The estimates of revenue loss and induced giving depend on the elasticity that is
assumed. In the high-elasticity case, giving in 2020 would increase by $23.7 bil ion, while the
revenue loss would be $13.4 bil ion. At the elasticity of -1.0, induced giving would be $15.9
bil ion, while the revenue loss would be $12.8 bil ion. With an elasticity of -0.5, induced giving
would be $7.9 bil ion, with a revenue loss of $12.3 bil ion.
In addition to potential y creating more “bang for the buck,” a floor (as long as it completely
excluded contributions below a dollar amount or percentage of income) would simplify
administration and compliance by having no deductions for smal contributions.
In considering a percentage of income versus a dollar floor, a dollar floor would be more
transparent and serve the purpose of excluding deductions for minor contribution amounts, but
the percentage-of-income floor would be more efficient because it could provide a meaningful
floor for wealthy taxpayers.
Charitable Giving and Disaster Relief
As noted previously, in the past Congress has passed legislation eliminating the percentage of
AGI limit for charitable contributions made for disaster-relief purposes following certain disaster
events.98 Senator Tim Scott and Representative Diaz-Balart have introduced legislation that
would temporarily increase the limitation on charitable contributions made for relief efforts
related to Hurricane Dorian (S. 2476/H.R. 4415). Other proposals in the 116th Congress would
temporarily increase charitable giving limits following disaster events general y (the Tax Relief
and Expedited Assistance for Disasters Act of 2019 [TREAD Act] [H.R. 3287], introduced by
Representative Tom Rice); for hurricanes Florence and Michael and the California wildfires of
2018 (the Hurricanes Florence and Michael and California Wildfire Tax Relief Act [S. 2544],
introduced by Senator Richard Burr); or for disasters in 2019 (the Disaster Tax Relief Act of
2019, introduced by Representative Adrian Smith [H.R. 2284] and Senator Deb Fischer [S.
1133]). Other legislation introduced earlier in the 116th Congress would have increased the
limitation on charitable contributions made for relief efforts for disasters in 2018 (the 2018
Natural Disasters Tax Relief Act [H.R. 1148], introduced by Representative Rice). The
enhancement of charitable incentives in the CARES Act could also be viewed as a form of broad

98 Additional discussion related to tax incentives for charitable giving to support disaster relief can be found in CRS
Report R45864, Tax Policy and Disaster Recovery, by Molly F. Sherlock and Jennifer T eefy .
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disaster relief as much of the need for additional charitable giving was the result of economic
contraction brought on by the coronavirus pandemic.
Gifts of Appreciated Property
Gifts of appreciated property, as noted above, receive a double benefit: a deduction for the fair
market value and an exclusion of the gain from tax. These benefits also create an incentive to
overvalue a gift so as to maximize the value of the charitable deduction. Charities may also incur
costs to maintain or sel the property and may not even want the contribution but wil accept it so
as not to antagonize a wealthy donor.
Several options could be considered for gifts of appreciated property. First, only contributions
made in cash could be deductible, which would force the taxpayer to sel the property and then
donate the proceeds to charity (thus incurring a capital gains tax and valuing the deduction at
market value). A similar approach would be to al ow a deduction equal to the basis in the property
(usual y, the amount original y paid for it). Taxpayers might stil donate property with little
appreciation, but that approach would also eliminate the double benefit and address the valuation
issue. One difficulty with this option is that it would require either a loss of deduction or limit the
optimal recipient in cases where the property was particularly desired to be used by the recipient,
such as a contribution of a work of art to a museum.
An option that would eliminate the double benefit but not address the valuation problem would be
to al ow the contribution of appreciated property but to tax the appreciation as if it were a realized
capital gain. This approach would address the problem of donating an artwork to a museum.
The Tax Reform Act of 2014 (H.R. 1) had provisions aimed at limiting the problems attached to
valuation. The deduction would have been limited to basis except for property related to the
purpose of the charitable institution, certain property receiving special treatment such as
conservation easements, and publicly traded stock as long as it was no more than 10% of the total
shares.
Another option is to al ow a deduction only for the amount that the charity rec eives from a sale.
One analyst has suggested (presumably to address property used by the charity) that the deduction
be limited to the lesser of the benefit from sale, or the donor’s tax basis plus one-half of the
untaxed appreciation.99
There are proposals to address concerns about inflated values of easements that may be associated
with the use of syndicated partnerships to donate conservation easements. One proposal would
limit the value of these deductions to 2.5 times the partnership adjusted basis (the Charitable
Conservation Easement Program Integrity Act of 2019, introduced by Senator Steve Daines [S.
170] and Representative Mike Thompson [H.R. 1992]).100
Charitable Mileage Rate
Charitable organizations can reimburse volunteers (without income tax consequences) for miles
driven for charitable purposes. Nontaxable reimbursements by charities can be made up to the
charitable mileage rate of 14 cents per mile. This rate was set in 1997, and has not been adjusted
since. The IRS has the authority to adjust the business mileage rate (58 cents per mile for 2019)

99 Roger Colinvaux, “Fixing Philanthropy: A Vision for Charitable Giving and Refo rm,” Tax Notes, March 4, 2019, pp.
1007-1015.
100 CRS Insight IN11141, Charitable Conservation Contributions: Potential for Abuse?, by Molly F. Sherlock.
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and the medical and moving expense mileage rate (20 cents per mile for 2019).101 The charitable
mileage reimbursement rate is set in statute.
Legislation in the 116th Congress, the CHARITY Act of 2019 (S. 1475/H.R. 3259), would align
the charitable mileage reimbursement with the rate used for medical and moving expense
purposes. Other legislation, the Volunteer Driver Tax Appreciation Act of 2019 (H.R. 2072),
introduced by Representative Collin Peterson, and the Nonprofit Relief Act of 2019 (H.R. 3323),
introduced by Representatives Carolyn Maloney and James Clyburn, propose increasing the
charitable rate to match the business mileage rate. The Delivering Elderly Lunches and Increasing
Volunteer Engagement and Reimbursements (DELIVER) Act of 2019, introduced by
Representatives Joseph Morel e and Ron Wright (H.R. 2928) and Senators Angus King and John
Cornyn (S. 1603), would raise the standard charitable mileage rate for delivery of meals to
homebound individuals who are elderly, disabled, frail, or at-risk.
Increasing the charitable mileage reimbursement rate could encourage charitable activity, such as
meal delivery, and help adjust for the increase in the cost of automobile use since the late 1990s.
A concern with increasing the charitable mileage rate, particularly to the business mileage rate, is
that a higher rate could overcompensate volunteers for their automobile-related expenses (i.e.,
al ow taxpayers to take a deduction that exceeds actual driving/vehicle use costs).
Proposals Relating to Tax-Exempt Organizations
Some proposals relate to the treatment of the charitable organizations.102 Certain types of tax-
exempt or charitable organizations may have specific or additional requirements.
DAFs, Endowments, and Foundations (Nonactive Charities)
Several policy options are related to entities that receive charitable contributions, but do not
immediately use these contributions for a charitable purpose. These entities include DAFs,
supporting organizations, and university endowments. One option could be to subject these
organizations to rules similar to private foundations and Type III Non-FISO supporting
organizations, and require a minimum payout. Another option is to require al funds in a DAF
account to be distributed within five to seven years.
A proposal has been made to not al ow foundations to make donations to DAFs, or require that if
they do, the funds be spent immediately and with full disclosure. This option might address the
concern that DAFs can be used to avoid transparency that is otherwise required of private
foundations. The New York State Bar Association (NYSBA) Tax Section, commenting on an
advance version of Treasury Notice 2017-73, addressing certain issues relating to DAFs,
suggested that foundations could give to DAFs if the DAFs agree to distribute the funds
immediately. The NYSBA also recommends applying the same rules as applied to foundations in
cases where a pledge is made and DAF distributions satisfy it.103

101 Internal Revenue Service, “IRS Issues Standard Mileage Rates for 2019,” press release, December 14, 2018, at
https://www.irs.gov/newsroom/irs-issues-standard-mileage-rates-for-2019.
102 A number of these proposals are discussed in Colinvaux, “Fixing Philanthropy.”
103 See New York Bar Association T ax Section, Report on Notice 2017-73, February 28, 2018, at
http://www.nysba.org/workarea/DownloadAsset.aspx?id=80453. IRS Advance Notice 2017-73 dealt with situations
where original donors received a benefit from funds contributed through DAFs (such as tickets to events), where the
DAF contribution satisfied a pledge, and the ability of organizatio ns that would otherwise be private foundations to
qualify as public charities by having large donors make their contributions through DAFs. Notice 2017 -73 is at
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A proposal to encourage greater use of DAFs would al ow IRA rollover contributions to charity to
go to DAFs (generally these contributions must go to public charities but cannot go to supporting
organizations or DAFs). This proposal was included in the Charities Helping Americans
Regularly Throughout the Year (CHARITY) Act of 2019, introduced by Senator John Thune (S.
1475) and Representative Earl Blumenhauer (H.R. 3259).
Several policy options that relate to university endowments might be considered. These could
include payout requirements, or measures to address offshore sheltering of earnings from the
UBIT. Another proposal is to modify or repeal the tax on endowment net investment income
enacted in the 2017 tax revision.104 The Reducing Excessive Debt and Unfair Costs of Education
(REDUCE) Act of 2018 (H.R. 5916) would have imposed an excise tax on undistributed required
payouts from college and university endowments, with payout requirements designed to direct
support lower- and middle-income students. Also in the 115th Congress, the Don't Tax Higher
Education Act (H.R. 5220) would have repealed the endowment excise tax.
Tax-Exempt Hospitals
A nonprofit hospital applying for, or seeking to maintain, tax-exempt status as a “charitable”
organization under IRC Section 501(c)(3) must meet the “community benefit standard.” Broadly,
and as previously discussed, this standard requires the hospital to show that it has provided
benefits that promote the health of a broad class of persons to the community. One way hospitals
can demonstrate that they have met the community benefit standard is by providing charity
care.105 The potential for increased coverage of health care for low-income individuals in the
Affordable Care Act may have reduced the need for charity care and has raised questions about
the need for the tax benefits for nonprofit hospitals.106 Disal owing tax-exempt bond financing
was an option discussed during debates leading up to the 2017 tax revision. In addition, concerns
have been raised about the enforcement of the community benefit standard.107
UBIT Provisions Adopted in the 2017 Tax Revision
Some proposals reconsider the UBIT provisions adopted in the 2017 tax revision (P.L. 115-97).108
One proposal would eliminate the separate business calculation of the UBIT (see the Nonprofit
Tax Relief Act of 2019; H.R. 3323). Requiring that unrelated business taxable income be
computed separately for each trade or business activity treats nonprofits differently from for-
profit businesses, and it complicates administration and compliance because of the difficulties of
classifying businesses. This provision may have been motivated by concerns about improper

https://www.irs.gov/pub/irs-drop/n-17-73.pdf.
104 See CRS Report R44293, College and University Endowments: Overview and Tax Policy Options, by Molly F.
Sherlock et al.
105 See CRS In Focus IF10918, Hospital Charity Care and Related Reporting Requirements Under Medicare and the
Internal Revenue Code, by Marco A. Villagrana et al.
106 T here remain, however, questions about the hospitals’ provision of ch arity care. Some have argued that hospitals set
artificially high prices, and when they lower the price for uninsured patients it is considered charity care. Dan
Diamond, “GOP Fails to Pressure Hospitals on Community Benefits,” Politico, December 21, 2017, at
https://www.politico.com/story/2017/12/21/gop-congress-tax-reform-nonprofit -hospitals-252841, quoting Laurel
Prussing, former mayor of Urbana, Illinois.
107 See Dan Diamond, “GOP Fails to Pressure Hospitals on Community Benefits,” Politico, December 21, 2017, at
https://www.politico.com/story/2017/12/21/gop-congress-tax-reform-nonprofit -hospitals-252841; T ravis F. Jackson,
“Congressional Scrutiny of Charitable Hospitals Likely to Return,” Tax Notes, July 2018, pp. 45-50.
108 T hese provisions affecting UBIT are discussed in Colinvaux, “Fixing Philanthropy.”
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al ocation of expenses across 501(c)(3) colleges’ and universities’ unrelated business activities. A
2013 IRS compliance report found that some colleges and universities were misal ocating
expenses between nonprofit and for-profit activities (which was already disal owed) and
underpaying UBIT.109 The Preserve Charities and Houses of Worship Act (S. 1282), introduced by
Senator Ted Cruz, and the Nonprofits Support Act (H.R. 513), introduced by Representative
Michael Conaway, also propose repealing this provision.
The change in the 2017 tax revision that subjected transportation benefits for employees to the
UBIT was criticized and ultimately repealed in the Taxpayer Certainty and Disaster Tax Relief
Act, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 (P.L. 116-94).
This change resulted in a revenue loss of $1.9 bil ion for FY2020-FY2029.110
Administrative Reforms
Several proposals have been made to provide administrative reforms. One such proposal is to
require electronic fil ing of 990 forms. This proposal is included in the CHARITY Act of 2019.
Another proposal, considering the task of monitoring a large number of charities, would be to
provide more funds to the IRS or even to create a separate regulatory authority, given that the IRS
is a revenue collection agency, not a nonprofit regulator. For that reason the IRS has few
incentives to devote resources to enforcing the rules regarding nonprofits.111

109 Internal Revenue Service, College and Universities Compliance Project Final Report, May 2, 2013, at
http://www.irs.gov/pub/irs-tege/CUCP_FinalRpt_050213.pdf.
110 Joint Committee on T axation, Estimated Budget Effects of the Revenue Provisions Contained in the House
Am endm ent to the Senate Am endment to H.R. 1865, the Further Consolidated Appropriations Act, 2020 (Rules
Com m ittee Print 116-44), JCX-54-19R, December 17, 2019.
111 T hese administrative reforms are discussed in Colinvaux, “Fixing Philanthropy.”
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Appendix A. Evidence on Elasticities for Charitable
Giving
Lifetime (Inter-Vivos) Giving
Table A-1 reports the results of seven different studies (with a number of specifications that
attempt to measure both permanent and transitory effects of changes in price and income on
charitable giving).112 Two of these studies (Bakija 2000, and Bakija and McClel and 2002) also
provided some critiques of other studies and some sensitivity analysis that is useful in
understanding the studies and their strengths and weaknesses. Results that are not statistical y
significant have an asterisk. Lack of statistical significance means that, although a relationship
that most closely fits the data is estimated, there is such deviation from that relationship in the
observations that there is not a clear causal effect. Estimates that are not statistical y significant
are usual y, although not always, associated with very smal values that are close to zero.
While the studies differ in methodology, as discussed below, one difference is the type of data
used. Tax return data are available for general use only to researchers in the Department of the
Treasury and the Joint Committee on Taxation. (The Congressional Budget Office [CBO] has
access to taxpayer data but must have uses approved by the Joint Committee on Taxation.) The
data on giving and tax rates are probably superior in these studies and contain a larger sample of
high-income taxpayers; however, such research cannot be replicated or subjected to any
sensitivity analysis by others. Other researchers have to use public-use data constructed from
other sources. Of the seven studies in Table A-1 four (Randolph 1995, Auten et al. 2002, and
Bakija and Heim 2008 and 2011) used taxpayer data, and al had as authors or coauthors a
Treasury employee. The Bakija and McClel and (2002) study, with a CBO coauthor, included a
sensitivity analysis for the Auten et al. study, but used a public-use file, not the tax data. The other
two studies also used a public-use file.
Many of the studies listed below report multiple results using different specifications and, in
general, an attempt is made to report the results that appear to be preferred by the author(s). In the
case of the Bakija and Heim (2011) report, the preferred estimate for the permanent elasticity is
associated with variations in the state tax rate, and estimates from other specifications (such as
al owing coefficients to vary across incomes) are even larger (see the discussion of that study).
For comparison with this table and to il ustrate the importance of dealing with transitory effects,
Bakija and McClel and (2002), who presented a range of strategies, also estimated a standard
pooled cross-section estimate, the type that had been done prior to the evidence shown by the

112 T he studies are William Randolph, “Dynamic Income, Progressive T axes, and the T iming of Charitable
Contributions,” The Journal of Political Economy, vol. 103 (August 1995), pp. 709-738; Kevin Stanton Barrett, Anya
M. McGuirk, and Richard Steinberg, “Further Evidence on the Dynamic Impact of T axes on Charitable Giving,”
National Tax Journal, vol. 50 (June 1997), pp. 321-334; Jon Bakija, “ Distinguishing T ransitory and Permanent Price
Elasticities of Charitable Giving with Pre-Announced Changes in the T ax Law,” October 2000, Mimeo; Gerald E.
Auten, Sieg Holger, and Charles T . Clotfelter, “Charitable Giving, Income and T axes: An Analysis of Panel Data,”
Am erican Econom ic Review, vol. 92 (March 2002), pp. 371-382; Jon Bakija and Rob McClelland, “ T iming vs. Long-
Run Charitable Giving Behavior: Reconciling Divergent Approaches and Estimates,” December 2004, Mimeo; Jon
Bakija and Bradley Heim, Does Charitable Giving Respond to Incentives and Incom e? Dynamic Panel Estim ates
Accounting for Predictable Changes in Taxation , National Bureau of Economic Research Working Paper 14237,
August 2008; Jon Bakija and Bradley Heim, “How Does Charitable Giving Respond to Incentives and Income: New
Estimates From Panel Data,” National Tax Journal, vol. 64, no. 2, part 2 (June 2011).
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1980s tax cuts that did not deal with transitory effects. That estimate showed results that are
typical of past cross-sectional studies, a price elasticity of -1.22 and an income elasticity of 0.84.
In general, the theoretical expectation is that transitory price effects are large and transitory
income effects are smal (due to the permanent income hypothesis or consumption smoothing).
Price elasticities and income elasticities in cross-section studies are a combination of permanent
and transitory effects. Thus, a lower permanent price elasticity and a higher permanent income
elasticity would be expected than those observed in cross-section studies. Only two studies,
Randolph (1995) and Bakija and Heim (2008) find these results, and the Bakija and Heim income
elasticity is only marginal y higher.
Table A-1. Elasticities from Studies that Accounted for Transitory Effects
Permanent
Transitory
Permanent
Transitory
Price
Price
Income
Income
Study
Elasticity
Elasticity
Elasticity
Elasticity
Randolph (1995): Giving Weighted
-0.51
-1.55
1.14
0.58
Unweighted
-0.08*
-2.27
1.30
0.09
Barrett et al. (1997)
-0.47
-1.18
0.495
—
Bakija (2000)
-0.29*
-1.15
0.44
0.79
Auten et al. (2002): 1980-1983 Data
-0.79
-0.52
0.40
0.45
1980-1987 Data
-1.26
-0.61
0.49
0.49
1980-1992 Data
-1.26
-0.40
0.87
0.29
Bakija and McClel and (2002): Basic
-0.24
-0.40
0.72
0.02*
Using Tax Reform Instruments
-0.29*
-0.56
0.27*
-0.06*
Basic with Lagged Variables
-0.75
-0.50
0.40
0.14
Tax Reform Instruments, Lagged Variables
-0.74
-0.66
0.04*
0.11*
Auten et al. (2002) Method; with Foresight
-0.64
-0.34
0.55
0.12
Bakija and Heim (2008): Aggregate
-0.70
-0.47
0.91
0.25
<$100,000
-0.147*
-0.500
0.104
0.301
>$200,000
-0.654
-0.589
0.783
0.271
>$500,000
-0.483
0.730
0.608
0.301
>$1,000,000
-0.493*
0.557
0.916
0.320
Bakija and Heim (2011): State Tax Rate -
1 . 1 6 -0.85
0.51
0.34
Federal Tax Rate
-0.35
-0.61
0.51
0.34
Federal and State Combined Tax Rate
-0.61
-0.60
0.60
0.32
Source: See text for discussion of studies.
Randolph (1995) was the first study to focus on the problem of transitory effects, and the
technique used a 10-year panel that treated deviations from average income (and the resultant
deviations from tax rates) as transitory. Permanent tax rates varied through changes in the tax law
(and years around the 1981 and 1986 changes were excluded). This study al owed a long period
of time to be transitory; therefore, it is possible that some of the permanent price and income
effects are reflected in the transitory estimates, as the author acknowledges. Other studies tend to
al ow much shorter-term transitory effects, which might go too far in the other direction.
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Randolph’s model al owed the price elasticity to vary by the share of giving, and he reports two
measures: one unweighted with a price elasticity of -0.08, which is not statistical y significant,
and one weighted more heavily toward large contributors, which Randolph appears to prefer. The
results in the Randolph study are consistent in general magnitude with the expectations based on
the aggregate data discussed in the text: a smal permanent price elasticity, a large transitory price
elasticity, an income elasticity of around 1.0, and a smal er transitory income elasticity.
Bakija (2000), who among other things replicates the Randolph results with public -use data,
argues that the second weight, which yields an insignificant price elasticity, is more appropriate
(although he criticizes other aspects of the model). In his own replications with public-use files he
finds effects similar to Randolph’s unweighted results but suggests the appropriate measure of the
aggregate elasticity evaluated over the full sample. These results are similar to Randolph’s
unweighted results: he also finds similar results for the elasticity when confined to incomes over
$100,000.113 Based on the specification he prefers and his replication, this approach basical y
finds no evidence of a permanent price response.
The Randolph study differs from the other studies in some important ways. By using average
income over the panel as permanent income and estimating transitory effects based on deviations,
he al ows a broad scope for shifting over time, whereas other studies use shorter periods. This
choice may be influenced by experience with capital gains realizations studies, where using short
periods to control for transitory effects was not successful in producing reasonable results.114
Barrett et al. (1997) al ow limited intertemporal shifting variation and also a lagged value of
giving to deal with adjustment. They focus particularly on how quickly adjustment takes place,
which they find to be very rapid. Their panel also does not include tax rate changes after 1986,
which are an important exogenous source of variation. They find a lower price elasticity than a
standard cross section, but also a smal income elasticity. Like the other studies, this study
includes individual fixed effects that are designed to control for heterogeneity among taxpayers
(e.g., a taste for philanthropy, religiosity). (Randolph could not employ individual fixed effects
because he used an average over the entire panel for permanent income, which was then
indistinguishable from a fixed effect.) One drawback, however, of fixed effects, as Barrett et al.
acknowledge, is that the fixed effect could also be picking up permanent income effects, and so
suppressing the value of that elasticity. The Barrett et al. study also al owed a more limited scope
for intertemporal substitution.
Auten et al. (2002) also use fixed effects and more limited intertemporal substitutions. As pointed
out by Bakija and McClel and (2002), they also did not address known changes in the tax law
(that is, 1986 was a higher-tax year than 1987, even though the high realizations in 1989 were
associated with a preannounced drop in tax rates), which would tend to bias their price elasticities
upward. This was a particular problem for panels that included 1986, and Bakija and McClel and
reestimated their model using a public data file and found a much lower elasticity.
Bakija (2000) mainly contrasted his model with Randolph’s by using legislated transitory changes
in tax rates as the way to determine the transitory component of taxes. Bakija and McClel and

113 He finds a positive but insignificant permanent price elasticity of 0.322, a transitory price elasticity of -1.202, a
permanent income elasticity of 1.188, and a transitory income elasticity of 0.195. For incomes over $100,000 he finds
an insignificant permanent price elasticity of -0.155, a transitory price elasticity of -0.744, a permanent income
elasticity of 0.611, and a transitory income elast icity of 0.145.
114 For a discussion of some of these issues, see two reprinted CRS reports by Jane G. Gravelle: “Can A Capital Gains
T ax Cut Pay for Itself,” Tax Notes, vol. 48 (July 9, 1990), pp. 209-219; and “Limits to Capital Gains Feedback
Effects,” Tax Notes, vol. 51 (April 22, 1991), pp. 363-371. As these two reports taken together show, studies of capital
gains realizations with short intertemporal effects continued to produce the high elasticities that appeared much larger
than reasonable, given that realizations cannot exceed accruals.
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base their analysis off Auten et al., and while they introduce a number of innovations, their main
changes are to model expected tax changes and introduce adjustment lags.
Bakija and Heim (2008) use a panel approach with tax data, with fixed effects, with more limited
substitution frameworks than Randolph, and with attention to expectations of tax changes. They
characterize intertemporal substitution mainly through those preannounced tax changes and al ow
shorter substitution periods. The main source of determining the price elasticity is the difference
in response across taxpayers who had different changes in their tax rates. They also examine
separate estimates for higher-income individuals. They obtain different estimates depending on
how they deal with fixed time effects (variables meant to control for changes that affect al
observations in a given year), which cannot be introduced into the higher income levels because
they are so closely correlated across the sample with legislated changes in tax rates. The first one
they reported, which did not use fixed time effects but incorporated a time trend, is included in
the assessment.115
Bakija and Heim (2011) is similar to their 2008 study but reports effects for using the state tax
rate alone, the federal tax rate alone, and the combined federal and state rate. The authors believe
the state tax rate provides a more reliable measure of response because state tax rates al ow a
comparison of people with the same income but living in different states, and thus is less likely to
reflect the effects of omitted variables. The federal rate or combined rate (where the federal rate
would dominate) captures the effects of changes in income and the effects of exogenous federal
tax changes. The study also reports effects when coefficients of nonprice variables (i.e., other than
the tax variables) differ across income, finding higher permanent price elasticities (a permanent
elasticity of -1.53). When the study al ows price elasticities to vary across income, there is some
indication that elasticities increase with higher incomes, but some estimates are statistical y
insignificant (including estimates for some high-income individuals). Statistical y significant
estimates of -1.19 are found for the $200,000-$500,000 class and of -1.71 for the over $1 mil ion
class; but estimates for the other classes were not statistical y significant.
Ultimately no study is perfect, and thus it is difficult to choose a central elasticity from among
these. Excluding the high elasticities in Auten et al. for the panel that covers 1986 and that are
likely overstated, the elasticities range from essential y 0 to 1.2. It seems likely that the
unweighted Randolph estimate may be biased downward, but some others may be biased upward
because of fixed effects or short periods for intertemporal substitution. In addition, the response
to the 1986 tax revision suggests a higher transitory price elasticity than permanent price
elasticity, and intuition would suggest that charitable giving is a luxury that would tend to have an
income elasticity above 1.0. Only the Randolph study finds effects consistent with these
expectations, suggesting an elasticity of around 0.5.
Table A-2 reports the results of seven different studies that attempt to estimate both the price and
wealth elasticities of charitable bequests. Although these studies find a diverse set of estimated
elasticities, they reach two common general conclusions: (1) the price elasticity dominates the
wealth elasticity and (2) charitable bequests, general y, respond elastical y to changes in the tax
price of bequests. The exception to this second conclusion is provided by Greene and McClel and
(2001) and is likely explained by their focus on the portion of the tax price related to the
exemption level.

115 When they used time dummies for the higher-income sample, they got results much like cross-section results,
suggesting they were identifying effects in a similar way.
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Table A-2. Elasticities from Charitable Bequests
Study
Price Elasticity
Wealth Elasticity
Bakija, Gale, and Slemrod (2003)
-2.14
1.56
Joulfaian (2000)
-2.26
1.2
Boskin (1976)
-1.2
0.7
Clotfelter (1985)
-2.79
0.42
Greene and McClel and (2001)
-0.6
0.37
Barthold and Plotnick (1984)
No effect
0
Joulfaian (1991)
-3.0
0.23
Sources: Jon M. Bakija, Wil iam G. Gale, and Joel B. Slemrod, “Charitable Bequests and Taxes on Inheritances
and Estates: Aggregate Evidence from across States and Time,” Papers and Proceedings of the Annual Meeting of the
American Economic Association, vol. 93, no. 2 (May 2003); David Joulfaian, “Estate Taxes and Charitable Bequests
by the Wealthy,” vol. 53, no. 2 (September 2000); Michael J. Boskin, “Estate Taxation and Charitable Bequests,”
Journal of Public Economics, vol. 5, no. 1-2 (January/February 1976); Charles T. Clotfelter, Federal Tax Policy and
Charitable Giving (Chicago: University of Chicago Press, 1985); Pamela Greene and Robert McClel and, “Taxes
and Charitable Giving,” National Tax Journal, vol. 54, no. 3 (September 2001); Thomas Barthold and Robert
Plotnick, “Estate Taxation and Other Determinants of Charitable Bequests,” National Tax Journal, vol. 37, no. 2
(June 1984); and David Joulfaian, “Charitable Bequests and Estate Taxes,” National Tax Journal, vol. 44, no. 2 (June
1991).
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Appendix B. History of the Tax Treatment of
Charitable Contributions and Organizations
Charitable Contributions
The charitable deduction was added by passage of the War Revenue Act of 1917 (P.L. 65-50).
Senator Henry Hollis, the sponsor, argued that high wartime tax rates would absorb the surplus
funds of wealthy taxpayers, which were general y contributed to charitable organizations.116 The
deduction was original y limited to individuals. A deduction for trusts and estates was added in
the Revenue Act of 1918 (P.L. 65-254), and a deduction for corporations was added in the
Revenue Act of 1936 (P.L. 74-740).
The deduction al owed in 1917 was limited to 15% of taxable income. Most of the revisions in
the early tax law related to this limit. In 1944, it was changed to 15% of adjusted gross income.
The corporate deduction was limited to 5% of income when introduced. In 1952, the individual
limit was increased to 20%. The limit was increased to 30% in 1954, but the additional 10% had
to go to specified charities (churches or religious orders, educational institutions, and hospitals).
Thus, the 20% limit was retained for foundations and other charities. A carryover of unused
deductions for two years was first al owed for corporations in 1954. In 1964, the carryover was
increased to five years and extended to individuals.
The percentage limit on individual contributions to charities was increased to 50% by the Tax
Reform Act of 1969 (P.L. 91-172) but was restricted to 30% for gifts of appreciated property. The
percentage limit on corporate charitable contributions was increased to 10% of taxable income in
the Economic Recovery Tax Act of 1981 (P.L. 97-34). The limit on contributions to private
foundations was increased to 30% for cash contributions by the Deficit Reduction Act of 1984
(P.L. 98-369).
The Economic Recovery Tax Act of 1981 also al owed a temporary deduction for nonitemizers,
but this provision was not extended by the Tax Reform Act of 1986 (P.L. 99-514).
Concerns about abuse led to provisions requiring greater substantiation of gifts. The Deficit
Reduction Act of 1984 (P.L. 98-369) required written substantiation of contributions in excess of
$2,000, and the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) lowered that amount
to $250. The American Jobs Creation Act of 2004 (P.L. 108-357) increased reporting
requirements for donors of noncash gifts.
The Pension Protection Act of 2006 (P.L. 109-280) provided for some temporary additional
benefits (part of the “extenders”) that were effective through 2007 at that time. The 2006 act also
added restrictions on DAFs and certain supporting organizations. The 2006 law also tightened
rules governing charitable giving in certain areas, including gifts of taxidermy, contributions of
clothing and household items, contributions of fractional interests in tangible personal property,
and recordkeeping and substantiation requirements for certain charitable contributions.

116 A history of the charitable deduction can be found in Vada Waters Lindsey, “T he Charitable Contribution
Deduction: A Historical Review and a Look to the Future,” Nebraska Law Review, vol. 81 (2003), pp. 1056-1096; and
Nicolas J. Duquette, “Founders’ Fortunes and Philanthropy: A History of the U.S. Char itable-Contribution Deduction,”
Business History Review, 2019, pp. 1-32. A history of the contributions of property can be found in Roger Colinvaux,
“Charitable Contributions of Property: A Broken System Reimagined,” Harvard Journal on Legislation, vol. 50
(2013), pp. 263-269. A history of the individual charitable contribution provision can be found at CRS Report R46178,
The Charitable Deduction for Individuals: A Brief Legislative History, by Margot L. Crandall-Hollick.
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Temporary charitable giving incentives were further extended through 2009 by the Economic
Emergency Economic Stabilization Act of 2008 (P.L. 110-343), enacted in October 2008, and
through 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act
of 2010 (P.L. 111-312). Some provisions were extended through 2013 by the American Taxpayer
Relief Act (P.L. 112-240). These provisions were made permanent in the Consolidated
Appropriations Act (P.L. 114-113).
The 2017 tax change, P.L. 115-97, popularly known as the Tax Cuts and Jobs Act, increased the
percentage-of-income limit for contributions of cash to public charities to 60% and eliminated the
phase-out of itemized deductions on a temporary basis (through 2025).
Charitable Organizations
Corporations or associations organized for religious, charitable, or educational purposes were
defined as exempt from tax in the original 1913 law establishing the income tax.117
These organizations could earn exempt income from activities related to their mission and also
from unrelated business activities whose profits were used for the exempt purpose. The Revenue
Act of 1950 (P.L. 81-814) established the unrelated business income tax (UBIT) on the income
from commercial activities (other than on churches). The UBIT also applied to rents from real
estate sale-leaseback arrangements that relied on debt finance.
The Tax Reform Act of 1969 (P.L. 91-172) defined private foundations, established a series of
restrictions on them, imposed a 4% excise tax on their investment income (to share the cost of
enforcement), and established a minimum payout requirement of 6% of assets to avoid a penalty.
The 1969 legislation also expanded the UBIT to al tax-exempt organizations (including
churches), and applied it to al debt-financed income. The Tax Reform Act of 1976 (P.L. 94-455)
changed the minimum distribution requirement to 5% of assets. The Revenue Act of 1978 (P.L.
95-600) reduced the net investment income excise tax to 2%. The Deficit Reduction Act of 1984
(P.L. 98-369) exempted certain operating foundations from the excise tax and reduced the tax to
1% for foundations making improvements in their distributions. The 2017 tax reduction (P.L. 115-
97) imposed an excise tax of 1.4% on investment income of certain private colleges and
universities (excluding smal er ones), added certain fringe benefits (such as parking) to the UBIT
base (repealed in P.L. 116-94), and required UBIT to be calculated separately for each business
activity.

Author Information

Jane G. Gravelle
Molly F. Sherlock
Senior Specialist in Economic Policy
Specialist in Public Finance

Donald J. Marples

Specialist in Public Finance

117 A detailed history of the treatment of the tax-exempt sector through 2007 can be found in Paul Arnsberger, Melissa
Ludlum, Margaret Riley, and Mark Stanton, “ A History of the T ax Exempt Sector: An SOI Perspective,” Statistics of
Incom e Bulletin (Winter 2008), at https://www.irs.gov/pub/irs-soi/tehistory.pdf.
Congressional Research Service
47

Tax Issues Relating to Charitable Contributions and Organizations

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Economic Policy

Report Type: CRS Report

Source: CRSReports.Congress.gov, EveryCRSReport.com

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