Article on Charitable Contributions of Property
On average, nearly $46 billion of property is given tocharitable organizations each year, about twenty-five percent of the totalcharitable deduction. This makes the charitable contribution deduction forproperty a tax expenditure within a tax expenditure, yet it is rarely analyzedas such. It emerged as part of a noble effort to encourage contributions toworthy organizations. But the deduction for property has never worked well. Thegeneral rule allowing a deduction based on the fair market value of the propertymay have some intuitive appeal, but its implementation has yielded numerousexceptions and immense complexity. The Article argues that the extensivehistorical effort to allow a deduction for property contributions is a failure.Given the substantial direct and indirect costs involved, the uncertain benefitto the donee from property contributions, and the absence of any affirmativepolicy to favor property contributions as such, it is time to reverse thegeneral rule and not allow a charitable deduction for property contributions.Reversing the general rule would provide many benefits — increased revenue,improved tax administration, fewer abusive transactions, a simpler and moreequitable tax code, and a preference for cash. Exceptions to the general ruleof disallowance may be warranted, but any exception should be analyzed andfashioned according to whether it provides a measurable benefit to the donee.By following a measurable benefit to the donee standard, emphasis will beplaced on providing a tax benefit that is administrable and that is based onthe goal — donee benefit. Any resulting complexity should be viewed as a costof the incentive, and weighed accordingly in deciding whether it should beprovided.