What types of contributions qualify for the credit?
Options available to legislators and policymakers include cash, in-kind and appreciated property. Most proposals, however, restrict qualification for the credit to cash contributions. Some proposals do allow for in-kind contributions, either to nonprofit organizations or directly to the poor. BHI recommends restricting contributions to cash contributions. BHI recommends against appreciated property because it would allow the taxpayer, in substance if not in form, to sell the asset to the charity without recognizing a capital gain. This practice would result in massive revenue losses, since taxpayers could give all their appreciated assets to qualified charities rather than selling them. The motivation to give to charity would be pure tax avoidance, rather than altruism. A gift of stock worth $1,000, for example, with a cost basis of $300, would yield a deduction of $1,000, and the state would never see the tax revenue that the $700 of appreciation would have yielded.
