Last month, Congress passed, and the President signed, a comprehensive package intended to combat the public health and economic impacts bought about by the novel coronavirus (COVID-19) outbreak. Termed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, this legislation pays out roughly $2.5 billion in federal tax reduction for those who make cash donations to those fighting COVID-19. However, in Kansas, a sizeable group of taxpayers making donations won’t see a state tax reduction.
When Kansas lawmakers return to finish their 2020 session, they should reward the generosity of Kansans like the CARES act has done. Returning the tax windfall is the best response. It ensures we lower state taxes for those who’ve donated cash to those most affected by the Coronavirus outbreak.
As a reminder, state law says taxpayers who chose the federal standard deduction cannot claim state itemized deductions. In 2018, the legislature made two attempts to change the law and update the state’s tax code. The Governor vetoed both attempts, and roughly 90,000 Kansas taxpayers paid higher taxes in 2019. In 2020, another three to five thousand Kansas taxpayers saw a tax increase from this inaction.
Here’s a breakdown of how the CARES lowers taxes for those who give to charity.
Section 2105: Increase Deductions for Cash Contributions to 100% of Adjusted Gross Income
Before the CARES Act, if you itemize on your federal tax return, you can deduct from your income the amount of cash charitable donations made. However, the amount you can deduct was limited to no more than 60% of your Adjusted Gross Income (AGI).
After the CARES Act, for the 2020 tax year, you can deduct charitable cash deductions up to 100% of your AGI. Moreover, this provision allows Kansas taxpayers to take a larger deduction than would typically be available. It potentially boosts the charitable giving of Kansans as we get deeper into the global health crisis. Additionally, it rewards Kansans that have already provided cash donations to public charities.
Section 2104: Allow a $300 Charitable Contribution Deduction for Taxpayers who take the Federal Standard Deduction
Before the CARES Act, taxpayers who claim the federal standard deduction do not get a tax benefit from any charitable contributions made.
After the CARES Act, taxpayers who claim the federal standard deduction can deduct up to an additional $300 of cash contributions to public charities from 2020 and every year after that.
How does this affect the Kansas state return? Remember those 95,000 Kansans who saw a state tax increase due to the Governor ‘s veto of the tax windfall? What if those Kansas taxpayers made cash donations so far this year, especially to help those suffering under COVID-19? If so, they wouldn’t see lower state taxes for it.
When times are difficult, people naturally help each other, and the Coronavirus outbreak is no exception. In Andover, Kansans are working with the local police department to provide goods and cash to the Sunshine Children’s Home. In Johnson County, the Shawnee Mission Education Foundation is asking for cash donations to relieve Kansas families that are seeing financial hardship. Even Kansas congressional delegates like Roger Marshall and Sharice Davids are calling for Kansans to donate. Many Kansans give from a sense of obligation and generosity. Policymakers should reward these Samaritan deeds**
Unfortunately, the inability of Kansas to update its state tax structure has repercussions that permeate today. Policymakers should reward Kansans for helping their fellow man burdened by COVID-19.
**The point isn’t that KPI endorses these specific charitable efforts. Countless organizations are doing good work to relieve COVID hardship, and Kansans are flocking to support them.