House Passes Tax Bill Hurting Nonprofit Coffers

House Passes Tax Bill Hurting Nonprofit Coffers

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The impact of the tax plan extends beyond charitable and foundation giving, according to David Thompson, vice president of public policy for the National Council of Nonprofits. Those two streams account for about 15 percent of nonprofit budgets combined. What council leadership and partners will concern themselves with in 2018 is the ripple effect the tax plan will have in state legislatures and on community organization budget sheets.

Even after a successful defense of the Johnson Amendment, which Thompson expects to come under attack again in the future, the council still opposed the tax bill because:

  • Its increase on the standard deduction is expected to cut $13 billion out of giving annually, a sum that equates to between 220,000 and 260,000 jobs in the sector;
  • Tax exempt organizations are, in part, paying for tax cuts as entities such as large universities see their exempt status erode; and,
  • The $1.5 trillion increase on the national deficit is likely to mean spending cuts that would probably have the effect of trickling down to the state level. About one-third of state budgets are tied to federal dollars, Thompson said, and federal cuts are likely to lead to state cuts which are likely to lead to cuts in social programs.

“Getting work done is more important,” Thompson said when asked about the effect the plan would have on donations. “If agencies shut down, people will come next year. People come to [nonprofits] whether there is funding for that program or not. 2018 will be a year of reckoning.”

Much of the council’s work has traditionally been focused on state and local issues. Thompson expects a ripple effect to run through the states in 2018. States will be seeking to constrain eligibility for public assistance and to promulgate programs such as volunteer requirements in exchange for public benefits — something the council opposes.

State legislatures will also be looking for new revenue sources. Federal measures such as the tax plan’s 1.4-percent excise tax on about 30 universities with assets of $500,000 or more per student opens the door for federal and state officials to tax university endowments and other potential nonprofit entities such as hospitals and cultural institutions, Thompson said.

Source Name: 
The NonProfit Times
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