Chronicle Of Philanthropy 2017-11-06 15:16:37
Charity fundraisers could face new challenges persuading Americans to give under the tax measure House Republicans unveiled today, with some experts forecasting a $14 billion decline in giving. The Republican plan would also make sweeping changes in how at least some nonprofits operate by loosening decades-old limits on political activities, taxing nonprofits that pay executives $1 million or more, and placing new levies on the endowments of big, wealthy private colleges. The Republicans’ proposal keeps the charitable deduction intact. But it nearly doubles the standard deduction, which would slash by millions the number of Americans who itemize their deductions and take a write off for their gifts. Nonprofit leaders say that would likely depress giving substantially. Charities worked for months to convince lawmakers to mitigate the effect of an increased standard deduction by letting everyone, not just those who itemize, deduct charitable gifts from their income. Lawmakers took a pass. “This is a glaring, glaring negative,” said Hadar Susskind, senior vice president of government relations at the Council on Foundations. “It’s a huge miss.” The House bill would also make fewer wealthy people subject to the estate tax, a change that could dampen the incentive for the ultrarich to support colleges, hospitals, and foundations. The entire tax would be phased out in six years. Tax Proposals Important to Charity in the GOP Bill Standard deduction. The standard deduction would double. As a result, far few people would itemize their taxes, eliminating a financial incentive for millions of people to give to charity. Partisan politics. Churches would be freer to engage in political activities as long as it was done in the “ordinary course of the organization’s business” and the spending on such activity was a “de minimus” amount. The draft legislation did not make clear whether this change would apply to all religious institutions or to other nonprofits. Estate tax. The amount currently exempt from the estate tax, $5.49 million per individual, would double. After six years, the estate tax would be eliminated entirely. Many charity experts say the estate tax is a major incentive for wealthy people to give away their fortunes, and its elimination would hit big institutions like hospitals and universities especially hard because they rely the most on large bequests from wealthy donors. Charitable deduction limit. The bill would increase to 60 percent the limit on how much adjusted gross income a taxpayer could write off by deducting cash gifts to qualified charities. The current limit is 50 percent (30 percent for gifts to foundations). University endowments. Income on many private university endowments would be taxed at 1.4 percent. The tax would apply to institutions with assets of more than $100,000 per student. Prominent universities such as Harvard, Yale, Princeton, and Stanford universities would be affected, but Chronicle data shows that well over 100 lesserknown institutions also would be hit by the tax. Foundation excise tax. The bill would replace the existing two-tiered tax on foundations’ net investment income (1% or 2% depending on how much they distribute in grants) with a flat 1.4 percent excise tax. Politics and Nonprofits In addition, Republicans aim to loosen limits on politicking by churches, an apparent carve out of a ban on such activity by nonprofits that is often referred to as the Johnson Amendment. According to the bill language, places of worship would be permitted to speak out on partisan matters as long as it is in “ordinary course of the organization’s business” and the spending on such activity remains a small share of the organizations’ budgets. It is not clear from the draft legislation whether the rule would affect other types of religious institutions or other nonprofits. Most nonprofit and religious leaders vehemently object to the change in the politicking rule because they say it would drag them into partisan politics. “This tax bill will deform, not reform, the tax law that protects our houses of worship,” Amanda Tyler, executive director of the Baptist Joint Committee for Religious Liberty, said Thursday. “Gutting the law that protects 501(c)(3) organizations from candidates pressing for endorsements threatens to destroy our congregations from within over disagreements on partisan campaigns.
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