Panel: Tax Policy, Fiscal Scarcity, and Nonprofits
(Public Finance)

Thursday, November 8, 2012: 10:15 AM-11:45 AM
Jefferson (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Organizers:  Joseph Cordes, George Washington University
Moderators:  William Randolph, Congressional Budget Office
Chairs:  Mary Kay Gugerty, University of Washington

Budgetary pressures at all levels of government have led to proposed tax policy changes that affect nonprofits, both directly and indirectly. At the same time, charities are struggling with rising demand and lower donations due to the recession. In this climate, there is a need to assess how tax policy affects charities and the efficacy of current tax law. This panel will explore the interactions between tax policy and nonprofits, with a special focus on how recent financial constraints have led policymakers to reassess tax benefits for charities. Each paper in the proposed panel will examine specific features of the tax code, assessing how these laws affect charities, how efficient current provisions are, and how nonprofits could be affected by proposed reforms at the federal, state and local levels. Papers will also examine the rationales behind tax benefits for charities and provide economic analyses of their efficiency. Finally, the panel will compare current tax policy with revenue-increasing proposals. The first paper, “Principles and Rationales Behind the Charitable Deduction and Proposed Reforms,” by Roger Colinvaux, Brian Galle, and Eugene Steuerle (presenter), will examine various rationales underlying the income tax deduction for charitable contributions, including incentives for giving, ability to pay taxes, progressivity, and market rather than government decisions about how subsidies should be allocated. Part of this analysis will contrast the supporting arguments and subsidy effects of a charitable deduction, credit, capped incentive, or none at all. In “Evaluating Options for Reforming the Charitable Income Tax Deduction,” Joseph Cordes and Joseph Rosenberg (presenter) will present an empirical assessment of specific options for reforming the current income tax deduction. Using the Tax Policy Center’s microsimulation tax model, survey data on giving patterns by income, and the tax return data of nonprofits, they will estimate how revenue raising reform options would affect tax incentives to donate, and how changes in contributions would affect the financial resources of nonprofits. Reform options include capping the rate at which deductions can be taken; limiting it to deductions in excess of a minimum floor; and replacing the deduction with a flat-rate tax credit. The third paper, “The Nonprofit Property-Tax Exemption and PILOTs” by Joseph Cordes (presenter) and Evelyn Brody, will focus on state and local tax benefits for charities, most notably the property tax exemption for nonprofits. Recent budgetary pressure has affected not only the federal government but also many states, counties, and cities. In some jurisdictions, nonprofits—particularly universities and hospitals—own a large portion of local property, and thus their exemption represents a significant loss of local tax revenue. An increasing number of jurisdictions have begun requesting “voluntary” payments in lieu of taxes or PILOTs from nonprofits owning sizable amounts of property. This paper will examine the difficulties of constructing well-designed PILOT program and whether a more global solution is possible, as well as who wins and who loses under the current property tax exemption.

Principles and Rationales Behind the Charitable Deduction and Proposed Reforms
Roger Colinvaux, Catholic University Columbus School of Law, Brian Galle, Boston College Law School and C. Eugene Steuerle, The Urban Institute

Evaluating Options for Reforming the Charitable Income Tax Deduction
Joseph Rosenberg, Urban Institute and Joseph Cordes, George Washington University

The Nonprofit Property-Tax Exemption and Pilots
Evelyn Brody1, Joseph Cordes2, Daphne Kenyon3 and Adam Langley3, (1)Chicago-Kent College of Law, (2)George Washington University, (3)Lincoln Institute of Land Policy

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