December 19, 2017 Advocacy Report
Members of the House and Senate released a final tax reform bill on Friday after ironing out the differences between the two bills passed by both houses of Congress. (The National Council of Nonprofits has created a chart about the differences between the various versions and the impact on nonprofits.)
As expected, the charitable deduction has been retained; however, the bill doubles the standard deduction, which will lead to a significant decline in the number of taxpayers who itemize. The ability to itemize is a driving force for charitable giving. It’s expected that charitable contributions could decrease by $12-20 billion next year.
The universal charitable deduction that would be available to all taxpayers, whether they itemize or not, is not included in the final tax reform bill. PAA member organizations, along with our nonprofit parters, have long advocated to Congress to preserve the full scope and value of the charitable deduction; this legislation does not do that.
The Senate and House are expected to vote on the final tax bill this week. Lawmakers need to hear from the charitable sector about our disappointment in this new legislation and that we are paying attention.
It is important for Congress to continue to hear from constituents about how tax reform will impact our work and our ability to support our communities during and after the vote this week.
Here’s what you can do:
- Tell them this final bill will hurt charities, and more importantly, the communities we serve will feel the impact.
- Tell Congress that tax reform does not preserve the full scope and value of the charitable deduction.
- Let Congress know that charities will continue to advocate for a universal charitable deduction that will incentivize all Americans to give and support the organizations that they care about.
Voicing your opinion to your elected officials can help set the stage for a better future, and every message you send makes a difference! If you contacted your elected officials in response to our most recent Action Alert (November), thank you–and please take action again today.
Additional Information regarding tax reform:
- No charitable deduction for growing ranks of non-itemizers: While the charitable deduction is preserved for those who itemize their tax returns, the number of itemizers is expected to fall dramatically as the standard deduction is nearly doubled in an effort to simplify tax returns. Charitable giving has been projected to decline by up to $13 billion per year if only 5% of taxpayers itemize their returns, and nonprofits are also deeply concerned about the long-term impact if a habit of giving is no longer cultivated among taxpayers early in their earning years.
- Limitations loosened on charitable deductions for itemizers: For taxpayers who would continue to itemize returns, both the House and Senate bills raise the limit on the deductible amount from 50% of adjusted gross income to 60%, potentially incentivizing more giving by those who had reached the 50% cap. Both bills also would also repeal the “Pease limitation,” which currently reduces total itemized deductions for high-income tax payers.
- Estate tax exemptions doubled: The bill would preserve the estate tax, but double the amount exempted from taxation.
- Protects the non-partisanship of 501(c)(3)s: What started as an effort to allow more partisan speech by churches was expanded to impact all 501(c)(3) organizations, as the House and White House proposed removing the protection in law (called the Johnson Amendment) that prevents nonprofits from being pressured into partisan activity. The broad charitable and philanthropic communities successfully spoke up in strong opposition to repealing the Johnson Amendment, and the provision remains in place in the current tax package.
- Changes to UBIT calculations: Where Unrelated Business Income Tax (UBIT) is concerned, changes are less severe than originally proposed in earlier House tax reform frameworks. Under the current bill, organizations that operate more than one trade or business must calculate net income for each business separately, rather than in aggregate. A loss can only be applied to the tax liability from the business where it occurred.
- Retains historic preservation tax credits and private activity bonds.