Saturday, July 7, 2018

Charitable Giving Trends and Federal Tax Law

GUSA2018ReportCoverflatTwo important recent reports provide information regarding trends in charitable giving, the annual Giving USA report and a report from the American Enterprise Institute on the likely effects of the recent federal tax legislation on charitable giving.

The Giving USA 2018 report shows continued growth in charitable giving, by 5.2 percent (3.0 percent adjusted for inflation) over 2016 to an estimated $410.02 billion in 2017. Individuals continue to provide most of the giving (70 percent), although foundation giving has increased by an annualized average of 7.6 percent over the past five years. Religious organizations continue to receive the largest proportion (31 percent) of giving among types of charities. These numbers mask at least two interesting trends, however. One is the well-known growth in donor-advised funds (see, e.g., this Atlantic article and this ThinkAdvisor article, both gathering data about such growth). The other is a decline in the number of donors, even as the total amount of donations has increased, as documented in data collected by the Indiana University's Lilly School of Philanthropy showing that from 2000 to 2014 the share of Americans donating dropped from 66.2 percent to 55.5 percent. See Chronicle of Philanthropy article.

The Giving USA report almost certainly does not reflect much impact from the recent federal tax legislation, given its passage in December 2017, but the AEI report fills that gap by trying to predict how the legislation as enacted will affect charitable giving. It concludes that the tax law changes will reduce charitable giving by 4.0 percent or $17.2 billion in 2018 under a static model and by $16.3 billion if the changes also provide a modest boost to growth. Four-fifths of this effect is driven by the increased number of taxpayers who will claim the enhanced standard deduction and so will no longer benefit from the itemized charitable contribution deduction.

Lloyd Mayer

https://lawprofessors.typepad.com/nonprofit/2018/07/charitable-giving-trends-and-federal-tax-law.html

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