Total US charitable giving in 2020 reached an estimated $471 billion, an increase of more than five percent in nominal terms over the prior year. The growth came almost entirely from emergency response to the COVID-19 pandemic, supported by an unusual federal policy intervention that briefly restored a charitable deduction for non-itemizers. Both the magnitude of the giving response and the structure of the policy support deserve closer attention than they received at the time.
The emergency response
By mid-March, the Centers for Disease Control had advised against gatherings of more than fifty people, and most US schools and workplaces had transitioned to remote operation. Within ten days, community foundations across the country had launched COVID emergency funds; by the end of April, roughly one thousand such funds had been established, raising an aggregate of over $1 billion. Candid’s tracking of philanthropic COVID-19 response would eventually document over $20 billion in dedicated commitments from US foundations and corporations.
The largest single donor category, however, was individuals. Spontaneous personal giving to food banks, mutual-aid networks, and frontline-worker support funds drove a fourth quarter that was the largest single-quarter giving period any sector tracker had recorded.
The CARES Act provisions
The Coronavirus Aid, Relief, and Economic Security Act, signed in late March, contained two provisions specifically aimed at charitable giving. The first was a temporary above-the-line deduction of up to $300 for non-itemizers (later extended to $600 for joint filers in 2021). The second was a temporary lifting of the percentage-of-adjusted-gross-income cap on cash gifts for itemizers, allowing donors to deduct cash contributions up to one hundred percent of AGI for the year.
The first provision was essentially a one-year experiment in the universal charitable deduction that the sector had been advocating since 2018. The second was a more targeted accommodation for donors who wanted to make very large gifts during the crisis without bumping into the normal sixty-percent cap.
What the experiments showed
The universal deduction provision is the more analytically interesting of the two. Roughly forty-two million tax returns claimed the $300 above-the-line deduction in tax year 2020, indicating that a meaningful number of non-itemizing households did make charitable contributions and were aware of the deduction. The average claimed amount was, unsurprisingly, near the $300 ceiling, suggesting that the cap was binding for many filers.
Whether the provision actually induced new giving (versus merely subsidizing giving that would have occurred anyway) was a harder question to answer. Several econometric studies in the years that followed produced estimates in the range of $4 to $8 billion in induced giving from the provision — a significant figure but a minority of the total giving response, most of which was driven by the pandemic itself rather than by the deduction.
The hundred-percent-of-AGI cap was used by a much smaller number of donors but accounted for several billion dollars in unusually large gifts that would not have been deductible under normal rules. Several university endowments, hospital systems, and disaster-response organizations received eight- and nine-figure gifts that were sized specifically against the temporary higher cap.
The provisions lapsed
Both provisions were set to expire at the end of 2021, and despite extensive sector advocacy, neither was extended. The structural argument the sector had been making since 2018 — that the post-TCJA tax code provides no federal incentive to give for non-itemizing households — would resume after a brief two-year interruption and would not be addressed by subsequent legislation.