Nonprofits nationwide could see billions of dollars lost and at least 220,000 jobs cut with the new Tax Cuts and Jobs Act . This means our local nonprofit organizations will need our help more than ever. Cynthia Ries, executive director of the workplace giving program Greater Cleveland Community Shares, believes the tax changes will require nonprofits to reevaluate how they operate.
“It is an opportunity to re-engage their boards to say, ‘How do you see these tax changes impacting our work’?” Ries says. “It is also a chance to solicit donors differently and develop deeper relationships with them.”
During a gathering of more than 280 nonprofit executives in Detroit last week, the idea of the “gentrification of philanthropy” was posed as a concern. George Moroz, special assistant to the president of The Henry Ford museums in Dearborn, Michigan, sees the new tax plan as potentially allowing large charities to flourish while the smaller ones struggle. Wealthier donors that will see the most benefits from the tax plan often give to the arts, while less well-off donors give more to social service agencies, Moroz says.
Cuyahoga County has around 8,500 registered nonprofit organizations (as of 2016) that provide such services as neighborhood health clinics, mentoring programs, homeless shelters and civil rights groups. Our communities are better because of them.
New federal law more than doubles the size of estates that are subject to the estate tax. So, with fewer estates required to pay the estate tax, less may opt to make large gifts to nonprofits. Estimates from the Tax Policy Center find this could result in a $4 billion loss in charitable giving. The last time the estate tax was not in force (2010), charitable bequests dropped by 37 percent (from 2009). Then, when that tax was restored, major gifts rose by 92 percent, finds a report from The Hill.
Currently, 30 percent of the U.S. tax-filing population itemizes their deductions. Of those who itemize, 83 percent include charitable giving. Under the new tax plan, Congress doubled the standard deduction to $12,000 (for singles) and $24,000 (married couples), which makes it more attractive to take the standard deduction rather than itemize. Those who itemize receive the greatest benefit from the charitable contribution deduction. More people opting for the standard deduction rather than the charitable contribution could result in a $13 to $20 billion reduction in charitable giving this year, according to the Tax Policy Center.
Many of us ended the holiday season with generous monetary or time gifts to our favorite nonprofit organizations. Walking the walk, we feel good knowing we invested in causes that make our communities stronger; however, we can’t rest on our laurels until next December.
Whether we give to nonprofits or work for them, the Tax Cuts and Jobs Act will affect us all. One thing that will not change is the necessity to continue investing in our communities. Now is the perfect time to make deeper connections and commitments to the causes and nonprofits creating the change we wish to see.