The head of Capital Area United Way is concerned the recently-passed GOP tax bill could take a toll on its donations as tax incentives for giving disappear. United Way Worldwide anticipates losing hundreds of millions in contributions under the new tax scheme.
Meanwhile, the Baton Rouge Area Foundation says the tax rewrite will actually help its donations, and that its donors don’t give for the tax benefit.
The two competing takes on the tax overhaul represent a yet-to-be-answered question triggered by Republicans’ signature legislation of 2017: Will charitable donors eschew their donations now that the tax benefit is going away for many of them?
“I’d like to think that people donate out of the generosity of their heart but this will certainly test that,” says George Bell, president and CEO of the Capital Area United Way.
At issue are several provisions of the GOP tax plan, signed by Trump last week, that reduce the financial incentives for making charitable gifts. Decreased tax rates mean donations will be worth less in tax benefits when donors write them off on their returns. Plus, a rollback of the estate tax makes estate giving less enticing financially.
Perhaps most significantly, says LSU law professor Philip Hackney, is the plan nearly doubles the standard deduction, which is expected to dramatically reduce the number of people who itemize—or write off specific, eligible expenses, including charitable gifts.
“What that means is that there will be no tax benefit to most people when they give to their church, their food bank, their synagogue, their university,” Hackney, who also serves on the board of the Louisiana Association of Nonprofit Organizations.
Whether charities and other nonprofits take a big hit in Louisiana remains to be seen, but United Way Worldwide anticipates losing $256 million to $455 million in contributions. One study pegged the loss of charitable donations in the U.S. at north of $13 billion under the new standard deduction. The tax changes could spur people to bundle their giving every other year, making the sector less stable, Hackney says.
In a statement, BRAF cited a strong market and economy this year that is helping charitable giving and says the tax changes will help that continue.
“Our donors give because they want to make a difference, and then they look at the tax impact,” BRAF says. “The capacity to give is greater than the tax deductibility.”
Kelly Pepper, president and CEO of the Louisiana Association of Nonprofit Organizations, is setting out on a campaign to educate its 460 member organizations on the slew of changes in the tax overhaul and is currently wading through the provisions added and subtracted from the bill in the rapid-fire process lawmakers took in passing it.
“I would like to believe the charitable giving will continue,” she says. “But it definitely will impact estate giving and planned giving. It will certainly impact major gifts.”