A good amount of confusion and concern buzzes across the country among taxpayers at all income levels ever since President Trump signed the tax act into law.  Most of the discussion focused on the changes for individual tax payers and corporations.  But this has also impacted the nonprofit community significantly. Whether it is the repeal of the Affordable Care Act (Obamacare) individual mandate or the reduction in giving incentives, nonprofits will find themselves in the middle of a juggling act as they respond and adapt to the long term changes that are on the horizon.

Nonprofit leaders across the country were initially appreciative that the language gutting the Johnson Amendment (which preserves nonpartisanship for nonprofits) was removed.  However that celebratory atmosphere quickly disappeared; due to the reality of the final provisions and the potential this Act has for creating extraordinary challenges within the nonprofit community.

The sections that will have the most negative influence are:

  1. Charitable Giving Incentives Reduced. Only those households who itemize their tax returns will be able to take advantage of the charitable deduction.  While those individuals who take the standard deduction cannot deduct charitable gifts.
  2. Estate Tax Threshold Doubled. When the estate tax threshold nearly doubles, the expectation stands that federal revenues will decrease by nearly $100 billion over the next ten years.  With an anticipated impact that will result in lowering charitable giving by $4 billion across the country.
  3. State and Local Taxes Reduced. This has been much talked about because here in New Jersey individual taxpayers will no longer be able to deduct these state and local taxes.  Additionally there will be a $10,000 cap on property tax deductions as well.
  4. Affordable Care Act Individual Mandate Repealed. According to the Congressional Budget Office, this will result in 13 million fewer people having insurance coverage in the next decade.  Also average premiums will rise by 10% more than they would be currently without the repeal.

The trickle-down effect of these fiscal and budgetary cuts are significant for nonprofits. The bill is projected to increase the federal deficit by at least $1.5 trillion over the next decade. If that materializes, funding cuts will take place.  Which puts stress on state and local governments that are already reeling under the pressure of maintaining critical services. The outcome of this scenario will most likely result in additional demands for the programs and services offered by nonprofits.  These organizations have been addressing increasing need and shrinking revenue for many years.  But now the demands will grow even more onerous. The people in the communities at the grass roots levels who depend on the government and nonprofit social service organizations for providing essential support will experience even greater struggles.      

For more detailed information, a side by side chart of the changes, and Op-Ed in NJ Spotlight, a link to The National Council of Nonprofits’ summary and overview of the final bill as well as to view a recent video interview with Linda Czipo, CEO of Center for Nonprofits on NJTV news, please click here:

http://www.njnonprofits.org/US_TaxReform2017.html