By Gretchen Greiner-Lott
Vice President, Washington Regional Association of Grantmakers
Today – #GivingTuesday – is a day to “celebrate and encourage” giving. It is also a key day in the process to reform our tax codes, which may stifle giving and degrade the charitable sector for years to come.
The following provisions in the Senate Tax Reform Bill directly relate to the charitable sector:
- Johnson Amendment – the Senate bill preserves the current law that protects nonprofit nonpartisanship; however, the House bill allows nonprofits, houses of worship, and foundations to participate in partisan electioneering. (Result: $2.1B in lost revenue to federal government as donors move political contributions from non-deductible to deductible status)
- Standard Deduction and Incentives for Charitable Giving – both the Senate and House bills contain increases to the standard deduction for individuals, couples, and heads of households making the charitable deduction unavailable to 95% of the population. Without the tax incentive of charitable deductions, it is projected that charitable giving will significantly decrease. (Result: estimated loss of $13B or more per year to charitable nonprofits)
- Universal Deduction for Charitable Deductions (Non-Itemizer or Above-the-Line Deduction) – neither the Senate nor the House bill provides charitable giving incentives to non-itemizers; if the standard deductions are increased as described above, the negative consequences on individual giving must be mitigated with a universal deduction.
There are other parts of the bills that would affect the charitable sector and/or issues in which the sector is actively engaged, including:
- Private Activity Bonds – although the Senate bill makes no change to the current law, the House bill would do away with all tax-exempt private activity bonds that many nonprofits use to finance building and renovation projects, including affordable housing, schools, and hospitals.
- State and Local Tax (SALT) Deductions – both bills repeal all state and local income tax deductions, and the Senate bill ends all property tax deductions, resulting in state and local governments needing to cut spending on (or totally eliminate) programs and services for those in need. Nonprofits and foundations would be expected to fill these service and funding gaps.
Before the Senate votes on the bill, expect amendments to be offered and changes to be made. Once approved, the legislation must go back for another House vote.
It is unclear what the final bill will include. What is clear is the potential harm that could befall the charitable sector – and the individuals, families, and communities it serves – if the above provisions pass. Critical actions may be taken in the next week or so in order to meet the goal of finalizing tax reform by year’s end.
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