Stories of abuses by both donors to charities and by charitable organizations have once again filled newspaper headlines recently. The types of abuse are multiple, stretching from overvalued donations of easements (restrictions on certain uses of land to protect it, say, for conservation purposes) to vacations financed by donations of dead animal heads to the storage rooms of museums. In every crisis there is opportunity, and, in this case, it blends together a clean-up of the charitable sector with additional charitable incentives.

Retargeting the estate tax to very wealthy households and lowering its rates would blunt much of the criticism against it while retaining many of its advantages. This brief explains how the estate tax works and examines who is affected by it under current law. It discusses how reform would affect tax revenues, the distribution of tax burdens, farms and small businesses, and charitable giving and bequests. A concluding section discusses ways to reduce the tax’s complexity.

The IRS does not administer well items for which it does not have information reporting. Extending information reporting to most charitable contributions would simplify life for most individual givers, improve compliance, and likely be better for the charitable sector as well. An improved information reporting for charitable contributions goes hand-in-hand with the continually improving systems of accounting that accompany the advances of information technology.