Healthcare groups, including the American Hospital Association, want Congress to protect tax breaks given to those who make donations to not-for-profit organizations.
The Obama administration has proposed decreasing the cap on tax deductions from charitable gifts to 28% from 35% as part of the efforts to avert the fiscal cliff of spending cuts and tax hikes. The administration's proposal includes caps on all itemized deductions, including mortgages, and state and local taxes. Defeated Republican presidential candidate Mitt Romney also proposed capping itemized deductions.
“We are concerned about it, there are certainly a number of folks who are looking at the avenue to provide additional revenue to the government, and caps on deductions are one of those,” said Tom Nickels, the AHA's senior VP of federal relations, who added that hospital foundations could see the biggest impact if the government implements a tax-deduction cap.
The AHA wants the administration to preserve tax breaks for donations in order to protect charitable gifts that reached $8.9 billion in fiscal 2011, according to the Association for Healthcare Philanthropy. The AHA sent a letter (PDF)
Friday to Senate Majority Leader Harry Reid (D-Nev.) detailing its objections.
“As hospitals face new challenges to provide high-quality care to everyone who needs it, the support they find from generous members of the communities they serve is needed now more than ever,” the letter read. “We urge you to continue to encourage private giving by excluding charitable giving from any limitations on deductions, thereby maintaining the existing federal tax charitable deduction.”
About 40% of respondents in an AHA survey of hospital and health developmental professionals cited by the letter said that donations would drop by 10% to 30% “if significant changes are made to the current tax incentives for charitable donations.” That could amount to a $1.1 billion drop in annual giving, the AHA claimed.
The $8.9 billion in donations in fiscal 2011 for not-for-profit hospitals and healthcare systems was record-breaking, according to the AHP. The AHA's letter cited AHP's figures from fiscal 2010, which showed donations at $8.3 billion. The AHP earlier this year said
donations have rebounded from declines in recent years, even though the economy remains in rough shape.
The AHP was among more than 225 not-for-profits from the Charitable Giving Coalition that addressed members of Congress about preserving the rate of charitable deductions. The AHP reasoned that unlike other itemized deductions, that charitable deductions encourage philanthropists to donate a part of their income. The other deductions only encourage consumption.
“Data suggests that for every dollar a donor gets in tax relief for his or her donation, the public typically receives three dollars of benefit,” the AHP said in a written statement
The AHA's Nickels said support for capping donation deductions will slow once the public realizes how it would impact hospitals and other not-for-profit groups.