What does tax reform mean for the nonprofit sector?

December is a time of giving, not just to family and friends but to nonprofit organizations as donors look at their year-end tax obligations and decide to accelerate expenses by making donations to their favorite charities. This year has been a good one for many people who have seen enough financial success to give more generously than usual.

However, current tax reform plans from both the Senate and House threaten to reduce charitable giving in the United States. Greenville Partnership for Philanthropy has not met to take a position on these proposals, but many of our peer organizations, such as the National Council of Nonprofits, United Way Worldwide, and the Council on Foundations,  have issued warnings about how dramatically the proposals could change the nonprofit sector.

United Way Worldwide cautions that under the bills, 95 percent of Americans will be taxed on their donations to charities, which would result in a $13 billion decrease in giving. An increase in the estate tax exemption will also reduce giving, as was seen in 2010 when the estate tax was temporarily not in force and bequests from estates declined 37% (rising again by 92% in 2011), according to the National Committee for Responsive Philanthropy.  And a weakening of the Johnson Amendment, present in the House bill, would mean that churches and charities could lobby, thus  – as the Council on Foundations suggests – becoming “subject to pressure by donors, potential donors, elected officials, political parties or other external forces to endorse or oppose candidates for public office. It would also allow for money donated for political purposes to be claimed under the charitable deduction—compromising the charitable missions and integrity of 501(c)(3) organizations by allowing electoral activity to enjoy the same benefits as charitable work.”

The National Council of Nonprofits has a helpful side-by-side comparison of the bills and their potential impacts on the nonprofit and philanthropic sector.

The conference committee to iron out the differences between the bills has been appointed; Senator Tim Scott is the only South Carolinian to be involved in the process. If you have information to share with elected officials on this topic, the time to do so is NOW. Contact Senator Scott as well as your other Senate and House members who may soon vote on the new reconciled bill.  As our July speaker, Stephanie Powers from the Council on Foundations, told us, funders have the right and responsibility to pay attention to public policy and inform legislators of potential impacts (as do nonprofit organizations who offer health and human services, education, support for the arts, protection for the environment, and more).  And as citizens acting on your own, you can and should tell your representatives what you expect of them as a constituent.

But meanwhile, outside of Washington, DC, I know that our GPP members continue to support our nonprofit sector with gifts of money and time, and cheers to all of our fellow community members who are making those year-end gifts to local charities.