The Reagan administration has agreed to accept an amendent to its tax bill creating a major expansion of the charitable tax deduction, according to Sen. Robert J. Dole (R-Kan.), chairman of the Senate Finance Committee.
Dole refused to outline details of the amendment in deference to the two key sponsors, Sens. Bob Packwood (R-Ore.) and Daniel Patrick Moynihan (D-N.Y.). But other sources said it would give the two-thirds of all taxpayers who use the short form the right to deduct charitable contributions, in addition to the standard deduction or zero bracket amount.
"I told them [Treasury Department officials] that the amendment has 49 co-sponsors and it can't be stopped," Dole told reporters at the end of a brief and relatively insignificant Saturday Senate session. He said the administration has agreed to accept a phased-in tax break for charitable contributors.
The proposal would allow the new deduction in modified form in 1982, and it would become fully effective in 1986, resulting in an estimated loss of $2.7 billon from U.S. Treasury revenues in the final year. In the first year, however, it would have little effect on the deficit since it would cost only $38 million.
During the past year, 310 charitable organizations, religious groups and corporations with contribution programs have banded together into a lobby called the Independent Sector. The coalition has argued that Reagan administration budget cuts are going to create new pressures for private charitable contributions, and some form of tax break is needed to encourage more giving.
Treasury Department officials have opposed the expansion of the charitable deduction on the grounds that taxpayers who use the short form already get what amounts to an assumed deduction for gifts to charity in the standard deduction.
Under the terms of the amendment to be approved next week by the Senate, if everything goes along the lines of the scenario outlined by Dole, the amendment would provide for the following:
In 1982, taxpayers using the short form would be able deduct up to 25 percent of their gifts to charity up to a ceiling of $100. The same would be true in 1983. But in 1984 the ceiling would be lifted, in 1985 the percentage would be raised to 50 percent, and in 1986 there would be a straight deduction for all gifts with no ceiling.
The amendment calls for the special tax break to end in 1987, but most participants in the debate over the issue contend that if the amendment becomes law, pressure on Congress to reenact it in 1987 will be intense.
While the Senate took no recorded votes yesterday, Dole said he is confident he has the votes to defeat an anticipated effort to restore a special tax "loophole" for commodity dealers the Senate Finance Committee bill closes.
In addition, he said a whip count is now being conducted to determine whether an effort to exempt from the windfall profits tax 1,000 barrels of "new" oil a day is being made. He indicated that he believes the amendment would be defeated, but declined to make a specific prediction. Pressure for the exemption has declined because House Democrats have become increasingly wary of including a parallel provision in their version of the tax cut.