The Senate this week is weighing a wide-ranging tax-code overhaul that has major implications for nonprofits and charitable giving. A final vote could come as early as Thursday, and nonprofits have been rallying advocates to let them know the impact on charities.
Like a tax bill that passed the House this month, the Senate legislation would preserve the charitable deduction. But nonprofit leaders and scholars say that doesn’t matter for many middle-class and low-income people because the measures would both increase the standard deduction — meaning that as little as 5 percent of Americans would itemize their taxes and be eligible to take the tax break. That could cause giving to drop by as much as $13 billion, economists estimate.
To counteract that, many nonprofit advocates want Congress to vote to allow people to take a tax write-off for charitable gifts even if they don’t file for a deduction separately. Such a provision — often called a “universal deduction” by its advocates — did not receive consideration in the House. In the Senate, James Lankford, an Oklahoma Republican, has put forward a measure to let everyone deduct charitable gifts, but it is unclear whether it will be added when Senators vote on the bill.
The House tax package also includes a provision that would ease a rule that prohibits nonprofits from endorsing political candidates and spending on campaigns. Loosening the regulation, known as the Johnson Amendment, has been a priority for some conservative Christian congregations that want to protect pastors who make political statements from the pulpit. Many nonprofit leaders and scholars, however, fear that it would weaken public trust in charitable organizations and render nonprofits opaque vehicles for political donations.
Even if the Senate bill passes this week, that doesn’t mean the tax changes would take effect. Members of the House and Senate would have to reconcile differences in the measures, and both chambers would have to vote on the compromise before anything went to President Trump to sign.
Further Reading
To dig deeper into the issues in the bills, here are several helpful Chronicle articles:
- Tax Bill Targets Million-Dollar Club of Nonprofit Executives
- Charities Are Divided Over Efforts to Kill the Estate Tax
- Nonprofits Strike Back at Suggestion of Time Limit on Donor-Advised Fund Payouts
- Nonprofit Leaders Urge Pence to Expand Charitable Deduction
- Trump and Taxes: A Guide for Nonprofit Leaders
