The Register Citizen (Torrington, CT)
Nonprofits fear donations drop in wake of federal tax bill
In the wake of the Tax Cuts and Jobs Act signed into law by President Donald Trump last week, local nonprofits scrambled last wek to help donors take advantage of tax incentives that disappeared Jan. 1.
“What we’ve been hearing from current donors as well as new donors is: what’s an option to them because of the new implications for for charitable giving,” said Kristy Jelenik, development director at Fairfield County’s Community Foundation, based in Norwalk.
That is because the new tax law shifts incentives away from making charitable donations.
Taxpayers have two options for deductions, which lower the amount of earnings they are taxed for. They can subtract a preset amount, known as a standard deduction, from their taxable income. Or they can instead subtract various expenses such as state taxes, real estate taxes and charitable donations — what is known as an itemized deduction.
This means charitable donations only provide a tax benefit if your deduction-eligible expenses are greater than the standard deduction — and the new tax law nearly doubles that standard deduction to $12,000 for singles and $24,000 for married couples. The Council on Foundations estimates that, as a result, the amount of charitable giving will decrease by $16 billion to $24 billion a year, dealing a blow nonprofits around the world.
“It basically says that unless you donate more than a significant amount, it’s not worth reporting that for tax reasons,” said Anthony Crisci, executive director of the Triangle Community Center in Norwalk, which provides resources for the LGBTQ community throughout the county.
“So for the average person who can’t afford to donate on that scale, there’s basically no tax benefit for donating to that charity. While the majority of donors care deeply and passionately about our mission, and their first concern with giving is not whether it’s tax deductible, it would be reasonable to assume that some of our donors, maybe five to 10 percent, might reconsider their gift or may not give as much.”
A rush to give before new tax law takes hold
Local nonprofits have suggestions for donors.
Jelenik put forth the idea of a donor advised fund. That setup allows donors to put cash and appreciated assets in a fund now, taking advantage of current deduction laws, then dole it out to charities over the upcoming years. While there are only a couple days left in 2017, she said the funds were quick to arrange.
“I got a call this morning from a donor, emailed her the fund agreement, and she’s already signed it, scanned it and gotten it back to me. So it’s that easy to establish a donor advised fund,” Jelenik said.
Peter Saverine, director of philanthropy at STAR Inc., a Norwalk-based nonprofit that supports people with intellectual and developmental disabilities, suggested donating vehicles as a creative way to receive a deductible for supporting a charity. “Even if it’s a clunker, the minimum deductible a donor gets is $500,” he said.
He added that he’s noticed an uptick in donations that could suggest some donors are giving tomorrow’s donations today. “In the past couple of days, in an unsolicited way, people who typically give a certain amount have unexpectedly doubled it. I don’t know if that’s because the stock market is strong or if it’s this year’s and next year’s bundled up together,” he said. “I think it’s there is a bit of a rush for people to take advantage of whatever tax deduction they can get ... but it’ll only be a onetime fix, because they won’t be able to do it next year.”
Looking to the future
Many local places are hopeful their donor base will not be deterred by the lack of incentives.
“Our donor base is a very loyal donor base,” said Steve Mernick, president of the Rowayton Arts Center board. “They’ve supported us for years, and we think that because of the type of organization that we are, they will continue that loyalty,” he said, though he added it is too early to understand the full implications of the new law.
“Most of the money we get, realistically, is from people who are touched by the people we serve,” Saverine said.
“We see that most people are motivated by a desire to give,” Jelenik said.
However, many worried about the impacts on the broader sector. At the same time private giving is being disincentivized, government funding for social services are being cut on both the state and federal levels, a problem that will impact even organizations that emerge financially unscathed.
“We really operate as a network,” Crisci said, explaining that when clients need services, such as housing, they are often referred to other nonprofits, which work together as a team. “So when the other agencies see a cut in funding, that impacts us as well, because it limits the resources our clients have access to.”
“This has the potential to be devastating to nonprofits in Connecticut and elsewhere,” said Gian-Carl Casa, chief executive officer of the Alliance, the largest nonprofit association in Connecticut. “So many of the programs that are operated by nonprofits — programs that provide drug treatments, programs that provide for developmentally disabled people — are recipients of state funding. And if that funding is cut, they have to look for other sources of revenue. If individual contributions also dry up, you’re setting up, really, a perfect storm for nonprofits.”
In response, the Alliance is calling for government funding as well as what’s known as a universal deduction, which would allow charitable donations to be deducted on top of standard deductions. “We’re going to keep fighting,” Casa said.