Industry Experts: President Trump’s Tax Plan Could Hurt Nonprofits
Last week, the White House and the U.S. House released the broad outlines of an upcoming effort to dramatically overhaul the U.S. tax code, amounting to a massive tax cut for both individuals and corporations. Nonprofit industry experts warn that both proposals could result in a big hit to bottom line for nonprofit organizations by changing to the amount of money taxpayers can write off and increasing the standard deduction. A timeline on when either package may be considered in Congress remains unclear and most analysts predict the proposals are a starting point for negotiations, not a final package.
Tax experts have noted the increasing the standard deduction and capping the amount of giving taxpayers can write off could deter charitable giving. The American Enterprise Institute, an influential conservative think tank, found that $17.6 billion in annual giving could evaporate under Trump’s tax proposal. Private dollars are an essential source of funding for many mental health and addiction treatment providers. Further, this type of funding often allows for greater flexibility and innovation in program design than grants from public agencies.
INCREASED STANDARD DEDUCTION
President Trump’s tax blueprint calls for an increase to the standard deduction, which is the dollar amount that lowers the income on which Americans are taxed. Most Americans use the standard deduction amount, as opposed to itemizing their deductions. According to Tim Delaney, CEO of The National Council of Nonprofits, if more money is available under the standard deduction, taxpayers may not feel motivated to save money by adding up charitable donations. “The standard deduction increase will be a disguised assault on charitable giving in the name of tax simplification,” Delaney explained.
CAPPED TAX WRITE OFFS
Another potentially big hit for nonprofits is the White House’s proposal to place a cap on the amount of charitable giving individuals can write off. President Trump’s proposal would limit itemized deductions to $100,000 for singles, and $200,000 for couples. These caps wouldn’t impact most charitable giving, but could deter large gifts from wealthy donors.