House tax reform bill reduces charitable contributions and injects nonprofits into politics.
Announced on Nov. 13, 2017, Colorado Nonprofit Association opposes H.R.1, the Tax Cuts and Jobs Act which the U.S. House of Representatives will likely vote on this week. In its current form, the bill has several provisions that would impair the ability of nonprofits to serve people and strengthen communities. Most significantly, the bill would reduce charitable giving and allow all charities to engage in politics.
Charitable Giving Will Decline
The bill substantially reduces charitable giving by doubling the standard deduction, shrinking the number of taxpayers who itemize and can deduct their charitable contributions down to five percent. This change affects Colorado taxpayers who previously deducted $1.7 billion annually in contributions and would reduce charitable giving by $13 billion nationally.
Coloradans will continue to give, but many people will no longer receive a tax benefit for giving back to their communities,” said Renny Fagan, president and CEO of Colorado Nonprofit Association. “Although taxpayers lose a tax benefit, the real loss falls on communities because most nonprofits rely on individual donations to achieve their missions.
Nonprofits have proposed a solution to this problem by making the charitable deduction available to 100 percent of American taxpayers, including those who take the standard deduction. This tax policy would grow charitable giving nationally by about $5 billion per year. As of today, the House bill does not include this provision.
Nonprofits Get Political
Since the 1950s, federal law has prohibited 501(c)(3) organizations from endorsing or opposing political candidates or using charitable assets to support political campaigns. The public trusts nonprofits to be nonpartisan and apolitical.
In its current form, H.R. 1 allows nonprofits to make political communications in the ordinary course of their business if their expenditures are minimal.
Although this appears to be a narrow exception, it opens the door to partisanship and ultimately blurs the purpose of a tax-deductible charitable donation,” Fagan said. “If a nonprofit favors or opposes a candidate, a unrestricted donation to that nonprofit could be used for political communications. This undermines public trust that nonprofits are dedicated solely to their charitable missions.
In addition, nonprofits that engage in political communications would likely violate state nonprofit laws.
More than 5,500 organizations nationally, including more than 160 in Colorado, signed the Community Letter in Support of Nonpartisanship opposing any change to the current law prohibiting political activity.
With these potentially harmful results in mind, Colorado Nonprofit Association urges the public to act today to protect charitable giving and public trust in nonprofits by:
- Urging local representatives to vote NO on H.R.1, the Tax Cuts and Jobs Act.
- Asking local senators to make the charitable deduction available to 100 percent of taxpayers.