Split charitable deduction AGI cap by organization type

changelog_entry.yaml

@@ -0,0 +1,4 @@
+- bump: minor
+  changes:
+    added:
+    - Split non-cash charitable deduction AGI cap by organization type per 26 USC 170(b)(1). Non-cash donations to 50-percent limit organizations are capped at 50% of AGI, while donations to other organizations are capped at 30% of AGI.

policyengine_us/parameters/gov/irs/deductions/itemized/charity/ceiling/non_cash_to_non_50_pct_org.yaml

@@ -0,0 +1,16 @@
+description: >-
+  Ceiling (as a fraction of AGI) for noncash charitable contributions
+  to organizations other than 50-percent limit organizations.
+  Note: 170(b)(1)(D) sets a stricter 20% cap for capital gain property
+  to these organizations, which is not yet modeled separately.
+metadata:
+  unit: /1
+  period: year
+  label: Non-cash charitable deduction limit for non-50% limit organizations
+  reference:
+    - title: 26 U.S. Code 170(b)(1)(B) - General 30% limit for non-50% limit organizations
+      href: https://www.law.cornell.edu/uscode/text/26/170#b_1_B
+    - title: 26 U.S. Code 170(b)(1)(D) - 20% limit for capital gain property to non-50% limit organizations
+      href: https://www.law.cornell.edu/uscode/text/26/170#b_1_D
+values:
+  2013-01-01: 0.3

policyengine_us/tests/policy/baseline/gov/irs/income/taxable_income/deductions/itemizing/charitable_deduction.yaml

@@ -5,7 +5,7 @@
     charitable_non_cash_donations: 500
     positive_agi: 1_000
     charitable_deduction_for_non_itemizers: 0
-  output: # min(min(500, 1000 * 0.3) + 300, 1000 * 0.5)
+  output: # min(min(500, 1000 * 0.5) + 300, 1000 * 0.5)
     charitable_deduction: 500
 
 - name: 2018 filer
@@ -14,7 +14,7 @@
     charitable_cash_donations: 500
     charitable_non_cash_donations: 200
     positive_agi: 1_000
-  output: # min(min(200, 1000 * 0.3) + 500, 1000 * 0.6)
+  output: # min(min(200, 1000 * 0.5) + 500, 1000 * 0.6)
     charitable_deduction: 600
 
 - name: 2020 filer
@@ -24,7 +24,7 @@
     charitable_non_cash_donations: 200
     positive_agi: 1_000
     charitable_deduction_for_non_itemizers: 0
-  output: # min(min(200, 1000 * 0.3) + 500, 1000 * 1)
+  output: # min(min(200, 1000 * 0.5) + 500, 1000 * 1)
     charitable_deduction: 700
 
 - name: 2021 filer
@@ -34,7 +34,7 @@
     charitable_non_cash_donations: 200
     positive_agi: 1_000
     charitable_deduction_for_non_itemizers: 300
-  output: # min(min(200, 1000 * 0.3) + (500 - 300), 1000 * 0.6)
+  output: # min(min(200, 1000 * 0.5) + (500 - 300), 1000 * 0.6)
     charitable_deduction: 600
 
 - name: 2021 filer 2
@@ -44,7 +44,7 @@
     charitable_non_cash_donations: 200
     positive_agi: 1_000
     charitable_deduction_for_non_itemizers: 600
-  output: # min(min(200, 1000 * 0.3) + min(500 - 600, 0), 1000 * 0.6)
+  output: # min(min(200, 1000 * 0.5) + max(500 - 600, 0), 1000 * 0.6)
     charitable_deduction: 600
 
 - name: No AGI
@@ -91,3 +91,73 @@
     positive_agi: 20_000
   output:
     charitable_deduction: 12_000
+
+- name: Non-cash to non-50% limit orgs capped at 30% of AGI
+  period: 2024
+  input:
+    charitable_cash_donations: 0
+    charitable_non_cash_donations: 500
+    charitable_non_cash_donations_non_50_pct_orgs: 500
+    positive_agi: 1_000
+  output:
+    # 50% org non-cash = 0
+    # non-50% org: min(500, 0.3 * 1000) = 300
+    # min(0 + 300, 0.6 * 1000) = 300
+    charitable_deduction: 300
+
+- name: Mix of 50% and non-50% org non-cash donations
+  period: 2024
+  input:
+    charitable_cash_donations: 0
+    charitable_non_cash_donations: 600
+    charitable_non_cash_donations_non_50_pct_orgs: 200
+    positive_agi: 1_000
+  output:
+    # 50% org: min(400, 500) = 400
+    # non-50% org: min(200, 300) = 200
+    # min(400 + 200, 600) = 600
+    charitable_deduction: 600
+
+- name: Overall ceiling binds with mixed org types
+  period: 2024
+  input:
+    charitable_cash_donations: 0
+    charitable_non_cash_donations: 800
+    charitable_non_cash_donations_non_50_pct_orgs: 400
+    positive_agi: 1_000
+  output:
+    # 50% org: min(400, 500) = 400
+    # non-50% org: min(400, 300) = 300
+    # min(400 + 300, 600) = 600
+    charitable_deduction: 600
+
+- name: Non-50% org only hits 30% cap
+  period: 2024
+  input:
+    charitable_cash_donations: 0
+    charitable_non_cash_donations: 400
+    charitable_non_cash_donations_non_50_pct_orgs: 400
+    positive_agi: 1_000
+  output:
+    # non-50% org: min(400, 300) = 300
+    # min(300, 600) = 300
+    charitable_deduction: 300
+
+- name: Non-50% org with floor and cash
+  period: 2026
+  input:
+    charitable_cash_donations: 5_000
+    charitable_non_cash_donations: 20_000
+    charitable_non_cash_donations_non_50_pct_orgs: 5_000
+    positive_agi: 100_000
+  output:
+    # floor = 0.005 * 100000 = 500
+    # 50% org non-cash = 15000, reduced = max(15000 - 500, 0) = 14500
+    # capped 50% = min(14500, 50000) = 14500
+    # remaining_floor_after_50 = max(500 - 15000, 0) = 0
+    # non-50% non-cash = 5000, reduced = max(5000 - 0, 0) = 5000
+    # capped 30% = min(5000, 30000) = 5000
+    # remaining_floor = max(0 - 5000, 0) = 0
+    # cash = max(5000 - 0, 0) = 5000
+    # min(14500 + 5000 + 5000, 60000) = 24500
+    charitable_deduction: 24_500

policyengine_us/variables/gov/irs/income/taxable_income/deductions/itemizing/charitable_deduction.py

@@ -11,30 +11,74 @@ class charitable_deduction(Variable):
     reference = "https://www.law.cornell.edu/uscode/text/26/170"
 
     def formula(tax_unit, period, parameters):
+        # TODO: 26 USC 170(b)(1) defines 4 contribution categories with
+        # separate AGI caps:
+        #   (G) Cash to 50% limit orgs: 60% AGI (post-TCJA)
+        #   (B) Cash to non-50% limit orgs: 30% AGI
+        #   (C) Capital gain property to 50% limit orgs: 30% AGI
+        #       (or 50% with basis-reduction election)
+        #   (D) Capital gain property to non-50% limit orgs: 20% AGI
+        # Currently we model two non-cash categories (50% vs 30% cap)
+        # and treat all cash as subject to the overall cap only.
+        # The cash split and the 20% category are not yet modeled.
         cash_donations = add(tax_unit, period, ["charitable_cash_donations"])
         non_cash_donations = add(
             tax_unit, period, ["charitable_non_cash_donations"]
         )
+        non_cash_to_non_50_pct = add(
+            tax_unit,
+            period,
+            ["charitable_non_cash_donations_non_50_pct_orgs"],
+        )
+        non_cash_to_50_pct = non_cash_donations - non_cash_to_non_50_pct
         positive_agi = tax_unit("positive_agi", period)
         p = parameters(period).gov.irs.deductions.itemized.charity
-        capped_non_cash_donations = min_(
-            non_cash_donations, p.ceiling.non_cash * positive_agi
+
+        # Non-cash to 50% limit orgs capped at 50% of AGI.
+        # Note: this models the basis-reduction election under
+        # 170(b)(1)(C)(iii); the default cap for capital gain
+        # property is 30% per 170(b)(1)(C)(i).
+        capped_non_cash_50 = min_(
+            non_cash_to_50_pct, p.ceiling.non_cash * positive_agi
         )
+        # Non-cash to non-50% limit orgs capped at 30% of AGI
+        # per 170(b)(1)(B). Note: the stricter 20% cap for
+        # capital gain property under 170(b)(1)(D) is not yet
+        # modeled separately.
+        capped_non_cash_non_50 = min_(
+            non_cash_to_non_50_pct,
+            p.ceiling.non_cash_to_non_50_pct_org * positive_agi,
+        )
+        capped_non_cash = capped_non_cash_50 + capped_non_cash_non_50
 
         total_cap = p.ceiling.all * positive_agi
         if p.floor.applies:
             deduction_floor = p.floor.amount * positive_agi
-            reduced_non_cash_donations = max_(
-                non_cash_donations - deduction_floor, 0
+            reduced_non_cash_50 = max_(non_cash_to_50_pct - deduction_floor, 0)
+            capped_reduced_non_cash_50 = min_(
+                reduced_non_cash_50,
+                p.ceiling.non_cash * positive_agi,
             )
-            capped_reduced_non_cash_donations = min_(
-                reduced_non_cash_donations, p.ceiling.non_cash * positive_agi
+
+            remaining_floor_after_50 = max_(
+                deduction_floor - non_cash_to_50_pct, 0
+            )
+            reduced_non_cash_non_50 = max_(
+                non_cash_to_non_50_pct - remaining_floor_after_50, 0
+            )
+            capped_reduced_non_cash_non_50 = min_(
+                reduced_non_cash_non_50,
+                p.ceiling.non_cash_to_non_50_pct_org * positive_agi,
             )
 
-            remaining_floor = max_(deduction_floor - non_cash_donations, 0)
+            remaining_floor = max_(
+                remaining_floor_after_50 - non_cash_to_non_50_pct, 0
+            )
             reduced_cash_donations = max_(cash_donations - remaining_floor, 0)
             return min_(
-                capped_reduced_non_cash_donations + reduced_cash_donations,
+                capped_reduced_non_cash_50
+                + capped_reduced_non_cash_non_50
+                + reduced_cash_donations,
                 total_cap,
             )
-        return min_(capped_non_cash_donations + cash_donations, total_cap)
+        return min_(capped_non_cash + cash_donations, total_cap)

policyengine_us/variables/household/expense/charitable/charitable_non_cash_donations_non_50_pct_orgs.py

@@ -0,0 +1,17 @@
+from policyengine_us.model_api import *
+
+
+class charitable_non_cash_donations_non_50_pct_orgs(Variable):
+    value_type = float
+    entity = Person
+    label = "Charitable non-cash donations to non-50% limit organizations"
+    unit = USD
+    documentation = (
+        "Non-cash charitable donations to organizations other than "
+        "50-percent limit organizations described in "
+        "26 USC 170(b)(1)(A), such as private non-operating "
+        "foundations. These are subject to a lower AGI ceiling "
+        "than donations to 50-percent limit organizations."
+    )
+    definition_period = YEAR
+    reference = "https://www.law.cornell.edu/uscode/text/26/170#b_1_B"