Implications of tax reform on the charitable sector
Last week, the House Ways & Means Committee unveiled the Tax Cuts and Jobs Act, which proposes sweeping tax reform, including several measures that directly affect the nonprofit sector.
As the region’s community foundation, Adirondack Foundation works daily to fight for policies that maximize the nonprofit sector’s ability to do the most good for the region. Here in the Adirondack region, nonprofits are vital to the social and economic health of our communities. A 2013 study by Adirondack Foundation found that the economic impact of just 36 nonprofit organizations was over $422 million annually, accounting for approximately 1 in 10 jobs. In many cases, nonprofit organizations like The Wild Center, Adirondack Health, Adirondack Experience, and others are anchor institutions in their community — major sources of employment, draws for visitors, and hubs for social activity.
As Congress debates this bill, Adirondack Foundation urges our representatives to carefully consider any and all changes that affect charitable giving. We applaud Congress for removing overly-restrictive policies on Donor Advised Funds (DAFs) and for keeping the charitable deduction intact, but we’re troubled by proposals that could hinder the ability of nonprofits to provide the best services possible to their constituents:
Doubling the standard deduction. If approved, this would likely result in fewer people itemizing their taxes, thus removing an important incentive to give to charity.
Limiting, and eventually eliminating, the estate tax. The estate tax serves as a major incentive for the wealthy to reduce their taxable estate by making life time gifts via bequests—bequests that often serve as foundational sources of support for nonprofits.
Taxing nonprofit college and university endowments to pay for tax cuts. The bill would impose a new excise tax of 1.4 percent on net investment income of nonprofit colleges and universities with assets valued at more than $250,000 per full-time student. Adirondack Foundation believes that all well-managed nonprofits maintain reserves so they can adjust to changes or seize new opportunities.
We’re also keeping close tabs on a proposal that would allow churches to speak out on partisan matters. Traditionally, nonprofits and churches have been protected from political candidates seeking endorsements. In its current form, it’s unclear whether these changes would also apply to other types of religious institutions or other nonprofits.
This week, the Council on Foundations released its analysis of the bill as currently proposed. We urge you to visit www.cof.org and learn more about the affects this legislation would have on the charitable sector. Independent Sector, a national group of charities, states that the legislation would decrease charitable deductions by 40 percent, or $95 billion, from current law.
The Senate has also unveiled its bill, and there's still time to let our representatives know just how important these charitable incentives are. We have and will continue to communicate our ideas and concerns to Rep. Elise Stefanik and New York’s congressional delegation. Through our partnership with the Council on Foundations and Community Foundation Public Awareness Initiative, we will stay engaged as tax reform talks move ahead in Washington.
Cali Brooks is president & CEO of Adirondack Foundation.