Thursday, October 25, 2018
A recent Forbes article encapsulated the nearly 10-month discussion of how the Tax Cuts & Jobs Act of 2017 (TCJA) will affect charitable giving and thus the finances of nonprofit entities. Although the TCJA did not make major changes to the tax law regarding charitable contributions, the increase in the standard deduction is estimated to significantly reduce the number of households that itemize deductions. The article references the Tax Policy Center's forecast at the beginning of the year that the TCJA could reduce donations by approximately 5 percent, and reduce the number of households taking an itemized deduction for charitable contributions from 21 percent in 2017 to 8 percent in 2018. The article summarizes the concerns of various players in the nonprofit sector (organizations, researchers, government officials):
- The TCJA likely will accelerate a growing shift from low- and moderate-income contributors to a relatively small number of mega-donors, a trend that makes many in the non-profit sector very uncomfortable.
- That shift will create winners and losers among non-profits. Religious and social service agencies may see contributions drop while bigger colleges, hospitals, and high-end arts organizations are largely unscathed.
- The benefits of the charitable giving deduction may go well beyond its ability to reduce the after-tax cost of giving. The signal it sends—that charitable giving is a good thing—may be as important as the dollars donors save.
- There is a lot unknown about what motivates givers, especially younger donors.