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How will the new tax law affect charities?



Deacon Greg Kandra - published on 12/28/17

I was wondering about this the other day—and how this could impact the church. Here’s one answer from the founder of a non-profit in The Los Angeles Times:

Unfortunately for nonprofits, the new rules are going to discourage charitable donations. At a time when discretionary government services are diminishing, and as deeper cuts are contemplated, the role of nonprofits in filling the holes in the social safety net is becoming more essential. Charities have been stepping up to provide emergency relief and long-term aid for those who lost everything in California’s wildfires, and in the floods and hurricanes that decimated the Gulf Coast and Puerto Rico. They’ve responded to the mass shootings in Las Vegas and Texas. And day in, day out, they work to meet the needs of abused women, hungry children, the homeless, the disabled. It’s never easy to keep social service charities running; they operate on tight margins in the best of times. Now the new tax law, according to estimates from the Council on Foundations, will drain $16 billion to $24 billion a year from the nonprofit sector going forward. The problem is that while the Tax Cuts and Jobs Act preserves the deductibility of charitable contributions, it restructures the system so that millions will lose incentives to give. Most people donate from their hearts to causes they care about, regardless of taxes. It is undeniable, however, that the reward for giving will go down and the cost of giving will go up… …The Tax Cuts Act simultaneously raises the standard deduction to $24,000 for a married couple. For millions it will no longer make sense to itemize, and that too means fewer charitable gifts: You can only deduct donations if you itemize. Twenty years ago, the estate tax exemption was $600,000 for an individual — estates worth more than that were taxed. Next year, the exemption will be over $11.2 million for an individual. Whatever your views on estate taxes, it should be clear that exempting larger and larger amounts to lower the tax burden on heirs erodes the incentive to leave bequests to charity.

Read on. 

The Washington Post has more: 

Many U.S. charities are worried the tax overhaul bill signed by President Trump on Friday could spur a landmark shift in philanthropy, speeding along the decline of middle-class donors and transforming charitable gift-giving into a pursuit largely left to the wealthy. The source of concern is how the tax bill is expected to sharply reduce the number of taxpayers who qualify for the charitable tax deduction — a big driver of gifts to nonprofits. One study predicts that donations will fall by at least $13 billion, about 4.5 percent, next year. That decline is expected to be concentrated among gifts from the middle of the income scale. The richest Americans will mostly keep their ability to take the tax break. That could create new winners and losers in philanthropy. Nonprofits have long noticed that the wealthy are more likely to cut big checks to support museums and universities, while smaller donors tend to give to social-service agencies and religious organizations. Charities fear that this shift could change how the public views donating and alter the priorities of nonprofits. “The tax code is now poised to de-incentivize the heart of civic action in America,” said Dan Cardinali, president of Independent Sector, a public-policy group for charities, foundations and corporate giving programs. “It’s deeply disturbing.”
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