NOVEMBER 27, 2017 — 2:00 PM EST
by Mike DiCandilo and Pedro Ramos
This is a critical time for our nonprofit community, as lawmakers consider comprehensive tax-reform legislation. A final decision is expected in coming weeks.
What is up for consideration could have tangible, long-lasting effects on private charitable giving throughout our nation, but more specifically here in Pennsylvania and New Jersey, as the legislation in play would cause significant reductions in charitable giving to local nonprofits.
Despite technically preserving the “charitable deduction,” according to the Joint Committee on Taxation, under the House bill (which passed the chamber on Nov. 16) and the draft Senate bill, 31 million taxpayers who currently claim the deduction will lose it. This, as noted in research conducted by the Indiana University Lilly Family School of Philanthropy, would cause a 5 percent decrease in overall giving, but more concerning is $13 billion in lost private donations to charities that concentrate on basic needs and disaster relief, which often rely on gifts from middle-class donors.
Consider the local impact:
- 1.5 million taxpayers in Pennsylvania claimed the charitable deduction and donated nearly $7 billion to nonprofit organizations during the tax year 2015.
- 1.53 million donors in New Jersey claimed the charitable deduction and gave more than $6 billion in donations in 2015.
- A loss of just 5 percent would mean $350 million less in Pennsylvania and $302.5 million less in New Jersey to fund private food banks, homeless shelters and crisis interventions, job training programs, and access to quality child care, likely resulting in reduced services for residents who need our help the most.
America is considered one of the most charitable nations in the world, contributing an estimated $390.1 billion to U.S. charities in 2016, according to Giving USA’s 2017 Report on Philanthropy. Years of research have shown that although individual reasons for charitable giving differ, the 100-year-old charitable tax deduction provides a significant incentive for people of all income levels to be, or become, philanthropic. Arguments that tax reform will result in increased giving without this valuable deduction are not supported by any economic data or focused studies, or even long-standing experience of those working in nonprofit development. Moreover, if tax reform in its current form is enacted, 95 percent of donors to charity will be taxed on their gifts, and only the wealthiest donors will be able to make tax-exempt donations.
The current tax reform plan has serious implications for those who give, and those who receive help. And it’s something to carefully consider as you make your holiday and year-end gifts to causes that you support. We urge you to support legislation that preserves the charitable tax deduction as an important and accessible way for all Americans to be charitable.