The Association for Healthcare Philanthropy (AHP) is concerned with the recently passed tax reform legislation's failure to protect the charitable giving tax deduction. In 2017, we supported the Charitable Giving Coalition's (CGC) efforts to expand the current deduction to a universal deduction. In 2018, we will join the CGC in advocating for the restoration of the charitable giving tax deduction to the millions of Americans who will no longer itemize under the new tax plan.
As the CGC has pointed out, under the new plan, we may see a decline of up to $13 billion in charitable contributions annually. Many people who itemized in 2017 will be unable to itemize this year, which may influence those who are strongly incentivized by the deduction to forgo giving.
AHP notes that the effects of the new tax laws are far-ranging, and how exactly giving will be affected this year remains to be seen. The annual limit on cash contributions to charities, however, would be increased to 60%, the standard deduction would be nearly doubled, and the lifetime gift tax exclusion would be doubled.[i]
Andrew Watt, interim CEO and president of AHP, stated, "While tax considerations are a factor in giving decisions, a mission-focused, impact-driven organization that demonstrates a compelling case for support will continue to have success in 2018 and beyond."
Denny Linderbaum, president of the UnityPoint Health Foundation, commented that he, like many others in health philanthropy, has "mixed feelings" about the new tax law. "I'm concerned about the fact that the change in the standard deduction is going to decrease the number of people who [itemize]," but added that the new law opens up new conversations all fundraisers should be having with their donors. "Regardless of the change in tax law, people should give where their heart tells them to."
He continued, "While I have concerns, here are some of the positives: the IRA rollover gift did not change; the gifts of appreciated assets and stocks did not change." He added, "We hope that fundraisers don't scare their donors. We don't [want to] get people so worked up that things don't turn into a self-fulfilling prophecy." Eddie Thompson, Ed.D., FCEP, founder and CEO of Thompson & Associates, agrees, recently writing that fundraisers should "focus on gifts that still work well (and may even be enhanced) under the new tax law, such as the IRA Charitable Rollover."
Others agree the effects of the new law aren't necessarily all negative. Russell James, J.D., Ph.D., CFP, Professor and The CH Foundation Chair of Personal Financial Planning at Texas Tech University, argues that the 2018 tax law may actually increase charitable giving deductions. "Donating appreciated stocks, bonds, or other assets instead of cash still avoids all capital gains taxes regardless of whether or not a donor itemizes," he noted recently. "For some, the value has gone up. For some, it has gone down. These effects are complicated because the people for whom the benefits of giving have gone up (high income, high wealth) are fewer in numbers, but these people generate a disproportionately higher share of charitable dollars."
AHP is concerned about the new law for exactly this reason: that the charitable giving tax deduction will now only be available to wealthy donors. As CBS reported, "Starting next year, the millions of relatively small donations that moderate-income people give to mainstream charities could be sharply reduced… charity could become less of a middle-class enterprise and a more exclusive domain of the wealthy."
Those that supported the tax plan, Linderbaum stated, "say that this benefits the middle class, but the numbers don't lie. The fact of the matter is the wealthy will benefit from this tax plan, so they will have more dollars that they could potentially give away."
A universal tax deduction would democratize philanthropy, affording everyone who wants to participate an opportunity to give. For now, AHP encourages members to continue connecting their donors to the most relevant giving outlets.
[i] "House and Senate Pass Tax Reform Bills." Bruce R. Hopkins' Nonprofit Counsel. Vol. 35, No. 1. Wiley Periodicals, Inc. January 2018.
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