Pittsburgh Foundation had increase in donations last year
Tax law changes have not hurt giving — yet
Just after sweeping federal tax reform was passed in December 2017, The Pittsburgh Foundation and other leading charitable groups issued a dire warning about how the new law might impact donations in 2018.
They projected charitable contributions could fall by as much as $60 million in the region because the new legislation raises the standard deduction to a level where many people might lose the incentive to make gifts that could no longer be written off on their tax returns.
But that didn’t happen at the foundation, a community philanthropy comprising more than 2,000 individual funds that award money to causes in and around Pittsburgh.
Donations totaled $69 million last year, up from $60.5 million in 2017, the Downtown-based charity reported Wednesday.
The total includes gifts to its affiliate fund, the Community Foundation of Westmoreland County.
“I do think Pittsburgh is just a very giving place,” said Maxwell King, president and chief executive of the foundation, which has more than $1 billion in assets.
“Despite the changes in the tax law, people in Pittsburgh remain very, very charitable and very interested in the community foundation model,” he said. “People just continued to want to give.”
Under the 2017 Tax Cuts and Job Act, the standard tax deduction roughly doubled from $6,350 to $12,000 for single filers, and from $12,700 to $24,000 for married couples.
The thinking was that people who traditionally itemized their deductions such as charitable gifts might decide to skip their annual donations because they couldn’t use the giving to lower their tax bills.
The Urban-Brookings Tax Policy Center in Washington has estimated the law will reduce the number of Americans who itemize charitable donations by more than half — from 21 percent to about 9 percent.
Mr. King noted that some individuals who gave to The Pittsburgh Foundation were able to claim a deduction for 2018 by using a technique called “bunching” in which they projected how much they would likely donate over several years and then made one large gift to a donor-advised fund.
Donors who “bunch” gifts can itemize their gift on their 2018 return and take the standard deduction for the next several years while their donor-advised fund continues to support their charity of choice, said Gene Logan, a shareholder with accounting firm Schneider Downs who leads the firm’s not-for-profit tax practice. Using that strategy, donors “get a much greater overall deduction in that time frame,” he said.
It may be too early to gauge the effect of tax reform, Mr. Logan said, because so many people have not yet filed their 2018 returns.
“We fully expected there’s going to be some impact … but for a lot of individuals it hasn’t dawned on them that the changes are going to take away the tax benefits of giving to charities,” he said.
Mr. Logan has stressed to his nonprofit clients that they may see a decline in donations for 2018 and in the future because of “pressures on individual giving.”
Still, a couple of factors could blunt the impact, he said.
A strong economy could encourage individuals to keep donating.
A report last year from Giving USA said Americans poured $410 billion into charities in 2017, surpassing $400 billion in a single year for the first time.
Also, tax deductions may not be the sole motivator for all who donate, said Mr. Logan.
“We’ve emphasized to our clients that people give because they believe in organizations, their mission and their cause — not to save dollars.”
For nonprofits, “it’s important to emphasize the good you do out there and the impact [donors’] dollars make,” he said.
The Pittsburgh Foundation said grants it awarded to nonprofits last year totaled $48.5 million, up from $44.5 million in 2017.
Though the foundation acknowledged the surge in giving last year will enable it to boost its grantmaking in 2019, it has yet to determine how to target the additional funds.