Charitable Contributions for Haiti's Earthquake Victims (CRS Report for Congress)
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| Release Date |
Revised Jan. 26, 2010 |
| Report Number |
R41036 |
| Report Type |
Report |
| Authors |
Molly F. Sherlock, Analyst in Economics |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
On January 12, 2010, a magnitude 7.0 earthquake struck Haiti. As of January 25, 2010, the death toll was estimated to exceed 150,000. The earthquake and resulting aftershocks affected approximately 3 million people and caused significant damage to buildings and infrastructure. The earthquake has left an estimated 1 million Haitians homeless.
On January 22, 2010, President Obama signed into law the Haiti Assistance Income Tax Incentive Act (HAITI Act; P.L. 111-126). This legislation accelerates income tax benefits for charitable cash contributions for the relief of earthquake victims. Specifically, the legislation allows taxpayers making charitable contributions of cash made to organizations providing aid to earthquake victims after January 11, 2010, and before March 1, 2010, to take the associated charitable deduction on their 2009 income tax returns. The HAITI Act (H.R. 4462) was introduced in the House on January 19, 2010, and passed by a voice vote on January 20, 2010. The Senate had introduced companion legislation (S. 2936) on January 20, 2010, but passed the identical House legislation H.R. 4462 on January 21, 2010. Provisions in the HAITI Act are similar to those adopted under P.L. 109-1 following the 2004 Indian Ocean tsunami. The Joint Committee on Taxation (JCT) estimates that the HAITI Act would result in revenue losses of approximately $2 million over the 10-year budget window spanning FY2010 through FY2019.
Under current law, charitable contributions to 501(c)(3) charitable organizations from individuals, corporations, and estates and trusts are tax deductible in the year they are made. Individuals can deduct up to 50% of their adjusted gross income (AGI), phased-out for higher income individuals. Corporations can deduct up to 10% of their taxable income. Individuals and corporations can carry forward any unclaimed charitable deductions for up to five years. Total charitable giving in 2008 was $307.65 billion.
In the past, Congress has passed legislation to encourage charitable giving following natural disasters. Following the 2004 Indian Ocean tsunami, legislation was passed that allowed taxpayers making charitable contributions to aid tsunami victims in January 2005 to take the charitable deduction on their 2004 tax return. This provision is similar to the one enacted under the HAITI Act. In September 2005, following Hurricane Katrina, individual and corporate giving limits were suspended. The rules surrounding charitable contributions of food inventory and books were also relaxed to encourage in-kind giving.
The HAITI Act, like other tax policies, can be evaluated along the dimensions of efficiency and equity. Efficiency is greatest when the policy's marginal impact, the giving induced by the program, is large relative to the policy's inframarginal impact, the benefits given to those whose behavior was not directly caused by the tax policy. Using this framework, the HAITI Act is unlikely to be economically efficient. In general, tax benefits for charitable giving do not appear to significantly increase donations. Furthermore, tax deductions violate principles of vertical equity in that the benefits of tax deductions accrue disproportionately to higher income groups and provide larger benefits to those with a greater ability to pay.
