Foundation Executive Sees Changes In Charitable Giving Due To Tax Cuts

Jan 3, 2019

A non-profit executive says the federal tax cut law is changing how some Iowans are giving to charity. 

Some taxpayers aren’t getting the same benefits for giving to charity, due to a slate of changes made by Congress. Especially for people with mid to high range incomes, they may save more on their taxes by not donating.

When Congress passed the Tax Cuts and Jobs Act, lawmakers nearly doubled the standard deduction, thereby incentivizing more taxpayers to take it, as opposed to itemizing their deductions, including their charitable giving. Supporters say the changes will make paying taxes easier for many Americans, and cut costs related to processing the filings.

While many donate to charity for a slate of different reasons, it seems some donors' decisions are impacted by the tax benefits they can recieve, says Kari McCann Boutell of the Iowa Council of Foundations. She says some non-profits in the state are seeing a dip in donations.

“A lot of folks who are giving smaller contributions to non-profits are not really impacted by the tax law changes because many of those folks are not itemizing," she said. "Mid and large donors who were thinking about tax implications for their charitable gifts have definitely been thinking about the changes in the tax law, and as a result many of them may not be giving as large of gifts as they would have in the past.”

Researchers expect many taxpayers will stop itemzing their deductions, and studies indicate the potential impact to non-profit organizations could be considerable. The National Council of Nonprofits estimates charitable giving could drop by $13 billion each year, while the American Enterprise Instititute puts the estimate at $17 billion.

McCann Boutell says some organizations are seeing consistent rates of giving, while others are seeing donors write larger checks this year, with the intention of skipping next year, a tax-saving strategy called "bunching". She says she's advising non-profits to brace for changes in giving, and budget accordingly.

“I think it’s certainly going to be an adjustment in their cash flow strategy and they will need to have pretty open and honest conversations with their donors about if it is a bunching gift that they're receieving or if they're just increasing their annual giving year over year," she said. "It'll be a more thoughtful conversation."

In the meantime, McCann Boutell says organizations in the state are in a "waiting game" and won’t know the full impact to charitable giving until the end of this year’s tax filing season.