How will tax reform affect charitable giving?

BY Lyndsay Christian, Producer and Correspondent |

There’s widespread uncertainty about the impact of the new tax code on families and companies. And people running not-for-profit charities are concerned donations they rely on to serve people in need may dwindle. The Center for Non-Profits President Linda Czipo spoke with Correspondent Lyndsay Christian.

Christian: Linda, so earlier this month there were two major not-for-profit conferences in which about 350 groups were in attendance. What were some of the issues discussed?

Czipo: A lot of different trends and concerns facing the nonprofit community. We talked about how to manage in turbulent times at the Investors Bank conference. At the Center for Non-profits conference, we focused on power in numbers. How nonprofits can come together in terms of collaboration and solving problems and advocating for their own well-being.

Christian: And some of those conversations overall, how do not-for-profits feel about the state of charitable giving?

Czipo: There is a lot of uncertainty right now. The economy is not quite proceeding the way that we’d hoped. The recovery has been a little bit slow and there is a lot of uncertainty with respect to what’s going to happen with the tax bill at the federal level. There are a lot of concerns with the tax bill because technically the charitable giving deduction is still in the bill, but because the standard deduction is raised, fewer people will be able to take it. That’s going to create a big disincentive for people to give to charity. The Johnson Amendment, which is the language that would prohibit charities from engaging in political speech, that is something we wanted out of the bill. We wanted to keep charities nonpartisan and fortunately that happened. The estate tax threshold is still going up and that’s another disincentive to charitable giving. So, we are very concerned about the impact this bill will have on charities, their ability to solicit donations that they need to provide the services that people need in communities.

Christian: When people think about giving, this is the holiday season, but you just mentioned there that there may be some confusion or people don’t think that deduction will matter. What are some other factors that would lead people not to give?

Czipo: I think maybe if they just don’t understand what a charity does. There’s a lot of information that they can find out either by going directly to the charity or going online and checking out what a charity does. There are some myths about what charities need and are allowed to do with the money. Charities need infrastructure support, they need to keep the lights on, they need to be able to hire and retain good people in order to provide the programs that people want to see them do.

Christian: So, we know that the economy is, as you mentioned earlier, it’s in the crux, right? For some people who are doing financially well, they have a little bit more to give. But, my question is why are nonprofits projecting a $13 billion drop in annual charitable giving?

Czipo: That again has to do with the tax reform bill. People can only deduct donations to charity if they itemize on their tax returns. Under the bill, the way it’s crafted, only five percent of taxpayers will actually be able to do that. That means a whole bunch of taxpayers who used to be able to itemize and used to be able to take that deduction won’t be able to anymore. And, we know that there is a link between, at a minimum, the amount that people give and the presence of a tax incentive. So, removing that is going to cause a precipitous drop and we are talking about at least $13 billion a year nationwide.

Christian: That is significant. Let’s look ahead to 2018, however. What is the projection for charitable giving overall or how can people really support and why should they support not-for-profits and nonprofits organizations?

Czipo: I think starting with the why, it’s because nonprofits are there in communities. They are providing the programs and services and education and environmental protection and artistic and spiritual enrichment that people need, and that people look to to keep themselves whole. And, nonprofits are often the first and last stop for people in distress. And unfortunately, the reality is for the last number of years, the demand for the services that nonprofits provide has outpaced the resources that not-for-profits need. So, we’re talking about a situation where nonprofits are already being stretched. So, every dollar every bit of resource and support is critically needed and it’s put to good use.