As passed, Tax Reform will have Negative Impact on Nonprofits, Charitable Giving
OpEd by Marnie Taylor, President and CEO
Last week, the Senate passed its version of the Tax Reform package similar to the House a few weeks prior. Both bills will be harmful to the charitable sector in the United States for a multitude of reasons. Nonprofits should be concerned about lasting effects of changes to the tax code that will have an impact on operations and charitable giving.
Both bills doubled the standard deduction to $12,000 for individuals and $24,000 for couples filing returns. This will reduce the number of Americans who itemize on their taxes from 30 percent to just five percent. Because of these reductions, it is estimated by the Lilly School of Philanthropy at Indiana University that charities in the United States could lose at least $13 billion annually in charitable giving. Additionally, both bills phase out the estate tax. This could disincentivize charitable gifts from larger estates that come through planned giving.
Worse yet, the House bill included language that will dramatically weaken the Johnson Amendment, allowing nonprofits and houses of worship to endorse candidates for office. We continue to support keeping political candidates out of nonprofit missions. We also are concerned that charitable contributions that are tax-exempt and tax-deductible could now be used to support candidates through endorsement from nonprofits and churches.
Last month, Sen. James Lankford introduced a Universal Charitable Deduction that would continue to encourage and incentivize giving from those who don’t itemize. It would allow all filers to deduct up to $2,100 (individuals) or $4,200 (couples) from their taxes regardless of whether or not they itemize on their returns. Unfortunately, that language did not make it into either the House or Senate versions of the tax bills. We are hopeful his bill could be passed with bi-partisan support separately from the tax reform package.
Additionally, while Congress reconciles the bills, we hope they remove the damaging language that will allow nonprofit organizations to endorse candidates. This would have a lasting and devastating effect on the sector, our credibility and our philanthropic support.