Nonprofits await tax law’s effect

Change to standard deduction may mean fewer donations by itemizing taxpayers

Milwaukee charities are waiting to see if the federal tax law will give them a short-term boost — and a long-term pinch.

When the tax legislation signed by President Donald Trump takes effect Monday, it will shift the incentives for charitable giving for many taxpayers.

That’s left nonprofits hustling to make sure their donors understand those changes and consider whether they should move up their planned giving to take advantage of what could be more favorable tax deductions in 2017.

The Milwaukee Art Museum, for instance, has sent out a letter to donors and noted the changes on its website. Marketing director Amanda Peterson said that some donors seem to be moving up some previously planned contributions and making them ahead of the Sunday deadline because of the change in federal law.

“On the smaller scale donations, we haven’t seen an uptick,” Peterson said. “On the larger individual gifts from our longtime supporters, (some) have shifted their donations.”

The Milwaukee Repertory Theater is seeing a similar trend.

“Milwaukee Rep has experienced some donors responding to the tax news by making their gifts for next year earlier than normal, but the majority of our donors are giving their usual annual gift amounts,” chief development officer Chuck Rozewicz said.

Republicans in Congress didn’t directly eliminate or even reduce the federal income tax deductions for charitable donations, which reduce taxes paid to the U.S. government by $41.5 billion a year. But their legislation could still have significant effects on nonprofits, particularly in the case of donors who aren’t wealthy.

As with any changes to the tax code, individuals and charities need to consult accountants or do their own research on how the new law will affect their specific situation.

For churches, nonprofits and donors,

the key change is this: starting in 2018 fewer people will need to itemize deductions for expenses like charitable donations, state and local taxes, mortgage interest and medical bills. That’s because the legislation nearly doubled the standard deduction to $12,000 for individuals, $18,000 for heads of household and $24,000 for married couples.

If a taxpayer stops itemizing, then a charitable contribution will no longer reduce his or her taxable income and federal tax liability, effectively making these donations more expensive.

Nationally and in Wisconsin, roughly one-third of tax filers itemize their deductions. That could drop to as few as 10% nationally under the new federal law, according to some estimates.

The Tax Policy Center has estimated that this change could reduce charitable giving by $12 billion to $20 billion nationally.

Steve Taylor, senior vice president and counsel for public policy at the national United Way, said he’s “very concerned” about a potential loss of donations next year, especially from relatively modest donors.

“A lot of charities are in shock. Charities feel totally blindsided and like we have been thrown under the bus,” Taylor said.

Experts say donations rose in late 1986 and then dropped the next year following the passage of a major tax overhaul under then President Ronald Reagan.

So far, however, not all Wisconsin charities are seeing major changes, perhaps in part because many donors haven’t fully digested the implications of the federal change.

“Our donations in December are running pretty

“A lot of charities are in shock. Charities feel totally blindsided and like we have been thrown under the bus.” Steve Taylor senior vice president and counsel for public policy at the national United Way

close to flat from last year,” said Dave Fantle, chief marketing officer of the United Performing Arts Fund in Milwaukee.

“We have seen a few notes on credit card donations regarding the tax bill, but not a spike,” said Sherrie Tussler, executive director of Hunger Task Force in Milwaukee. “Most of our donors give around $100, so (they’re) not big itemizers.”

Wisconsin Rep. Dale Kooyenga (R-Brookfield), a certified public accountant, said that donors have many reasons to give and that he believed most would continue to do so regardless of the federal changes.

But Kooyenga acknowledged that the law will change some behavior — even in his own household. For instance, Kooyenga said some donors may go ahead and make this week the contributions that they previously planned for early 2018.

“I know the Kooyenga family is,” he said. Going forward, Kooyenga said taxpayers may look at doubling up every other year on itemized deductions that they are able to shift forward or back by a few weeks or months. That could include property taxes, charitable contributions or even medical procedures that aren’t an emergency, he said.

In that way, taxpayers might exceed the higher standard deduction in one tax year and go back to using the standard deduction in the next, he said.