Despite its popularity, the universal charitable deduction could be facing headwinds in Congress. According to a recent news report, top congressional aides on tax-writing committees seem interested in direct payments to charities as an alternative.

The 2020 CARES Act and follow-up legislation provided for a $300 charitable deduction for non-itemizers ($600 for couples). That provision, which expired in December 2021, appears popular among key Members of Congress. For example, during a hearing on charitable giving earlier this year, Senate Finance Committee Chairman Ron Wyden (D-Ore.) lauded this universal deduction and encouraged a bipartisan push to revive and expand it.

“The charitable deduction is a lifeline, not a loophole,” he said.

However, key staff may be wary of the perceived cost of this provision. Tax Notes, a news source compiled by Tax Analysts, reported Andrew Grossman, Democrat chief counsel on the House Ways & Means Committee, told a conference of the American Institute of Certified Public Accountants that legislators want to know, “Are we getting bang for our buck here?”

He added, “I think there is a question… to what extent the provision represents a windfall benefit to taxpayers who otherwise would be giving anyway.”

Grossman suggested direct payments of cash to charities — programs perhaps in the mold of the employee retention credit — may be more beneficial than a deduction honoring the generosity of individual taxpayers. And Tax Notes reports Christopher Arneson, a senior tax policy advisor for the Senate Finance Committee, added that nonprofits do already get many grants from the government and there are efforts on Capitol Hill to expand those offerings.

Earlier this year, ECFA joined a letter sent to Capitol Hill explaining data showing a clear giving benefit inspired by the current universal charitable deduction. Emphasizing the importance of not simply extending, but expanding this policy, we said, “Granting lower- and middle-income taxpayers the same sort of generous tax incentive granted to higher-income taxpayers will help increase and democratize giving to all of America’s diverse ministries and other charities.”

ECFA will continue to monitor this matter closely. We are committed to urging legislators to support charitable giving incentives, particularly the successful universal charitable deduction.