What opportunities and challenges does the Federal Tax Reform present?
While the dust is settling right now, the passage of the Tax Reform legislation by Congress will have some positive and negative impacts for philanthropy and nonprofits. Here are some initial results as they are made available and some recommendations to your community, public grantmaking foundation, and nonprofit partners.
Philanthropy WV is highlighting provisions that will likely impact your foundations, nonprofit partners, and suggest that you consider amplifying your end-of-year appeals in the face of anticipated losses next year.
Briefly, doubling the standard deduction and eliminating or reducing other credits and deductions is projected to result in 95% of current itemizers no longer using that schedule. In West Virginia, based on 2015 data from the IRS, more than 50% of itemized charitable donations come from those in middle class and lower income households (less than $200,000 joint income households). This was more than $300 Million of the $507 Million in overall donations in 2015 (not including bequests).
What does this mean for your organization and those you support? We don’t know for sure but we do know that tax policy plays a major incentive for charitable giving and are afraid of how those donations might fall. Additionally, the exemption from the federal estate tax was doubled to about $22 million for couples.
As questions have come up, different public grantmakers and nonprofits are determining their position for planned or special appeals before the end of the year. There are strategies to consider beyond sending the message of “send more money now.” Pointing out that this may be the last year for which most donors will have the tax incentive to give, you might suggest they use their IRA assets (if they are 70 ½ or older) and/or that they consider making a one-time substantial gift.
Three positive results of the legislation includes:
- The Johnson Amendment stands and will continue to prohibit political activity by nonprofits;
- No changes were made to donor advised funds; and
- Donors can receive a tax deduction for cash gifts of up to 60% of their adjusted gross income, up from the current 50% limit.
In preparing for 2018, Philanthropy WV will be heading to Washington for Foundations on the Hill March 12-14th as we will need to discuss about a number of ways to work around the damage to charitable giving that we are expecting including:
- Allowing IRA assets to be given to donor advised funds
- Decrease the IRA charitable rollover to 59 1/2; and
- Create an above the line, universal charitable deduction for donations to nonprofits
Next year is a critical time so please plan to join with your philanthropy colleagues across the Mountain State and our nation in March (12-14) for Foundations on the Hill. We will be touching base with you in January about plans for the trip and meeting with our WV congressional delegation. Check out details about Foundations on the Hill by CLICKING HERE!
Please contact Philanthropy WV’s offices with any questions (Phone: 304.517.1450) and we will update you as we receive new information as the dust settles.