Recent signals from Washington, DC indicate that lawmakers are gearing up for the largest set of tax changes in 30 years.
The charitable deduction is not immune to the current winds of change and reform. The nonprofit sector needs to once again pick up the phones and remind the nation’s policymakers just how import the charitable deduction is to the sector and the hundreds of thousands it employs and the millions it serves.
Ashlea Ebeling recently wrote for Forbes, “Charities face two big threats [draft proposals here and here]: curtailed income tax incentives for charitable giving and estate tax repeal. ‘It’s by far the greatest threat to tax-encouraged charitable gifts that I’ve seen in over half a century,’ says Conrad Teitell, a tax lawyer and editor of Taxwise Giving. ‘It would be a double whammy.’”
Ebeling went on to write that the current draft plans propose a cap on total itemized deductions (including the charitable deduction) at $100,000 for single filers and $200,000 for joint filers. Lawmakers are also considering limiting benefits for property gifts, imposing capital gains taxes on property bequest to foundations, and requiring payouts from donor-advised funds.
The reality that tax plans are again seriously being floated around Washington that would in any way reduce the amount of revenue nonprofits earn from individual donors is causing unrest in the sector.
“Given the proposals we’ve seen, we’re quite concerned,” Dan Cardinali, president and CEO of Independent Sector, which lobbies on behalf of charities, told Ebeling. “Our institutional focus is bulls eye insuring that the charitable tax deduction is preserved, and on the offensive, increasing the number of Americans who can claim it.”
“Cuts, caps and limitations on the deduction mean less money for charities and those they serve,” Sandra Swirski, executive director of the Alliance for Charitable Reform, said in a statement. “The charitable deduction is not a loophole, it’s a lifeline.”
The possible danger to the charitable deduction has also encouraged nonprofit advocates, such as Independent Sector and the National Council of Nonprofits, to activate their networks around protecting the charitable deduction. (501(c) Agencies Trust is a proud member of Independent Sector.)
We agree with Independent Sector President and CEO, Dan Cardinali, that the nation’s nonprofits need to pause and make sure they are doing everything they can do to influence the actions of Congress. Appropriate conversations need to be had between lawmakers, boards and even staff to remind the nation exactly how important nonprofits are to the success of the country. Limiting the amount of charity individuals can deduct on their taxes could close organizations, eliminate vital resources for families and communities, and destroy jobs.
That is why 501(c) Agencies Trust is encouraging our members, our board, our employees and our network to take a moment and make a call. Contact your congressperson and US Senators. Tell them how any reduction in the charitable contribution will affect you, your family and your organization.
Here are three quick steps nonprofits can take to support their work and the charitable deduction:
- Join an advocacy group and lobby. IRS guidelines do restrict the type of lobbying many nonprofits can do. Fortunately, 501(c)(3)s can still lobby. Nonprofits can also join an advocacy group like their state nonprofit association, Independent Sector, ASAE (for associations), National Council of Nonprofits or the National Human Services Assembly to name a few.
- Get to know your Congressperson and U.S. Senators. Every organization should make a real effort to know their federal, state and local representatives – and make sure they know you. Include their offices on all your fundraising notices and good works press releases. Politicians like to be seen in public with organizations doing good work. Make sure their office knows they are welcome and make a connection.
- Engage your board, funders, those you serve and employees. We can’t force your clients or employees to advocate on your behalf, but you can empower them to do so. Create a simple template on what can be done (write, make a phone call, visit a lawmaker) and remind everyone connected to your organization that their voice matters. If they love what you do; need what you do; or help you do what you do, then they can advocate for you.
Nonprofits are a vital part of the culture of our nation as well as an integrated part of its economy. The nonprofit sector accounts for approximately 10 percent of all private sector employment in the United States. It is the third largest workforce behind the retail and manufacturing industries. Finally, nonprofits contributed an estimated $905.9 billion to the national economy in 2013 and reported $5.71 trillion in assets, compared to the $16.8 trillion U.S. GDP.
The charitable deduction encourages tax payers to invest in the good works of the nonprofit sector. It must be preserved and even expanded if possible.