House and Senate Now Seek to Reconcile Tax Plan Many Charities Oppose

The first comprehensive tax overhaul in more than 30 years moved closer to completion on Friday as the Senate passed a bill, voting along party lines, that contains many measures that will affect charities, foundations, and the people they serve.

Both houses made changes that nonprofits say will harm fundraising, lead to cutbacks in federal support to charities, and affect how nonprofits set compensation for top leaders, among other issues. What’s more, the House measure would allow all charities to get involved in politicking a move that’s unpopular with nonprofit leaders who want to stay out of partisan work.

“We are very troubled,” said Eric Goldstein, chief executive of the UJA-Federation of New York. “This legislation goes in the wrong direction.”

In the coming days lawmakers from the legislative chambers will meet to merge the Senate bill with similar legislation passed last month in the House. They plan to send a final bill to President Trump before Christmas.

Failed Effort on Proposed Tax Break

Despite a concentrated effort, nonprofits were unable to sway lawmakers to craft a bill more conducive to charitable giving.

Hundreds of nonprofit groups visited Capitol Hill throughout the year to press their case. They paid for advertisements in Washington publications designed to catch the eyes of policy makers, wrote their representatives, and hosted panel discussions at conferences to highlight the importance of the tax code. But perhaps the biggest goal common to nonprofits of all stripes — a provision that would allow all taxpayers, not just those who itemize their returns, to take a tax deduction — was not included in legislation approved by either chamber.

Many nonprofit leaders were disappointed by its exclusion, which they say will eliminate the incentive to give for most Americans. They also worried about the impact of the deficits the bills could cause and the squeeze that would put on government spending for programs that charities run and their clients depend on. That’s because the Senate bill, for example, would lead to $1 trillion in deficits over 10 years.

“When there are high deficits, there will have to be cuts to those federal programs,” said Nancy Berlin, policy director of the California Association of Nonprofits. “That’s going to hurt a lot of nonprofits and the communities they serve.”

Another provision, which is in the House bill but not the Senate tax package, is a major concern for Ms. Berlin and other nonprofit leaders. The House-passed bill would weaken the Johnson Amendment, which today prohibits nonprofits from endorsing political candidates and supporting political campaigns. If the measure is signed into law, it will trigger “the largest influx of dark money into politics we’ve ever seen,” Ms. Berlin said.

$13 Billion Loss Expected

Both the House and Senate versions of the bill call for a doubling of the standard deduction, which means far fewer people would itemize — and therefore be eligible for a charitable deduction. The result could be a $13 billion hit on charitable giving each year out of the $282 billion Americans give annually to museums, schools, homeless shelters and other nonprofit groups.

As the bills worked their way from committee to the House and Senate floors, charitable advocacy organizations could not muster support for a “universal deduction” that would have allowed people to write off charitable gifts even if they didn’t separately itemize them.

Msgr. Kevin Sullivan, executive director of Catholic Charities of the Archdiocese of New York, joined Mr. Goldstein and leaders from four other New York State nonprofit groups in signing a letter to lawmakers this week urging them to vote no. Among other things, the letter highlighted their opposition to the weakening of the Johnson Amendment, the elimination of the state and local tax deduction, which would hit people in higher-tax states like New York especially hard, and their concern that the increased standard deduction would render the charitable deduction meaningless.

While donors to Catholic Charities give because they are generous, the tax code helps, Monsignor Sullivan said.

“The tax code should incentivize that spirit of generosity and not cut back on those incentives” he said.

To see more of what’s at stake as the House and Senate reconcile the tax measures, here’s a comparison of the two bills. Measures that are identical in both bills have the greatest chance of making it into the final version.