Charities fear GOP tax plan could lead to loss of billions of dollars in donations

Wednesday, 15 November 2017, 06:32:21 AM. The Republican tax plan could cost charities billions by nearly doubling the standard deduction, eliminating itemized deductions and an incentive to donate for 95 percent of taxpayers.

Charities in the Chicago area and across the country are bracing for the potential loss of billions of dollars in annual contributions as a result of a tax overhaul plan from congressional that would eliminate the incentive to donate for nearly all Americans.

The proposed House bill, pitched as the “Cut Cut Cut Act” by President but officially named the Tax Cuts and Jobs Act, includes a provision that would nearly double the standard deduction to $12,200 for an individual and $24,400 for a married couple.

Raising the standard deduction would reduce the number of taxpayers who itemize deductions — including charitable donations — from the current 30 percent to 5 percent, experts say.

Combined with a decrease in the top marginal tax rate, the disincentive to itemize would reduce charitable giving by $4.9 billion to $13.1 billion annually, according to a May study by the Lilly Family School of Philanthropy at Indiana University.

In Illinois, where a two-year budget impasse stripped much-needed state funding from many charitable organizations, the impact of reduced individual giving may be even more devastating.

“Many of these groups that were hard-hit that didn’t receive funding — many of them still haven’t received funding,” said Anita Banerji, director of public policy for Forefront, a statewide membership association for nonprofits and foundations.

Forefront is gearing up for #ILGive on Nov. 28, an annual online fundraiser it sponsors to boost hundreds of Illinois charities. Last year the 24-hour event raised $11.3 million, and the mission has taken on an increased sense of urgency with the tax bill threatening to neuter the ubiquitous year-end charity drive.

One participating charity is the Center for Enriched Living, an independent, 50-year-old Riverwoods facility serving the developmentally disabled. The center, which receives no state or federal funding, provides daily programs for about 400 adults, including social, recreational and educational activities.

The center has 70 employees and an annual budget of $3.4 million.

“We are very dependent upon individual giving,” said Harriet Levy, the center’s executive director. “Any threat to that charitable deduction absolutely would hurt a nonprofit like the Center for Enriched Living.”

Levy said most of the money comes in toward the end of the year, with staffers busy this month stuffing envelopes and actively meeting with donors to solicit contributions.

“You want to encourage people to give, especially as government funding is continuing to be frozen or cut for this population,” she said. “To imperil any source of income really imperils the quality of life for this demographic.”

The Senate has introduced its own version of the tax bill, which would increase the standard deduction to $12,000 from the current $6,350 for individuals and to $24,000 from the current $12,700 for couples filing jointly.

More than $390 billion was given to charity last year, with individual donations accounting for 72 percent of that total, according to an annual report by the Giving USA Foundation.

Religious organizations top the list of recipients, with the collection plate netting 32 percent of all donations. Education, human services, foundations and health organizations round out the top five sectors benefiting from charitable giving.

The charitable deduction has been a part of the tax code for 100 years as a means to incentivize donations. While both proposed bills retain the deduction, critics say limiting it to the wealthiest 5 percent of Americans is unfair to taxpayers and especially damaging to local charities that depend on individual donations.

“It is huge collateral damage to the people of this country,” said Tim Delaney, president and CEO of the National Council of Nonprofits. “The people in the community that have the greatest need will no longer be provided services because the resources won’t be there for charitable nonprofits to do their work.”

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