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Donations to Churches Will Feel the Heat

New tax proposal decreases the value of charitable giving

Church leaders are concerned that giving could suffer if the federal government moves forward with plans to limit tax breaks, including those for charitable donations, as a way to rein in the country’s out of control budget deficit, according to a recent church survey on offerings and giving.

As part of President Obama’s FY 2012 budget proposals, lawmakers are proposing to decrease the value of charitable deductions and all other itemized deductions for individuals earning over $200,000 and couples earning more than $250,000.

“In other words, Obama is proposing a $11,600 penalty tax on every $100,000 of charitable gifts made by the wealthy,” said Steven Link, a former financial analysts with Goldman Sachs.

“After more than three decades of low donations to religious organizations, the church started to feel a sigh of relief last year when charitable giving started to increase. Churches and other nonprofits will be hit hard if this tax change goes through.”

The Obama administration says the proposal would reduce the deficit by $320 billion over the next 10 years, which would eliminate inequities in the tax code that the president says “unfairly benefits the rich.”

The proposal has triggered concerns within the religious community as to how the tax changes would hinder giving – especially in an already shaky economy.

More than 1,500 congregations were recently surveyed revealing that 43 percent saw an increase in giving last year, according to research conducted by the 3rd Annual State of the Plate on giving.

When asked about the federal government's plan to modify the rules concerning charitable tax deductions, 91 percent of church leaders expressed concern that this would negatively affect their offerings each month.

Matthew Robb, a board member for Centennial Memorial United Methodist Church in Frederick, Maryland, said their church is like thousands across the nation who have merged food pantries, financial assistance programs and hot meals during the week.

"Hunger is so acute in Frederick County that things are constantly changing at the food bank,” Robb said.

The Second Street and Hope operates out of the church and provides food, clothing, sleeping bags, tarps, and even toothpaste. Members say they see new faces walking through the doors every day and the needs continue to grow.

"We have been doing this food pantry since 2003 and we have never seen demand so strong," Robb said. "We welcome as much support of food items as we can get from the community and 100 percent of the charitable donations go back to the neediest people of Frederick."

There is other research on the new tax law including a new report issued this week by the Congressional Budget Office, showing that the proposed tax changes are not expected to affect religious organizations because donors are less sensitive to the tax benefits of contributions.

Instead, it is the charities favored by the rich-the arts, education, and healthcare-that are more likely to see lowered donations, according to the report.

Whether giving increases or decreases in 2011 financial analysts say it will depend on a variety of factors.

"It's critical for church leaders to nurture relationships with people and show them how their giving directly helps the church's mission and their surrounding communities," said Matt Branaugh of Christianity Today International.

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