As I understand the status quo, I think what you are proposing would treat donating time more favorably than donating money. Say I work for an hour and earn $50. Then I give that $50 to charity. The $50 tx deduction just offsets the $50 income. The end result is that I gave away an hour of my time and didn't get any tax deduction. (But I didn't have to pay taxes on it either!)

This is a great idea. As for the implementation and the time-value of money, this need to be worked out. My understanding of the underlying tax law is that if you donate a car, that is something that can be audited. If you donate time, that is not something that can be easily auditied. This would be an issue that needs to be addressed to satisfy the IRS. Otherwise, any old 501c3 can write down that I donated 1000 hours and it will be nearly impossible to track.

I think that the system should allow for completed "widgets" to be donated that are typically thought of in hours served. Rather than a lawyer donating X hours, he should be able to donate finalized language for a contract. A payroll company could donate time to process non-profits payroll, and the donation could be based upon very auditable checks processed, not the time required to process them. Granted, implementation of this in a consistent and fair manner is where the trick lies.

I do think that there should be a way for donated services to receive a tax break.