Tax Issues Relating to Charitable Contributions and Organizations

Tax Issues Relating to Charitable Contributions and Organizations. Congressional Research Service. Jane G. Gravelle, Donald J. Marples, Molly F. Sherlock. September 19, 2019

The federal government supports the charitable sector by providing charitable organizations and donors with favorable tax treatment. Individuals itemizing deductions may claim a tax deduction for charitable contributions. Estates can make charitable bequests. Corporations can deduct charitable contributions before computing income taxes. Further, earnings on funds held by charitable organizations and used for a related charitable purpose are exempt from tax. In FY2019, projected tax subsidies for charities, not including the value of the tax exemption on earnings of charities or the estate tax deduction, totaled $51.8 billion. If investment income of nonprofits were taxed at the 35% corporate tax rate in 2015, revenue collected is estimated at $26.7 billion (this amount excludes religious organizations). The cost of deducting bequests on estates is estimated at $4 billion to $5 billion.

[PDF format, 52 pages].

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