USA TODAY International Edition
Tax law changes could be charitable giving’s Grinch
WASHINGTON – The stakes are always high for charities this time of the year, but the final months of 2018 will be the most important in recent memory.
That's because nonprofit groups – including thousands of small charities such as the Dayspring Center homeless shelter in Indianapolis – will learn how much of a dent President Donald Trump's 2017 tax bill will put in their donations.
Studies predict the damage to charities nationally will be $13 billion to $20 billion, or 3 to 5 percent, said Michael Nilsen, vice president of communication for the Association of Fundraising Professionals. Charitable giving totaled about $410 billion in 2017, according to estimates by Giving USA, which provides data on charitable giving.
The 2017 Tax Cuts and Jobs Act increased the standard deduction that people may take on their federal tax returns and limited to $10,000 the amount of state income, sales and property taxes that could be deducted.
The end result, the Tax Policy Center predicted, is that about 16 million returns will itemize deductions for charitable gifts compared with 37 million in 2016.
That, in turn, is likely to cause people to give less, since they won't be getting the tax break they once did.
Lori Casson, executive director for the Indianapolis shelter, said some donors – probably those concerned about the tax advantages of giving – will “squeak in on Dec. 31” or mail donations that arrive after the new year but are dated in the previous year.
About 40 percent of the shelter's annual revenue of about $800,000 comes through donations in the last three months of the year, Casson said. Nationally, charities collect about onethird to one-half of their donations in the fourth quarter, Nilsen said.
The shelter uses the donations to provide emergency housing for 14 families at a time. Sometimes the families are parents and children, but there are also grandparents and grandchildren.
And the shelter is full virtually all the time, Casson said.
It's a plight many nonprofit groups face.
One study found that half of all nonprofit groups don't have the resources to meet the demand for their services, said Rick Cohen, a spokesman for the National Council of Nonprofits.
Identical bills were introduced in the House and Senate this session that would allow people to deduct their charitable contributions even if they do not itemize on their returns. Neither bill went anywhere, but advocates hope something can be done next year to ease the impact on charities.
Advocates also hope to reinstate a tax break for charities that was eliminated in the 2017 law. Under that provision, not-for-profit groups – which used to be allowed to provide free transportation benefits to employees – must pay a tax equal to 21 percent of the value of the benefit
The focus on the impact of the tax law has taken away from the attention that charitable leaders give to another of concern: the gradual decline in the number of givers. Household giving dropped 11 percent from 2000 to 2014, according to the Independent Sector, a national group of nonprofit members, but the overall amount given continues to grow because of the large bequests by individuals and companies.
“It's kind of an alarm bell,” Nilsen said, that signals that people are less connected with their communities. He called charitable giving by the middle class “the underpinning of our country.”