Top congressional committee leaders recently announced a long-awaited tax deal. Among its provisions are an expansion of the federal Child Tax Credit, a boost to a set of expired business deductions, and a significant shortening of the window for Employee Retention Credit filings. However, missing from the proposed legislation is an extension of the successful Universal Charitable Deduction (UCD).

The Chairmen of the House Ways and Means Committee and Senate Finance Committee hoped for quick action on their framework as the IRS tax filing season approached. Indeed, the bill sailed through the House Ways & Means Committee in a 40-3 vote and may be considered by the full House as early as next week (Update: The House approved the deal in a 357-70 vote on January 31). However, multiple concerns with the package may open the door for amendments, particularly as it heads to the Senate. Notably, Sen. Mike Crapo (R-Idaho), the top Republican on the Senate Finance Committee, called the agreement “a thoughtful starting point.”

Sen. James Lankford (R-Okla.), also a member of the Senate Finance Committee and a UCD champion, welcomed elements of the deal but said, “I was disappointed that the agreement failed to include the restoration and extension of the non-itemized charitable deduction that has seen broad, bipartisan support from our nonprofit community and more.”

“I am committed to working with leadership to find a compromise that supports our nonprofits and incentivizes Americans to give,” he added.

Congress allowed a basic UCD to expire at the end of 2021. That pandemic-era experiment had allowed a $300 above-the-line benefit for donations ($600 for married couples filing jointly)–a small step that helped fuel much-needed increases in giving in 2020 and 2021. Indeed, IRS data for 2021 shows more than 47 million non-itemizing households using the deduction for donations totaling nearly $18 billion. Notably, more than one-fifth of those households were donors with adjusted gross incomes of less than $30,000.

Many had hoped this new tax deal would recognize the value of the UCD for givers and ministries, and they are continuing to press for its inclusion.

“It’s time to bring back the universal charitable deduction, which data shows was clearly a success,” said Michael Martin, ECFA President & CEO, in a release issued by Sen. Lankford. “The government should honor and encourage the generosity of all charitable givers regardless of whether they itemize on their tax forms or not.”

In addition to its Child Tax Credit expansion and extended business deductions, other elements of the deal include provisions related to an increased 1099-NEC and MISC filing threshold (from $600 to $1000 paid to contractors in a year), Taiwan double-taxation, disaster relief, and low-income housing items. Perhaps most significant would be the early end of the Employee Retention Credit (ERC) application window on January 31, 2024, instead of April 15, 2025. The bill would also enhance efforts to battle abusive ERC claims, a ballooning problem that one ECFA webinar expert suggested last year could turn out to be “the biggest tax fraud scandal of all time.”  

ECFA will carefully monitor the progression of this tax agreement. On behalf of ECFA church and ministry members that know the value of individuals who give time and treasure to advance their Christ-honoring missions, we will continue to press for the reinstatement of a universal charitable deduction.