After years in the making, the Republican leadership in the House of Representatives has recently unveiled a bill, The Tax Cuts and Jobs Act, which would bring the first comprehensive changes to the U.S. tax code since 1986.
Potential Impact on Charitable Giving
In an effort to drastically simplify the tax code, one of the most significant proposed changes in the bill would be to double the standard deduction (plus eliminate or reduce several other current deductions) so that only an estimated 5% of Americans would continue to itemize their tax deductions. Studies have shown that, with so few Americans itemizing deductions, this could lead to a decrease in giving to nonprofits of over $13 billion each year.1
For those reasons, ECFA and other nonprofits in the Charitable Giving Coalition have supported a “universal” deduction (above-the-line) so that all taxpayers would have an incentive to give and support the good work of nonprofits regardless of whether they itemize. (Click here to learn more about the universal deduction.)
Other Important Changes
There are a multitude of other changes in the tax reform bill that would affect nonprofits and their employees as taxpayers, but a few of the most significant include the following:
Repeal the exclusion for qualified tuition reduction plans
Adjust the charitable mileage rate (from 14 cents per mile to a new rate adjusted for inflation)
Eliminate the exclusion for employer-provided adoption assistance programs
Increase the estate tax exemption and eventually repeal the estate tax
Repeal of the exclusion for qualified moving expenses
Next Steps Toward Tax Reform
Members of the House have already begun marking up the original bill with changes before it is taken to a vote, while the Senate is working on a companion piece of legislation expected to be released in the very near future. If the bills pass the House and Senate, then the two would go through a reconciliation process before being presented to President Trump for his signature.
Stay tuned to the latest tax reform developments through ECFA.org or follow ECFA on Facebook and Twitter.
1Indiana University Lilly Family School of Philanthropy, Tax Policy and Charitable Giving Results (May 2017), https://scholarworks.iupui.edu/bitstream/handle/1805/12599/tax-policy170518.pdf.