The Charitable Deduction for Individuals: A Brief Legislative History

January 14, 2020 – June 26, 2020 R46178

The Charitable Deduction for Individuals:
June 26, 2020
A Brief Legislative History
Margot L. Crandall-Hollick
This report provides a brief history of the major legislative changes to the charitable deduction
Acting Section Research
that have occurred over the past 100 years, focusing on changes to the amount that taxpayers
Manager
could deduct. Over the past 100 years, Congress has generally increased the amount that eligible

taxpayers can deduct for their charitable donations. These changes are summarized in the below
table.

As Congress has expanded the amount that can be deducted by those who claim the deduction, policymakers have debated
the deduction’s effectiveness at increasing charitable giving and the broader role of government subsidies for the
philanthropic sector—a discussion that continues to this day.
Major Legislative Changes to the Charitable Deduction for Individuals, 1917-Present
Year
Public Law
Legislative Changes
1917
P.L. 65-50
Enacted the charitable deduction for individuals. Applicable to contributions of cash or
gifts to organizations operated for religious, charitable, scientific, or education
purposes or for the prevention of cruelty to animals or children. Maximum al owable
deduction capped at 15% of taxable income.
1924
P.L. 68-176
Enacted the unlimited charitable deduction (UCD), which waived the 15% limitation
for taxpayers who made consistently large charitable contributions.
1944
P.L. 78-315
Changed income measure for limitation from taxable income to adjusted gross income
(AGI). Hence, charitable deduction was limited to 15% of AGI.
1952
P.L. 82-465
Increased charitable contribution limitation to 20% of AGI.
1954
P.L. 83-591
Increased charitable contribution limitation to 30% of AGI for donations to churches,
educational institutions, or hospitals.
(Donations to other organizations stil subject to the 20% AGI limit.)
1964
P.L. 88-272
Expanded the list of organizations for which taxpayers were subject to the 30% AGI
limitation to include most charitable organizations, except private nonoperating
foundations.
(Donations to private nonoperating foundations were stil subject to the 20% AGI limit.)
1969
P.L. 91-172
Phased out the UCD and increased the AGI limit to 50% of AGI for cash and ordinary
income contributions to charities.
(Gifts of appreciated property to public charities were stil subject to the 30% limitation. Gifts
to private nonoperating foundations [both of cash and appreciated property] were stil subject
to the 20% AGI limit.)
1981
P.L. 97-34
Enacted a temporary above-the-line charitable deduction for taxpayers who did not
itemize their deductions. This provision expired as scheduled at the end of 1986.
1984
P.L. 98-369
Increased the AGI limit to 30% for gifts of cash or ordinary income property to
donations made to private nonoperating foundations.
(Gifts of long-term capital gain property to private nonoperating foundations were stil subject
to the 20% of AGI limit.)
2017
P.L. 115-97
Temporarily increased the AGI limit to 60% for gifts of cash to charities for 2018-2025.
2020
P.L. 116-136
Created a temporary $300 above-the-line deduction for nonitemizers and temporarily
eliminated the 60% AGI limitation for cash donations to charities for 2020.
Source: CRS analysis of public laws and the Joint Committee on Taxation.

Congressional Research Service

The Charitable Deduction for Individuals: A Brief Legislative History

Introduction
This report provides a brief history of the major legislative changes to the charitable deduction for
individuals, from its enactment in 1917 through the recent temporary changes enacted in 2020.
Policymakers considering changes to this tax benefit may find it helpful to understand how this
benefit has evolved over the past 103 years. This report does not address al the legislative
changes made to this tax benefit, nor does it provide a broad overview of charitable giving in
general, charitable giving tax incentives, their economic effects, or policy options to modify
them. Those issues are discussed in CRS Report R45922, Tax Issues Relating to Charitable
Contributions and Organizations, by Jane G. Gravel e, Donald J. Marples, and Molly F. Sherlock,
and CRS In Focus IF11022, The Charitable Deduction for Individuals, by Margot L. Crandal -
Hollick and Molly F. Sherlock.
This report begins with a brief overview of the current charitable deduction for individuals. It
then describes major legislative changes made to the deduction from 1917 through the present
day, with the most recent changes being those made in 2020. For the purposes of this report,
major legislative changes include those that changed the amount that taxpayers could deduct. The
bil s summarized in this report do not include those that temporarily modified the charitable
deduction in response to a disaster.1 Laws that modified definitions2 or changed substantiation
requirements for taxpayers claiming the deduction are also general y excluded.3 This report wil
be updated as necessary to reflect future legislative changes.
Current Tax Benefit for Individual Charitable
Donations
Under current law, individuals who itemize their deductions can—subject to certain limitations—
deduct charitable donations to qualifying organizations. (Individuals who take the standard
deduction may not deduct their charitable contributions.) Deductions that cannot be claimed in
the current tax year can be carried forward for up to five years, subject to certain limitations.
Types of Qualifying Organizations
Under current law, charitable contributions are tax deductible when made to qualifying Section
501(c)(3) organizations, governmental units, veterans’ organizations, fraternal organizations, and
cemetery companies. A Section 501(c)(3) organization is either a public charity or private
foundation.4

1 For an overview of some recent charitable giving incentives for disasters, see CRS Report R45864, Tax Policy and
Disaster Recovery, by Molly F. Sherlock and Jennifer T eefy .
2 For example, in 1934, §23(o)(2) of the Revenue Act of 1934 (P.L. 73 -216) included a provision that prohibited a
deduction for contributions made to organizations whose activities were substantially composed of attempting to
influence legislation.
3 For example, the Pension Protection Act of 2006 (P.L. 109-280) included a provision that requires donors to keep
reliable written records of their charitable contributions. For contributions of at least $250 in value, the donor has to
obtain a contemporaneous written acknowledgment from the organization. Additional requirements apply if the
contribution is of high-value property. In addition, under the law taxpayers are penalized for substantial valuation
misstatements and substantial estate or gift tax valuation understatements.
4 Joint Committee on T axation, Present Law and Background Relating to the Federal Tax Treatment of Charitable
Contributions, October 14, 2011, JCX-55-11, p. 13.
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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.5 Most private foundations—91% of al private foundations
in 20156—primarily make grants to other charitable organizations and to individuals. These
foundations are referred to as nonoperating foundations. Foundations that directly operate their
own charitable programs are referred to as operating foundations.
In contrast, public charities tend to have broad public support and provide charitable services
directly to beneficiaries.7 Public charities include 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.”8
Types of Donations
Tax-deductible donations to qualifying organizations can be in the form of cash, securities, or
property. Properties or securities held for more than a year are often referred to as long-term
capital gain properties. Properties or securities held for less than a year are often referred to as
short-term capital gain properties. (For more information on general valuation rules of noncash
property, see Appendix B.) Depending on (1) the type of property donated and (2) the type of
qualifying organization that receives the donations, there are limitations on the total dollar
amount that the taxpayer can deduct, as il ustrated in Table 1. The limitations are defined as a
percentage of the taxpayer’s adjusted gross income (AGI).9

5 For more information, see Joint Committee on T axation, Present Law and Background Relating to the Federal Tax
Treatm ent of Charitable Contributions, October 14, 2011, JCX-55-11, and CRS Report 96-264, Frequently Asked
Questions About Tax-Exem pt Organizations.
6 Internal Revenue Service, SOI Tax Stats—Domestic Private Foundation and Charitable Trust Statistics, T able 1.
Domestic Private Foundations: Number and Selected Financial Data, by T ype, https://www.irs.gov/statistics/soi-tax-
stats-domestic-private-foundation-and-charitable-trust-statistics.
7 §501(c)(3) organizations are presumed to be private foundations and, if they want to be treated as public charities,
must generally tell the IRS how they qualify for public charity status based on the support and control tests found in
Internal Revenue Code (IRC) §509. Specifically, “[p]rivate foundations are defined under section 509(a) as all
organizations described in section 501(c)(3) other than an organization granted public charity status by reason of: (1)
being a specified type of organization (i.e., churches, schools, hospitals and certain other medical organizations, certain
organizations providing assistance to colleges and universities, or a governmen tal unit); (2) receiving a substantial part
of its support from governmental units or direct or indirect contributions from the general public; or (3) providing
support to another section 501(c)(3) entity that is not a private foundation.” Joint Committee on T axation, Description
of Present Law Relating to Section 501(c)(3) Organizations and Sum mary of Section 501(c)(3) -Related Provisions of
the Pension Protection Act of 2006 and Proposed Legislative Proposals, July 19, 2007, JCX-53-07, p. 8.
8 IRC §501(c)(3). For more information on the distinction between private foundations and public charities, see Joint
Committee on T axation, Historical Developm ent and Present law of the Federal Tax Exem ption for Charities and
Other Tax-Exem pt Organizations, April 19, 2005, JCX-29-05.
9 Adjusted gross income (AGI) is equal to a taxpayer’s total income (e.g., wages and salary income, investment
income, passthrough business income, farm income, rents and royalties) minus any above -the-line deductions for which
the taxpayer may be eligible. Above-the-line deductions are available to taxpayers regardless of whether they itemize
deductions or claim the standard deduction. For more information, see CRS Report RL30110, Federal Individual
Incom e Tax Term s: An Explanation, by Mark P. Keightley; CRS Report R45145, Overview of the Federal Tax System
in 2019, by Molly F. Sherlock and Donald J. Marples; and CRS Infographic IG10014, The U.S. Individual Incom e Tax
System , 2019, by Molly F. Sherlock.
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Table 1. AGI Limitations on Charitable Deduction for Individuals,
by Recipient Organization and Type of Property Donated
Type of Property
Limitation on the Amount a
Donated
Recipient Organization
Taxpayer Can Deducta
No AGI limitation for cash
donations in 2020 (i.e., 100% of
AGI limitation)
Public charity; private operating
Cash (or ordinary
60% of AGI (2018-2025 excluding
foundation; federal, state, local
income or short-term
government
2020) for cash donations
capital gain property)
50% of AGI for ordinary income
or short-term capital gain
property (and cash after 2025)
Private nonoperating foundationa
30% of AGI
Public charity; private operating
Long-term capital gain
30% of AGI
foundation
property
Private nonoperating foundationb
20% of AGI
Source: IRS Publication 526, Charitable Contributions and Internal Revenue Code (IRC) Section 170.
Notes: These are general rules, and there are numerous exceptions. AGI = adjusted gross income.
a. Contributions in excess of AGI can general y be carried forward up to five years.
b. This includes contributions to veterans’ organizations, fraternal societies, and nonprofit cemeteries. In
addition, not al nonoperating foundations are subject to the 30% limit.
History of the Charitable Deduction
Enacted in 1917, the deduction for charitable giving has changed over the years from “a short
statutory provision into a complex set of rules.”10 Below is a brief legislative history of the major
legislative changes to the charitable deduction that have occurred over more than 100 years,
focusing on changes to the amount that taxpayers could deduct.11 Table 2 summarizes these
changes.
Over the past 103 years, Congress has general y increased the amount that eligible taxpayers can
deduct for their charitable donation. The history of the charitable deduction il ustrates two main
policy objectives of this benefit. In its early years, the charitable deduction served to ensure that
resources given to charity would not be treated as income for the purposes of taxation. When the
charitable deduction was created, the income tax was in its early years, and applied only to the
very top of the income distribution. Thus, when the deduction was created, it could be viewed as
having been designed to “protect voluntary giving to public goods by rich industrialists who had
made their fortunes in business.”12 Today, many policymakers are focused on the charitable

10 Vada Waters Lindsey, “T he Charitable Contribution Deduction: A Historical Review and Look to the Future,”
Nebraska Law Review, vol. 81, no. 1056 (2003), p. 1057.
11 For a detailed summary of legislative changes to the charitable deduction, see Joint Committee on T axation, Present
Law and Background Relating to the Federal Tax Treatm ent of Charitable Contributions, October 14, 2011, JCX-55-
11; Vada Waters Lindsey, “T he Charitable Contribution Deduction: A Historical Review and Look to the Future,”
Nebraska Law Review, vol. 81, no. 1056 (2003); and John Y. T aggart, “ T he Charitable Deduction,” NYU Law Review,
vol. 26 (1970).
12 Nicolas J. Duquette, “Founders’ Fortunes and Philanthropy: A History of the U.S. Charitable-Contribution
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The Charitable Deduction for Individuals: A Brief Legislative History

deduction’s impact on giving, and its efficacy at inducing additional giving. As the deduction has
changed over time, policymakers have continued to discuss its effectiveness at increasing
charitable giving, the broader role of the government in the philanthropic sector, and reform
proposals—a discussion that continues to this day.13
Table 2. Summary of Major Legislative Changes
Made to the Charitable Deduction for Individuals, 1917-Present
Public
Year
Law
Legislative Changes
1917
P.L. 65-50
Enacted the charitable deduction for individuals. Applicable to contributions of cash or
gifts to organizations operated for religious, charitable, scientific, or education purposes
or for the prevention of cruelty to animals or children. Maximum al owable deduction
capped at 15% of taxable income.
1924
P.L. 68-176 Enacted the unlimited charitable deduction (UCD), which waived the 15% limitation for
taxpayers who made consistently large charitable contributions.
1944
P.L. 78-315 Changed the income measure for deduction limitation from taxable income to adjusted
gross income (AGI). Hence, charitable deduction was limited to 15% of AGI.
1952
P.L. 82-465 Increased charitable contribution limitation to 20% of AGI.
1954
P.L. 83-591 Increase charitable contribution limitation to 30% of AGI for donations to churches,
educational institutions, or hospitals.
(Donations to other organizations stil subject to the 20% AGI limit.)
1964
P.L. 88-272 Expanded the list of organizations for which taxpayers were subject to the 30% AGI
limitation to include most charitable organizations, except private nonoperating
foundations.
(Donations to private nonoperating foundations were stil subject to the 20% AGI limit.)
1969
P.L. 91-172 Phased out the UCD and increased the AGI limitation to 50% of AGI for cash and
ordinary income contributions to charities.
(Gifts of appreciated property to public charities were stil subject to the 30% limitation. Gifts to
private nonoperating foundations [both of cash and appreciated property] were stil subject to the
20% AGI limit.)
1981
P.L. 97-34
Enacted a temporary above-the-line charitable deduction for taxpayers who did not
itemize their deductions. This provision expired as scheduled at the end of 1986.
1984
P.L. 98-369 Increased the AGI limitation to 30% for gifts of cash or ordinary income property to
donations made to private nonoperating foundations.
(Gifts of long-term capital gain property to private nonoperating foundations were stil subject to
the 20% of AGI limit.)
2017
P.L. 115-97 Temporarily increased the AGI limit to 60% for gifts of cash to charities for 2018-2025.
2020
P.L. 116-
Created a temporary $300 above-the-line deduction for nonitemizers and temporarily
136
eliminated the 60% AGI limitation for cash donation to charities for 2020.
Source: CRS analysis of public laws and the Joint Committee on Taxation.

Deduction,” Business History Review, 2019, p. 2.
13 For example, see Senate Committee on Finance, Charities and Charitable Giving: Proposals for Reform , April 5,
2005, https://www.finance.senate.gov/hearings/-charities-and-charitable-giving-proposals-for-reform; Senate
Committee on Finance, Tax Reform Option: Incentives for Charitable Giving, October 8, 2011, S. HRG. 112–646. In
addition, see Congressional Budget Office, Curtail the Deduction for Charitable Giving, Options for Reducing the
Deficit: 2019 to 2028, December 13, 2018, https://www.cbo.gov/budget-options/2018/54790.
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The Charitable Deduction for Individuals: A Brief Legislative History

The War Income Tax Revenue Act of 1917
The charitable deduction was initial y enacted to offset the potential negative effects of increased
income taxes on charitable giving among the wealthy. The federal income tax,14 enacted four
years earlier as part of the Tariff Act of 1913, general y applied a top rate of 7% to only the
wealthiest Americans.15 The War Income Tax Revenue Act of 1917 (P.L. 65-50) increased federal
income tax rates—the top rate on individuals rose to 67% by 191716—as a way to pay for the
costs of the United States’ involvement in World War I. According to the Joint Committee on
Taxation (JCT),17 some
[l]egislators feared that the [tax] increase would reduce individuals’ income “surplus” from
which they supported charity. It was thought that a decrease in private support would create
an increased need for public support and even higher rates, so the [charitable] deduction
was offered as a compromise.
In short, some policymakers were concerned that without the charitable deduction, wealthy
taxpayers subjected to these higher tax rates would no longer contribute to charities or institutions
of higher education18 (or would contribute less). As Senator Hollis19 stated,
Usually people contribute to charities and educational objects out of their surplus. After
they have done everything else they want to do, after they have educated their children and
traveled and spent their money on everything they really want or think they want, then, if
they have something left over, they will contribute it to a college or to the Red Cross or for
some scientific purposes. Now when war comes and we impose these very heavy taxes on
income, that will be the first place where wealthy men will be tempted to economize,
namely in donations to charity. They will say, “Charity begins at home.” I should not favor
allowing any man to deduct all of his contributions to these objects from his income-tax
return, but if we limit it to 20 percent of his income we cannot be doing much harm to the
Public Treasury. Look at it this way: For every dollar that a man contributes for these public
charities, educational, scientific, or otherwise, the public gets 100 percent; it is all devoted
to that purpose.

14 While Congress had enacted an income tax in 1894, it was declared unconstitutional by the Supreme Court in 1895.
T he passage of the Sixteenth Amendment in February 1913 preceded passage of the income tax in October of that year.
For an overview of federal tax policy before 1913, see Sheldon D. Pollack, “Origins of the Modern Income T ax, 1894 -
1913,” The Tax Lawyer, vol. 66, no. 2 (Winter 2013).
15 According to the statute, the first $3,000 of income was exempt from taxation for an unmarried taxpayer, versus
$4,000 for a married taxpayer. In 2018 dollars, these amounts equal approximately $77,000 and $103,000. IRS data
from 1916 indicate that roughly three-quarters of all taxpayers at the time had income over $10,000. In 2018 dollars,
that amount equals roughly a quarter of a million dollars. See Revenue Act of 1913, Section II, C., 38 Stat. 114, 168;
the Bureau of Labor Statistics CPI Inflation Calculator https://www.bls.gov/data/inflation_calculator.htm; and T able 2
in T reasury Department United States Internal Revenue, Statistics of Incom e Com piled from the Returns for 1916
Under the Direction of the Com m issioner of Internal Revenue, T reasury Department Document No. 2817, 1918.
16 See Louis Alan T alley, “A Concise History of U.S. Federal T axation,” CRS Report for Congress 90-963, June 4,
1990 (available to congressional clients upon request). T he increase in marginal rates from 67% to 77% between 1917
and 1918 was a result of legislative changes made by the Revenue Act of 1918.
17 Joint Committee on T axation, Present Law and Background Relating to the Federal Tax Treatment of Charitable
Contributions, October 14, 2011, JCX-55-11, p. 4.
18 Ellen P. Aprill, “Churches, Politics, and the Charitable Contribution Deduction,” Boston College Law Review, vol.
42, no. 843 (July 2001), p. 849.
19 Senator Hollis, Congressional Record, vol. 55 (September 7, 1917), p. 6728.
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The Charitable Deduction for Individuals: A Brief Legislative History

And since “many believed charities could deliver social services better than the government,”20 a
drop in funding to charitable groups could have led to what many may have perceived as the
inefficient provision of social services and public goods by the government.
The law al owed a deduction for cash or gifts made to organizations operated for religious,
charitable, scientific, or education purposes, or for the prevention of cruelty to animals or
children.21 The overal amount that could be deducted was limited to 15% of net taxable income22
“to ensure that individual taxpayers could not eliminate their tax liability through the
deduction.”23
The Revenue Act of 1924
Several years later, Congress waived the 15% limitation for taxpayers who made consistently
large charitable donations. Specifical y, as a result of the Revenue Act of 1924 (P.L. 68-176),
taxpayers who donated “more than 90% of their net taxable income in the current year and in
each of the previous 10 years”24 were not subject to the 15% net taxable income limitation. This
provision was often referred to as the “Philadelphia nun” provision, after Mary Katherine Drexel,
a wealthy Philadelphia native who became a nun and underwrote her charitable activities from
her sizable inheritance.25 (In later years, it was also referred to as the “unlimited charitable
deduction” (UCD), or “unlimited charitable contribution deduction.”)
The Individual Income Tax Act of 1944
In 1944, Congress changed the limitation of the charitable deduction, which effectively increased
the maximum amount that taxpayers could deduct. As previously discussed, for most taxpayers
the charitable deduction was limited to 15% of net taxable income. The Individual Income Tax
Act of 1944 (P.L. 78-315) changed the measurement of this limitation from net taxable income to
adjusted gross income. Since AGI was general y larger than net taxable income, the maximum
amount that could be deducted in dollar terms was larger.26

20 Joint Committee on T axation, Present Law and Background Relating to the Federal Tax Treatment of Charitable
Contributions, October 14, 2011, JCX-55-11, p. 4.
21 IRC §501(c)(3). For additional information, see Vada Waters Lindsey, “T he Charitable Co ntribution Deduction: A
Historical Review and Look to the Future,” Nebraska Law Review, vol. 81, no. 1056 (2003), p. 1061.
22 Net taxable income was defined as gross income less allowable deductions except deductions for charitable
contributions. Net taxable income included capital gains. Vada Waters Lindsey, “ T he Charitable Contribution
Deduction: A Historical Review and Look to the Future,” Nebraska Law Review, vol. 81, no. 1056 (2003), p. 1062.
23 Joint Committee on T axation, Present Law and Background Relating to the Federal Tax Treatment of Charitable
Contributions, October 14, 2011, JCX-55-11, p. 4.
24 Joint Committee on T axation, Present Law and Background Relating to the Federal Tax Treatment of Charitable
Contributions, October 14, 2011, JCX-55-11, p. 4.
25 For more information, see Donald L. Barlett and James B. Steele, America: Who Really Pays the Taxes? (New York:
T ouchstone, 1994). Mary Katherine Drexel, who became a nun in 1889 and was referred to as Mother Drexel, was
reported to have used her $6 million inheritance to feed, educate, and clothe the poor. Even with the 15% charitable
deduction, a substantial portion of Mother Drexel’s income was subject to taxation. According to one source, the
Philadelphia nun provision was enacted “to free from income taxation one who is habitually contributing to benevolent
organizations amounts equaling virtually his entire income.” See J. S. Seidman, Seidman’s Legislative History of
Federal Incom e Tax Laws, 1938-1861 (1938), p. 734.
26 Vada Waters Lindsey, “T he Charitable Contribution Deduction: A Historical Review and Look to the Future,”
Nebraska Law Review, vol. 81, no. 1056 (2003), p. 1062.
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The Charitable Deduction for Individuals: A Brief Legislative History

This law also created a standard deduction, which some charities worried would result in a
reduction in charitable giving. The federal income tax, which before the early 1940s had been
levied only on high-income Americans, was expanded to apply to most working-age Americans
by the end of World War II. According to the IRS,27
In 1939 only about five percent of American workers paid income tax. The United States’
entrance into World War II changed that figure. The demands of war production put almost
every American back to work, but the expense of the war still exceeded tax-generated
revenue. President Roosevelt’s proposed Revenue Act of 1942 introduced the broadest and
most progressive tax in American history, the Victory Tax. Now, about 75 percent of
American workers would pay income taxes.
This expansion was driven by increasing needs for revenue to finance World War II expenses. As
more Americans became subject to the federal income tax, Congress became interested in
simplifying tax preparation for these new taxpayers, which motivated the creation of a standard
deduction. However, some worried that among those who used the standard deduction, there
would be a reduction in charitable giving since there would be no additional tax benefit for these
donations.
Others who advocated for the standard deduction contended that charitable contributions were
made for more than just financial reasons, and that especial y among lower- and middle-income
taxpayers (who were most likely to claim the standard deduction), the tax benefit for giving was
not an important factor in their decisions to give. According to Senator Walter George, Chairman
of the Senate Finance Committee,28
The committee does not believe that it can be proved that a tax incentive has been an
important factor in the making of such gifts by individuals having less than $5,000 of
adjusted gross income, and certainly the $500 standard deduction will not remove the tax
incentive for persons in the higher brackets, upon whom the charities depend for
contributions in substantial amounts.
Acts Increasing the AGI Limitations: 1952-1964
In 1952, as part of P.L. 82-465, Congress further increased the maximum amount taxpayers could
deduct, raising the limitation to 20% of AGI.
In 1954, Congress further increased the maximum deduction limit to 30% of AGI (P.L. 83-591)29
for any contributions to certain charitable organizations30—namely churches, educational
institutions, or hospitals.31 The 10% of additional AGI that taxpayers could deduct was al owable
only for contributions made to one of these eligible organizations. Deductible donations to other
eligible organizations were stil limited to 20% of AGI. One commentator noted that this was “the
first time that Congress encouraged certain charitable giving by granting more generous

27 See Internal Revenue Service, Understanding Taxes: Taxes in U.S. History, https://apps.irs.gov/app/
understandingT axes/teacher/whys_thm02_les05.jsp.
28 Senator George, Congressional Record, vol. 90 (May 19, 1944).
29 T he 1954 Internal Revenue Code (IRC) also renumbered the sections of the IRC, consolidating three sections of the
1939 code that pertained to charitable contributions in IRC §170. See U.S. Congress, House Committee on Ways and
Means, Report of the Com m ittee on Ways and Means House of Representatives to Accom pany H.R. 8399, A Bill to
Revise the Internal Revenue Laws of the United States, 83rd Cong., 2nd sess., March 9, 1954, p. 25.
30 T he Revenue Act of 1964 (P.L. 88-262) expanded the list of organizations that qualified for the 30% of AGI
limitation.
31 IRC of 1954 §170(b)(1)(A)(i)-(iii).
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The Charitable Deduction for Individuals: A Brief Legislative History

deductions for donations to certain charitable organizations than to others … [to] encourage
additional contributions to these organizations to offset their rising costs and modest returns on
endowment funds.”32
Congress expanded the list of organizations for which taxpayers could claim the 30% charitable
deduction as part of the Revenue Act of 1964 (P.L. 88-272)33 to include those that “receive a
substantial part of [their] support from a governmental unit … or from direct or indirect
contributions from the general public.”34 This effectively expanded the 30% AGI limitation to
most charitable organizations except private nonoperating foundations, which were stil subject to
the 20% limitation. In addition, the law included a provision that al owed for charitable
contributions in excess of the AGI limits to be carried forward up to five years. This five-year
carryforward al ows taxpayers who contributions exceed the AGI limit in a given year to stil
potential y receive a tax benefit from that contribution in future years.35
The Tax Reform of 1969
The Tax Reform of 1969 (P.L. 91-172) made several modifications to the charitable deduction,
including increasing the maximum AGI limits, phasing out the “Philadelphia nun” provision, and
creating certain limitations on donations of appreciated property. Many of the current parameters
of the charitable deduction for individuals were enacted as part of this law.
At the time that Congress was debating this legislation, there was increased concern that
taxpayers were using tax benefits like the charitable deduction to avoid paying income taxes.36 In
particular,
… the unlimited charitable contribution deduction (UCD) had become a sanctuary in which
many of the very wealthy were sheltered from the income tax. Prior to its repeal, the UCD
was being used by an estimated 100 taxpayers who generally had economic income in
excess of one million dollars. Since the UCD had a particular appeal to taxpayers having
large amounts of appreciated capital which could be donated to charitable institutions, with
the deduction based on the full market value rather than acquisition value, it not
surprisingly became a prime target for reformers.37
The Tax Reform Act of 1969 phased out the “Philadelphia nun provision” over five years while
also raising the maximum AGI limitation to 50% of AGI for donations of cash/short-term capital
gain property to public charities. The increase in the AGI limit was intended to “offset any
decreased incentive resulting from the repeal of the unlimited charitable contributions
deduction.”38 In addition, the increased AGI limitation was intended to

32 See Vada Waters Lindsey, “T he Charitable Contribution Deduction: A Historical Review and Look to the Future,”
Nebraska Law Review, vol. 81, no. 1056 (2003), p. 1063.
33 T he law also allowed taxpayers to carry over contributions in excess of the 30% limit for five years.
34 §209 of P.L. 88-272.
35 See §209(c) of P.L. 88-272. T axpayers electing the UCD were prohibited from using this five-year carryforward.
36 See Vada Waters Lindsey, “T he Charitable Contribution Deduction: A Historical Review and Look to the Future,”
Nebraska Law Review, vol. 81, no. 1056 (2003); and Donald L. Barlett and James B. Steele, Am erica: Who Really Pays
the Taxes? (New York: T ouchstone, 1994).
37 John Holt Myers and James W. Quiggle, “Charitable Contributions and Bequests by Individuals: T he Impact of the
T ax Reform Act,” Fordham Law Review, vol. 39, no. 2 (1970), p. 206.
38 Joint Committee on T axation, Summary of H.R. 13270, the Tax Reform Act of 1969, 91st Cong., 1st sess., August 18,
1969, p. 31.
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The Charitable Deduction for Individuals: A Brief Legislative History

[s]trengthen the incentive effect of the charitable contributions deduction for taxpayers.…
It is believed that the increase in the limitation will benefit taxpayers who donate
substantial portions of their income to charity and for whom the incentive effect of the
deduction is strong—primarily taxpayers in the middle- and upper-income ranges.39
The new 50% limitation general y did not apply to gifts of property that had appreciated in value
(e.g., capital gains), which were stil general y subject to the 30% AGI limitation. In addition, the
20% AGI limitation for donations to private nonoperating foundations (irrespective of the form of
the donation) was unchanged by the law.40
The Economic Recovery Act of 1981
Under the Economic Recovery Act of 1981 (P.L. 97-34), taxpayers who did not itemize their
deductions—i.e., those who took the standard deduction—could claim a new deduction for
charitable giving. This was a temporary provision that went into effect in 1982 and was scheduled
to expire at the end of 1986. (The law made no change to the itemized deduction for charitable
giving.) The amount that nonitemizers could deduct was limited to a percentage of the
contributed amount, subject in some years to an additional fixed dollar cap. In 1982 and 1983,
25% of contributions could be deducted, subject to a $100 cap. In 1984, the contribution
percentage remained unchanged (25%), but the dollar cap rose to $300. In 1985, 50% of
contributions could be deducted, and the contribution cap was eliminated, and in 1986 100% of
contributions could be deducted with no contribution cap.41 In addition to these caps, the amounts
that could be deducted were also subject to the AGI limits applicable to the itemized deduction
for charitable giving.
This temporary provision was opposed by the Department of the Treasury and some economists
at the time. For example, Donald Lubick, Assistant Secretary for Tax Policy at the Department of
the Treasury, argued that the main beneficiaries of the above-the-line deduction—lower- and
moderate-income taxpayers—would be less responsive than higher-income taxpayers in terms of
additional giving.42 Lubick argued that the above-the-line deduction “would go, in very large
measure, to those who are already giving with respect to their existing gifts,”43 providing them
with a windfal gain. He testified that an above-the-line deduction “would result in a large
revenue loss to the Treasury and little increased giving for the charities.”44

39 Joint Committee on T axation, Summary of H.R. 13270, the Tax Reform Act of 1969 , 91st Cong., 1st sess., August 18,
1969, p. 75.
40 Joint Committee on T axation, General Explanation of the Tax Reform Act of 1969 H.R. 13270, 91st Congress, Public
Law 91-172, prepared by Joint Committee on Internal Revenue T axation, 91 st Cong., December 3, 1970, s-16-70, pp.
75-81.
41 T his deduction was generally subject to the same eligibility rules as the itemized deduction for charitable giving.
Joint Committee on T axation, General Explanation of the Econom ic Recovery Act of 1981 , December 29, 1981, JCS-
71-81, p. 50.
42 Senate Committee on Finance, Statement of Donald C. Lubick, Assistant Secretary for Tax Policy, U.S. Treasury
Departm ent, Hearings Before the Subcommittee on T axation and Debt Management Generally of the Committee on
Finance on S. 219, 96th Cong., 2nd sess., January 30, 1980, p. 67.
43 Senate Committee on Finance, Statement of Donald C. Lubick, Assistant Secretary for Tax Policy, U.S. Treasury
Departm ent, Hearings Before the Subcommittee on T axation and Debt Management Generally of the Committee on
Finance on S. 219, 96th Cong., 2nd sess., January 30, 1980, p. 51.
44 Senate Committee on Finance, Statement of Donald C. Lubick, Assistant Secretary for Tax Policy, U.S. Treasury
Departm ent, Hearings Before the Subcommittee on T axation and Debt Management Generally of the Committee on
Finance on S. 219, 96th Cong., 2nd sess., January 30, 1980, p. 68.
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The Charitable Deduction for Individuals: A Brief Legislative History

But according to JCT,45 Congress disagreed.
The Congress believed that allowing a charitable deduction to nonitemizers stimulates
charitable giving, thereby providing more funds for worthwhile nonprofit organizations,
many of which provide services that otherwise might have to be provided by the Federal
government.
In addition, supporters of this provision believed that “[p]eople ought not be taxed on money they
contribute to charitable causes. This should be true whether or not their other economic actions
make it advantageous for them to itemize their deductions.”46
This tax benefit expired as scheduled at the end of 1986, and was not extended as part of the Tax
Reform Act of 1986. According to one commentator, “The big idea of the ’86 Act was to pare
away deductions and credits to broaden the base so you could bring the top rates down. And that
was a pretty powerful tide and the nonitemizer [deduction] just wasn’t strong enough to swim
against that current.”47
The Deficit Reduction Act of 1984
As part of the Deficit Reduction Act of 1984 (P.L. 98-369), Congress increased the contribution
limits on donations of cash or ordinary income property to private nonoperating foundations from
20% of AGI to 30% of AGI.48 (Donations of long-term capital gain property to private
nonoperating foundations remained limited to 20% of AGI.) In explaining this increase, JCT
noted the following:
Because as a general rule public charities and operating foundations directly carry out
charitable function and programs, expend charitable donations more promptly and have
public involvement, support, and supervision, the Congress concluded that a tax preference
for contributions to public charities and operating foundations [50% AGI limitation]
continues to be appropriate. However, acknowledging the substantial role of many grant
making foundations in private philanthropy, the Congress believed that the extent of this
tax preference should be narrowed by increasing to 30 percent the deduction limitation for
gifts by individuals of cash and ordinary-income property to nonoperating foundations.49
The Tax Cuts and Jobs Act of 2017
At the end of 2017, President Trump signed into law P.L. 115-97, often referred to as the Tax Cuts
and Jobs Act (TCJA),50 which made numerous changes to the federal income tax for individuals

45 Joint Committee on T axation, General Explanation of the Economic Recovery Act of 1981 , December 29, 1981, JCS-
71-81, p. 49.
46 Senate Committee on Finance, Statement of Hon. Barber B. Conable Jr. A Representative in Congress from the State
of New York, Hearings before the Subcommittee on T axation and Debt Management Generally of the Committee on
Finance on S. 219, 96th Cong., 2nd sess., January 30, 1980, p. 23.
47 Robert A. Boisture as quoted in Tax Notes. See Fred Stokeld, “Should Nonitemizers Get the Charitable Deduction,”
Tax Notes, July 15, 1997, p. 159.
48 T he law also extended the five-year carryover rule to include donations made to private nonoperating foundations.
49 Joint Committee on T axation, General Explanation of the Revenue Provisions of the Deficit Reduction Act of 1984
(HR 4170, 99th Congress; P.L. 98-36), committee print, 98th Cong., December 31, 1984, 40-926 O, p. 667.
50 T he original title of the law, the T ax Cuts and Jobs Act, was stricken before final passage because it violated what is
known as the Byrd rule, a procedural rule that can be raised in the Senate when bills, like the tax bill, are considered
under the process of reconciliation. T he actual title of the law is “ T o provide for reconciliation pursuant to titles II and
V of the concurrent resolution on the budget for fiscal year 2018.” For more information, see CRS Report RL30862,
The Budget Reconciliation Process: The Senate’s “Byrd Rule”, by Bill Heniff Jr.
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The Charitable Deduction for Individuals: A Brief Legislative History

and businesses.51 Among the many changes, the law temporarily increased the AGI limit for cash
donations made to public charities from 50% to 60%.52 This change went into effect in 2018, and
is scheduled to expire on December 31, 2025.
According to the House Ways and Means Committee report that accompanied H.R. 1 (the House-
passed version of P.L. 115-97):53
The Committee believes that a robust charitable sector is vital to our economy, and that
charitable giving is critical to ensuring that the sector thrives. For this reason, the
Committee believes that it is desirable to provide additional incentives for taxpayers to
provide monetary and volunteer support to charities. Increasing the charitable percentage
limit for cash contributions to public charities will encourage taxpayers to provide essential
monetary support to front-line charities.
While this change to the charitable deduction may increase the amount that some taxpayers can
deduct and hence may encourage more charitable giving, other changes made by the law are
expected to result in an overal reduction in charitable giving.54 TPC estimates that even after
including the increased 60% limitation, the changes TCJA made to the tax code could result in
charitable donations fal ing by 5%.55
The Coronavirus Aid, Relief, and Economic Security Act of 2020
In response to the economic fal out from the COVID-19 pandemic, Congress enacted the
Coronavirus Aid, Relief, and Economic Security Act at the end of March (CARES Act; P.L. 116-

51 For more information on the changes made to the tax code by P.L. 115-97, see CRS Report R45092, The 2017 Tax
Revision (P.L. 115-97): Com parison to 2017 Tax Law, coordinated by Molly F. Sherlock and Donald J. Marples.
52 According to statute, the 60% limitation applies only if all charitable donations made to a public charity are in cash.
IRC §170(b)(G). Hence, if a taxpayer made a charitable donation that was in part cash and in part unappreciated
property (i.e., short -term capital gain property), they would be subject to the 50% limit and not be eligible for the 60%
limit. For example, if an individual has AGI of $100,000 and makes a $50,000 donation of short-term capital gain
property to a charity (subject to the 50% AGI limit), they cannot deduct any additional cash donations to a public
charity. However, according to the Joint Committee on Taxation (JCT ), this was not the original congressional intent of
this provision. Instead, according to JCT , the 60% limitation “ for cash contributions is intended to be applied after (and
reduced by) the amount of noncash contributions.” Joint Committee on T axation, General Explanation of P.L. 115-97,
December 20, 2018, JCS-1-18. Under these coordination rules, if an individual has AGI of $100,000, and makes a
$50,000 donation of short-term capital gain property to a charity (subject to the 50% AGI limit), the maximum amount
they can deduct in a given year as cash is $10,000. Specifically, the taxpayer calculates the maximum amount they can
deduct as short -term property as $50,000 (50% of their AGI) and subtracts this amount from the maximum they can
donate as cash, which is $60,000 (60% or $100,000), y ielding a maximum cash deduction of $10,000. A draft of the
T ax T echnical and Clerical Corrections Act includes a provision that “corrects the coordination of the 60 -percent limit
applicable to cash contributions and the 50-percent limit applicable to noncash contributions. Under the provision, the
60-percent limit for cash contributions is reduced by the amount of certain noncash contributions.” As of the date of
this report, this bill has not been passed by Congress. For more information, see Joint Commit tee on T axation, Tax
Technical and Clerical Corrections Act, January 2, 2019, JCX-1-19.
53 Committee on Ways and Means, Report of the Committee on Ways and Means House of Representatives on H.R. 1
Together with Dissenting and Additional Views, November 13, 2017, Report 115-409, p. 177.
54 For more information, see CRS In Focus IF11022, The Charitable Deduction for Individuals, by Margot L. Crandall-
Hollick and Molly F. Sherlock; Howard Gleckman, 21 Million Taxpayers Will Stop Taking the Charitable Deduction
Under The TCJA, T he T ax Policy Center, January 8, 2018, https://www.taxpolicycenter.org/taxvox/21-million-
taxpayers-will-stop-taking-charitable-deduction-under-tcja.
55 Renu Zaretsky, For Charitable Giving, ’Tis the Season… But Will It Still Be, Post-TCJA?, T ax Policy Center,
T axVox: Individual T axes, December 5, 2018, https://www.taxpolicycenter.org/taxvox/charitable-giving-tis-season-
will-it-still-be-post -tcja.
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The Charitable Deduction for Individuals: A Brief Legislative History

136). The CARES Act included two temporary changes to charitable giving tax incentives for
individuals for 2020.56
First, for individuals who do not itemize their deductions, the law created a temporary above-the-
line deduction for cash gifts to public charities, private operating foundations, and federal, state,
and local governments. An estimated 90% of taxpayers do not itemize their deductions.57 The
maximum deduction amount is $300 per taxpayer (irrespective of filing status) and is not subject
to the AGI limitations of the itemized deduction. (Cash donations to private nonoperating
foundations, supporting organizations, or donor advised funds are not eligible for this tax benefit.)
This provision is temporary and in effect for eligible cash donations made in 2020. (Individuals
wil receive this benefit in early 2021 when 2020 returns are filed.)
Second, for individuals who itemize their deductions, the law temporarily eliminates the 60%
AGI limitation for cash gifts to public charities, private operating foundations, and federal, state,
and local governments. (Cash donations to private nonoperating foundations, supporting
organizations, or donor advised funds are not eligible.) This change is applicable for donations
made in 2020. In other words, individuals can deduct the full value of their cash contribution to
qualifying organizations up to 100% of AGI in 2020.

56 See CRS Report R46279, The Coronavirus Aid, Relief, and Economic Security (CARES) Act—Tax Relief for
Individuals and Businesses, coordinated by Molly F. Sherlock and Joint Committee on T axation, Description Of The
Tax Provisions Of P.L. 116-136, The Coronavirus Aid, Relief, And Econom ic Security ("CARES”) Act, April 23, 2020,
JCX-12R-20. For a summary of other changes to charitable giving tax incentives in the CARES Act for busine sses, see
CRS Insight IN11420, Tem porary Enhancements to Charitable Contributions Deductions in the CARES Act, by Jane
G. Gravelle.
57 T ax Policy Center, What are itemized deductions and who claims them? Briefing Book,
https://www.taxpolicycenter.org/briefing-book/what -are-itemized-deductions-and-who-claims-them.
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The Charitable Deduction for Individuals: A Brief Legislative History

Appendix A. Definitions of Commonly Used Terms
Term
Definition
Adjusted gross
Adjusted gross income (AGI) is equal to a taxpayer’s total income (e.g., wage and salary
income (AGI)
income, investment income, passthrough business income, farm income, rents, and royalties)
minus any above-the-line deductions for which the taxpayer may be eligible. (Above-the-line
deductions are available to taxpayers regardless of whether they itemize deductions or claim
the standard deduction.)
Basis
Basis is general y the amount of capital investment in property. In most situations, the basis of
an asset is its cost to the taxpayer.
Capital gain
Long-term capital gain property is a capital asset that, if sold at its fair market value on the day
property—long
it was donated, would have generated a long-term capital gain. Long-term capital gains are
term
realized when an asset has been held for 12 months or more.
Capital gain
Short-term capital gain property is a property that, if sold at its fair market value on the day it
property—
was donated, would have generated a short-term capital gain. Short-term capital gains are
short term
realized when an asset has been held for less than 12 months. For the purposes of the
charitable deduction, short-term capital gains and ordinary income property are often treated
the same.
Fair market
Fair market value (FMV) is the price that property would sel for on the open market. It is the
value (FMV)
price that would be agreed on between a wil ing buyer and a wil ing sel er, with neither being
required to act and both having reasonable knowledge of the relevant facts.
Ordinary
With respect to individual taxpayers, ordinary income property is a property that would h ave
income
generated ordinary income or short-term capital gain had it been sold at its fair market value
property
on the date it was donated. Examples include a work of art or manuscript created by the
donor. (Ordinary income property with respect to businesses includes goods that are held by
the donor for sale to customers in a trade or business—i.e., inventory.)
Private
A private operating foundation is a private foundation (which general y has one source of
operating
financing and derives its revenue from its investment assets) that primarily operates its own
foundation
charitable programs.
Private
A private nonoperating foundation is a private foundation (which general y has one source of
nonoperating
financing and derives its revenue from its investment assets) that primarily makes grants to
foundation
other charitable organizations and to individuals.
Public charity
A public charity is supported on an ongoing basis by public donations from individuals,
corporations, trusts, and other legal entities.
Source: IRS Publication 561; IRS Publication 526; Bruce R. Hopkins, Charitable Giving Law Made Easy (New York:
John Wiley & Sons, 2007); Historical Development and Present Law of the Federal Tax Exemption for Charities and
Other Tax-Exempt Organizations, April 19, 2005, JCX-29-05.
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link to page 17 link to page 16 link to page 17 The Charitable Deduction for Individuals: A Brief Legislative History

Appendix B. Valuation of Noncash Donations for
the Charitable Deduction
For noncash donations, there are certain rules on how to value the property. Depending on the
type of property and the recipient organizations, the property is general y valued either at its basis
(i.e., what the taxpayer original y paid for the property) or its fair market value (how much the
taxpayer would receive in an open market for the property at the time it is donated), as
summarized in Table B-1. For an overview of these and other terms often used in the context of
the charitable deduction, see Appendix A. If a property increases or appreciates in value, its fair
market value when sold wil be greater than its basis. If property decreases or depreciates in
value, its fair market value when sold wil be less than its basis. Hence, deducting the fair market
value of an appreciated (depreciated) property results in a larger (smal er) deduction for the
taxpayer than the basis value of that same property.
Table B-1. Valuation of Property for the Charitable Deduction

Type of Recipient

Private
Private
Foundations
Foundations
Type of Property
Public Charity
(Nonoperating)a
(Operating)
Short-term capital
Basis of the
Basis of the
Basis of the
gain / ordinary
property (fair
property (fair
property (fair
income property
market value net of
market value net of
market value net of
any gain)
any gain)
any gain)
Long-term capital
Fair market value of
Basis of the
Fair market value of
gain property
property at the time
property (fair
property at the time
the gift is made
market value net of
the gift is made
any gain)
Source: IRS Publication 526,| Charitable Contributions and Internal Revenue Code (IRC) Section 170.
Note: These are general rules, and there are numerous exceptions.
a. Includes qualifying contributions to veterans’ organizations, fraternal societies, and nonprofit cemeteries.

Author Information

Margot L. Crandall-Hollick

Acting Section Research Manager

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14

The Charitable Deduction for Individuals: A Brief Legislative History

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