Federal Tax Bill Targets Deductions, Endowments, Lobbying

Federal Tax Bill Targets Deductions, Endowments, Lobbying

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“They did a number of things: some good, some bad, some god awful,” said David Thompson, vice president of public policy for the National Council of Nonprofits. Of particular interest for the council is the partial repeal of the Johnson Amendment — which prohibits 501(c)(3) organizations from engaging in partisan politics — and the near-doubling of the standard deduction without the benefit of a universal deduction, which some leaders in the sector hoped would accompany an increased standard deduction.

The bill increases the standard deduction to $24,400 for couples and half that, $12,200, for individuals, up from $12,700 and $6,350, respectively. The exact impact of such a change is unclear. Original estimates were that a doubling of the standard deduction without the inclusion of a universal deduction would reduce the number of itemizers from about one-third of filers to about 5 percent. An inserted property tax exemption might bump that 5 percent figure up a few points, but it will still lead to a precipitous drop in itemizers and, by consequence, a likely drop in giving.

“They’ve narrowed the tax incentive to give,” Thompson said. “[Tax incentives] aren’t the only reason to give, but they do encourage people to give more.”

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The National Council has been vocally opposed to any repeal of the Johnson Amendment, named after then-senator Lyndon B. Johnson, Thompson added. Though initially floated as a complete repeal, the bill provides an exception only for churches and related auxiliaries. Thompson compared the partial repeal to the Supreme Court’s Citizens United opinion and said that it creates a “loophole begging for abuse,” such as sham congregations.

The repeal also creates an Equal Protection Clause issue by treating churches differently from other 501(c)(3) entities, Thompson said, and will make enforcement difficult on the Internal Revenue Service (IRS) as churches do not file Form 990s.

“It politicizes charitable nonprofits,” Thompson said. “It allows people to get a tax deduction while promoting partisan politics. That taints all of us.”

Source Name: 
The NonProfit Times
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