Spring 2018 issue of Horizons

the 26% of individual taxpayers who itemized deductions last year accounted for 82% of charitable donations. Specifically, the standard deduction for married taxpayers filing a joint return increased from $12,700 in 2017 to $24,000 in 2018 (for single taxpayers, the change from 2017 to 2018 are $6,400 to $12,000). The Tax Policy Center has stated that the number of taxpayers who file returns itemizing deductions could potentially decrease by 40 million by 2019. Per the National Council on Nonprofits, this dramatic decrease in the number of taxpayers who itemize could have a net effect on the nonprofit sector estimated at $13 billion in reduced charitable giving annually. To put that in perspective, per the National Philanthropic Trust, total charitable giving in 2016 was $390.05 billion, of which $281.86 billion was from individual donors. Further, as of January 1, 2018, the estate, gift, and generation-shipping transfer tax exclusions have doubled from $5.6 million to $11.2 million, which will be adjusted periodically for inflation. This increase could also cause a decrease in charitable bequests included as part of individuals’ estate plans. The National Council on Nonprofits has estimated the negative impact of these provisions on the nonprofit sector to be $4 billion annually. The entire nonprofit sector is strategically analyzing how to mitigate these impacts in this new and increasingly competitive charitable giving environment. Not-for-profits must put an increased emphasis on mission and impact (and less on the tax benefit) in their fundraising solicitations. Other options that not-for-profits may consider discussing with potential donors include: ∙ Charitable donation “bundling” or contributing every two to three years rather than every year

Not-for-profits must put an increased emphasis on mission and impact (and less on the tax benefit) in their fundraising solicitations.

With all of this uncertainty and fear, it should be noted that charitable giving did decrease after the last major overhaul to individual tax laws (in 1986), but recovered in two years. Weathering the next several years will be very important to the not-for-profit sector. We are hopeful that charitable giving will continue to increase with the greater infusion of disposable income in the economy, due to the reductions in the individual and corporate tax rates under the Act. However, the impact of these new tax rules on an organization’s charitable giving will certainly vary based on the demographics of the organization’s donors. There is an opportunity now for development teams to take strategic actions to address donor concerns as well as increase emphasis on mission-based giving. Education Savings Plan Payments of certain expenses up to $10,000 per year in connection with attendance of a student at a public, private or religious elementary or secondary school can now be made from section 529 plans. Previously, distributions could only be taken for college and other post-secondary training. In addition to being a positive change for individuals, this could assist private and religious elementary and secondary schools in attracting students. Entertainment and Meals Expenses Given the elimination and expanded limitation, respectively, of these business deductions under the Act, not-for-profit organizations holding fundraising events (such as golf tournaments), are concerned

∙ Use of donor advised funds

∙ Use of direct contributions from IRAs for donors over the age of 70½

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