BYU Law Review


JT Alston


The tax deduction for charitable contributions has existed in the Internal Revenue Code in some form since the early 1900s. While the charitable deduction has been preserved in the U.S. tax code for more than 100 years, the Tax Cuts and Jobs Act (TCJA) of December 2017 threatens charities by removing the tax incentive to donate to charity from all but the wealthiest taxpayers. Both charities and nonprofits play a vital role in the U.S. economy by providing some goods and services more efficiently than the public or private sectors. In this Note I explore the role of nonprofits in the U.S. economy and how the federal government has used tax incentives to encourage taxpayers to donate to charities. I describe how new changes in TCJA, including doubling the standard deduction, increasing the estate tax exemption, capping the state and local tax deduction, and lowering the income tax rates, remove the tax incentives for most individual taxpayers to donate to charity. I then propose solutions to the problems that TCJA created for charities. I submit that a carefully constructed universal charitable deduction could be a fiscally efficient subsidy. TCJA created an uncertain future for the nonprofit sector. Implementing the proposals in this Note could help preserve the future of the nonprofit sector in the United States by making the tax incentive to give to charity available to all taxpayers.


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