Foundation leaders fanned out across Capitol Hill this week with a simple message to lawmakers: The tax bill signed into law last year will hurt charitable giving and leave struggling nonprofits across the country wanting for funds.
Several legislative experts who met with the visiting foundation executives didn’t offer an immediate remedy.
Having spent the final weeks of 2017 writing a massive tax overhaul, most Republicans, who control both chambers of Congress, aren’t going to want to consider follow-up legislation before the midterm elections, said Harold Hancock, a tax lawyer and former tax counsel to the House Ways and Means Committee.
“I view this as the opening of a long discussion that will happen over the next couple of years,” he said. “Going back to revisit these big-picture items is not on the table.”
But there may be action on the Johnson Amendment, another item of interest to many of the 250 or so foundations leaders who came to Washington to participate in events sponsored by the Alliance for Charitable Reform, the Council on Foundations, and the United Philanthropy Forum. The amendment, named after Lyndon Johnson, who pushed for it when he was a senator in 1954, is a provision in the tax code that prohibits nonprofits from taking a position on political candidates.
Some religious leaders who wanted the green light to endorse candidates from the pulpit fueled an unsuccessful effort to repeal the nonprofit-politicking ban during last year’s tax debate. Their push, championed by Sen. Jim Lankford, an Oklahoma Republican, is likely to be resuscitated in the coming weeks.
Less Giving?
Perhaps the biggest cause for heartburn for nonprofits in the new tax law is a provision that doubled the standard deduction. The result is that fewer people will itemize their tax deductions, and that means fewer people will have a tax incentive to donate to charity. It is not certain what that will mean for charitable giving, but charity and foundation leaders are worried. Various estimates suggest giving could plunge about $20 billion.
Alternative Efforts
Nonprofits rallied unsuccessfully around a provision called a universal deduction that would have let everyone list charitable deductions on their tax returns, even if they don’t itemize.
Although tax legislation is usually not considered in a spending bill, some nonprofit advocates, including Steve Taylor, senior vice president of United Way Worldwide, speculated that an omnibus appropriations bill that could be voted on next week could include tweaks to the tax code. Hancock also suggested that tax changes could be inserted in the farm bill, which lawmakers will consider in the coming months.
But given the partisan rancor in Congress and the looming intensity of midterm election battles, lawmakers are unlikely to accomplish much, according to Hadar Susskind, senior vice president for government relations at the Council on Foundations.
Susskind said nonprofit leaders need to make regular trips to Washington to meet directly with legislators as part of a “long-game” legislative strategy.
“We don’t expect to see a different conclusion right now, but we want to let them know how people are feeling about this.
Positive Outlook
Not everyone sees doom and gloom for nonprofits.
Sandra Swirski, executive director of the Alliance for Charitable Reform, a project of the Philanthropy Roundtable, said the new tax law will be a “mixed bag” for giving.
Like many of her group’s conservative members, Swirski expects the newly passed tax cuts to spur economic growth, resulting in higher giving levels. And she noted that some of the changes in the tax code would encourage giving, such as an increase in the deduction limit for cash gifts from 50 percent to 60 percent of the a person’s adjusted gross income.
But she said not all nonprofits would see gains and there would be “winners and losers.”
Recalling a series of tax fixes that followed the last major tax overhaul in 1986, Swirski suggested that Congress might address the universal deduction after the midterm elections in November.
“There’s an opportunity in the lame-duck session to make the small changes that are needed,” she said.
Constitutional Argument
Advocates of repealing the nonprofit politicking ban hope that the effort could be revived as early as next week with a rider on a spending bill lawmakers are expected to begin considering.
“The Johnson Amendment is constitutionally infirm on its face,” said Christiana Holcomb, legal counsel for Alliance Defending Freedom. “It’s a speech restriction that’s empowered federal bureaucrats to look at your communications to see whether you have violated the law.”
Those favoring the status quo say that if religious organizations want to participate in politics, they should shed their 501(c)(3) tax-exempt status and start a political-action committee.
Nonprofits enjoy a trusted reputation of being nonpartisan, said Dave Biemesderfer, president of the United Philanthropy Forum, a membership organization of regional grant makers and philanthropy networks.
“If you start injecting partisan politics into that, it would destroy that reputation,” he said.
Making Their Case
Marissa Manlove, president of the Indiana Philanthropy Alliance, was among those on Capitol Hill Tuesday to make their case with lawmakers. She and other philanthropic leaders from Indiana pressed a legislative aide to Rep. Jim Banks, a Republican from their state, to support a measure that would allow retirees to direct money from their individual retirement accounts to donor-advised funds without incurring a tax.
Although they also expressed their concerns about the impact of the new tax law on giving during much of their visit they highlighted the overall importance of nonprofits and the foundations that support them, noting that 1 in 13 jobs in Indiana are at nonprofits.
Even if action isn’t imminent, Manlove said the visits are necessary to get lawmakers moving in a direction they favor.
“We use these meetings to say, ‘Here’s something else you can do to support us,’ as opposed to just complaining about what happened,” she said.
Correction: An earlier version of this article referred to the Alliance for Charitable Reform as the Alliance for Charitable Giving.
