Charitable Tax Deduction Research Articles

Ensuring a Legacy

We hear it repeatedly with the impending departure of American presidents, particularly those who have served two terms in office: How will I be remembered? What difference did I make? What did I make better? And the specific issue at hand: What will my legacy be? I have had little sympathy for these post-presidential concerns over the years. However, as I approach the twilight of my medical career in the post-acute and long-term care (PALTC) realm, I find myself asking these same questions of myself. I have prided myself on a career of, not perfection, but going to bed each night feeling I gave patient care my best effort that day. That no longer seems enough. In my career I have watched nursing homes evolve from what were essentially boarding houses with sewing circles and book clubs to mini-hospitals. And along with that journey has come the nexus of care and post-acute care transitions. We have moved from being the red-headed stepchild of health care to the care site everyone wants to engage and control. The next iteration of post-acute care is unimaginable to me as PALTC responds to the pressure of value-based payment and the promise of telemedicine.Planned GivingThere are two easy methods to provide for the future of AMDA and PALTC:1.Providing a legacy gift for Your Foundation through your will, which:•Costs you nothing during your lifetime•Preserves your savings and cash flow•Supports a mission you dedicated your life’s work to•Is easy to implement through your estate plan•Can be changed or revoked as needed2.Utilize life insurance. When you make a gift of life insurance to Your Foundation, you:•Receive an immediate charitable tax deduction without affecting your investment portfolio or your cash flow•Reduce estate taxes for your heirs•Support a mission you care about for generations to come There are two easy methods to provide for the future of AMDA and PALTC:1.Providing a legacy gift for Your Foundation through your will, which:•Costs you nothing during your lifetime•Preserves your savings and cash flow•Supports a mission you dedicated your life’s work to•Is easy to implement through your estate plan•Can be changed or revoked as needed2.Utilize life insurance. When you make a gift of life insurance to Your Foundation, you:•Receive an immediate charitable tax deduction without affecting your investment portfolio or your cash flow•Reduce estate taxes for your heirs•Support a mission you care about for generations to come I now find my thoughts wandering to who will take my place and, inevitably, deliver care to my patients in the not-too-distant future. Determining those talented people who will manage the unimaginable in the best interest of our patients is now beyond my scope of contemplation. Who, then, will be the next Cheryl Phillips, the next Chuck Crecelius, the next Cari Levy, or the next Wayne Saltsman among the other bright lights of the future? These questions have led me to donate my time to the Foundation for PALTC Medicine and a portion of my assets to the Foundation’s efforts to augment the geriatric workforce and support the study of the value of the PALTC clinician. I have made my decision to craft my legacy through the Foundation and its planned giving avenues. It is my fervent wish that my peers do the same. It’s easy to see why planned giving (see the sidebar) is gaining in popularity among our forward-thinking friends. Through these avenues of beneficence, everyone wins! Please join me and so many of our friends in shaping the future of PALTC through the Foundation for PALTC Medicine. Find out more today at www.paltcfoundation.org. Dr. Lett has practiced in the PALTC continuum for more than three decades as a hands-on clinician and medical director. He has served AMDA in multiple capacities including as president, on multiple committees, and is the current chair of the Foundation for PALTC Medicine.

The use of third-party information reporting for tax deductions: evidence and implications from charitable deductions in Denmark

We show that the introduction of information reporting for charitable tax deductions in Denmark in 2008 was associated with a doubling in the number of deductions claimed, and a 15% rise in the total value of claims, which can be credibly attributed to previously unclaimed deductions. This contradicts the presumption that evasion is the main source of non-compliance for deductions, and that the use of information reporting raises revenue collections. A pre-reform randomized audit experiment did not detect the unclaimed deductions, implying audits overstate evasion relative to extensive-margin underreporting. Various tests suggest that compliance cost, passive choice and overwithholding suppressed self-reporting of deductions.

Are contributions of time and money substitutes or complements?

ABSTRACTThis article empirically investigates the relationship between donations of time and money using Canadian tax policy reforms that changed the tax price of charitable donations. The 1988 reform where a charitable tax deduction was converted to a credit and the 2000 reform in provincial income taxes provide tax price variations plausibly exogenous to individuals’ unobserved heterogeneity. Our estimates on cross-price effects imply that individuals make more time donations as the tax price of charitable donations increases and hence money and time donations are substitutes, as some theories would imply. This contrasts with earlier findings using cross-sectional data.

Income Tax Deductions for Charitable Bequests of IRD

Estates and trusts are recognizing growing amounts of taxable income from “income in respect of a decedent” (or “IRD”). These are payments attributable to income earned by a decedent before death but received by an estate, trust, or other beneficiary after death, and taxed to that recipient. The most common source of IRD is a distribution from an inherited retirement plan account, such as an IRA, 401(k) plan or a profit sharing plan. Since IRD can be taxed twice (once on an estate’s estate tax return and again on the estate’s income tax return), it is possible for a single charitable bequest of IRD to produce charitable tax deductions on both returns.However, many estates and trusts that received IRD and also made charitable bequests were not able to claim a charitable income tax deduction. This was usually because the governing instrument – either the will or a trust instrument – failed to contain instructions to pay charitable bequests with IRD. Another income tax problem occurs when a retirement account or appreciated property satisfies a pecuniary (i.e., fixed dollar) charitable bequest. The IRS contends that taxable income is triggered, and there might not be any offsetting charitable income tax deduction.This article describes the best ways to structure a charitable bequest of retirement plan and other IRD assets (savings bonds, employee stock options, etc.), citing relevant court cases and IRS rulings. It recommends that every governing instrument contain instructions to “pay charitable bequests (if any) first with IRD (if any).” Sample drafting language is provided. Finally, the article describes techniques to avoid adverse tax consequences even when the governing instrument is missing these instructions.

For Goodnesss Sake: A Two-Part Proposal for Remedying the U.S. Charity/Justice Imbalance

The U.S. approach to addressing economic and social needs strongly favors individual and corporate charity over the establishment and enforcement of economic and social rights. This charity/justice imbalance has a severely negative impact on the nation’s poor, who despite the overall U.S. wealth struggle with inadequate access to healthcare, housing, and nutrition. This article suggests a two-part approach for remedying the charity/justice imbalance in the U.S.: First, the U.S. should eliminate the charitable tax deduction, a policy creation that does not effectively address economic and social needs, forces an inequitable poverty relief and tax burden on the middle class, and lulls the nation into a false sense of complacency about its poverty crisis. Second, the U.S. should replace the deduction with ratification of the International Covenant on Economic, Social and Cultural Rights. This two-part process would reverse the U.S. legacy of avoiding enforceable commitments to economic and social rights. Charity would take a step back; justice a step forward.

The Economic Consequences of Enhanced Charitable Tax Deductions

The Economic Consequences of Enhanced Charitable Tax Deductions

Are Charitable Giving and Religious Attendance Complements or Substitutes? The Role of Measurement Error

AbstractGovernment policies sometimes cause unintended consequences for other potentially desirable behaviors. One such policy is the charitable tax deduction, which encourages charitable giving by allowing individuals to deduct giving from taxable income. Whether charitable giving and other desirable behaviors are complements or substitutes affect the welfare benefit of the deduction—complements increase the benefit, while substitutes decrease the benefit. This paper focuses on the effect of the deduction on one behavior in particular: religious attendance. Using data from the Independent Sector Survey of Giving and Volunteering, I estimate a tax price elasticity for religious attendance of −0.4, which implies that charitable giving and religious attendance are complements. I resolve the difference between my estimate and a recent estimate by W. S. Gruber (2004) that implies charitable giving and religious attendance are substitutes. While Gruber imputes itemization status, an important factor in calculating tax incentives, I use survey‐reported itemization status. This imputation creates a large amount of non‐classical measurement error. I show that the measurement error is responsible for the disparate results: If I also impute itemization status, I obtain similar results as Gruber.

Prestige, charitable deductions and other determinants of alumni giving: Evidence from a highly selective liberal arts college

Private institutions of higher education are highly dependent on alumni support to cover operating expenses, fund endowments and fuel large capital campaigns. For example, in 2004, alumni at private liberal arts colleges generated nearly 43% of total voluntary support and funded 21.5% of total institutional expenditures. This paper uses 15 years of detailed data on alumni donations to a private liberal arts college to explore a full range of potential determinants of giving. Results suggest that wealthy alumni who live in states that allow charitable tax deductions are more generous than otherwise similar alumni in states without such subsidies. Alumni contributions also increase in years when the college has achieved greater athletic prestige but fall when academic prestige rises. Furthermore, recent alumni are more influenced by institutional prestige than older graduates. With regard to other determinants, females tend to be more generous, as do alumni living in wealthier neighborhoods within 250 miles of the college. Alumni who have close alumni relatives tend to give more as do alumni who participated in campus activities during their college years. Undergraduate major and occupational sector are also strong predictors of giving behavior.

Best Love of the Child

This paper examines the creation of the ability to give unconditional love (perhaps in tune with the theologians' definition of “best love”) and to discuss how laws might make this easier for children. Given my past work, it is perhaps not surprising that I see this as requiring permanence in the relationship. I hypothesize that children acquire this tendency (or longing, as Aristotle and Jennifer Roback-Morse would term it) as they see it around them. The most likely three relationships from which children can draw models of unconditional love are God's love, the parents' love for each other, and the parents' love for the child. God's love is of course the model for all human unconditional love. We might see parents' response to it in frequency of church attendance or how important they say religion is in their lives. The ability of law (at least in the United States) to influence belief and the exercise of it is of course a delicate constitutional question. The law can certainly continue to not discriminate against religion and to allow such benefits as charitable tax deductions for religious contributions and tax exemptions for religious properties. Tuition vouchers are a help, too. But the controversy in Massachusetts surrounding Catholic Charities' adoption policies show how fragile this balance has become. The parents' love for each other also can serve as a model for children. Other research, including my own, shows that unconditional love is most likely to flourish in marriage as opposed to cohabitation. It is also most evident in what Judith Wallerstein calls “The Good Marriage,” whose opposite is the “Separate Spheres” (or marriage reduced to its lowest common denominator) discussed by Lundberg and Pollock or the “exchange relationship” detailed in Gary Hanson's “Marital Exchange Relationship” piece in psychology. This love is threatened by any attempt to equate marriage and cohabitation (as with current Canadian law and the American Law Institute's Domestic Partnership proposals). It is strengthened by legal efforts to make marriages stronger, whether these are through requirements for premarital counseling or through tax and other subsidies based upon marital status (listed in, for example, the Vermont same-sex marriage case of Baker v. Vermont) and perhaps by laws that force couples to carefully think through the decision to divorce. From a nonlegal perspective, marriage is strengthened by increased support from extended family and the community, secular and religious. The parents' love for him or her is perhaps the first unconditional love noticed by a child. We can see it in what the parent says about the child, what kinds of activities he or she does with the child, and how close the child feels to the parent, perhaps whether the child feels the parent stands up for him or her or acts as an advocate. From an absent parent, we can still get some glimpse of this love through continued contact, attendance at the child's activities, and even faithful payment of child support. From a negative perspective, we see the absence of unconditional love in parents who say they are disappointed with their child, who neglect their child (when they have the means of support), perhaps when they engage in custody battles and certainly when they abuse the child. Law can strengthen parental relationships with children. On the extreme, children in foster care are unlikely to see this love, and efforts should be made to either strengthen the family of origin or place the child in a permanent adoptive or kincare situation. Child abuse is criminal and serious, and should be taken seriously by the law and prevented where possible (including abuse by non-parent adults living in the home). For another example (of many), custody laws can be carefully drafted to minimize incentives for vindictive behavior and to promote relationships with noncustodial parents. We can continue to promote family autonomy so that parents in less stressed families can effectively allow their children to flourish. This paper tests these ideas to the extent possible, finding that characteristics favorable to unconditional loving as adults are present in environments consistent with each of these models. I conclude with a number of policy recommendations to strength families and make them more permanent.

Income sources and declared charitable tax deductions

Within the framework of traditional economic theory a charitable contribution is considered a consumption good. As such, the demand for giving is affected by changes in the price of giving and current income. Moreover, changes in wealth, expected future income, and ‘habits’ may affect giving. Previous empirical studies of giving have not considered the possibility of the impact that donor's wealth might have on giving. One way of accounting for such possible effect is to include various sources of donor's income in the demand function. Using the Internal Revenue Service Individual Tax Model Files and a dynamic econometric model of charitable giving, we estimate demand for giving for various income groups and examine impacts of various income sources on giving. The findings indicate that the higher the share of wages and dividends in disposable income, the higher the amount of giving. The amount of giving is lower when the share of interest, capital gain, or pension income is higher.