Congress Approves GOP Tax Plan (and How This Affects Nonprofits)
Yesterday, Congress passed the Republican tax overhaul bill. The long-anticipated tax proposal could threaten the state of the nonprofit sector. The legislation now makes its way to President Donald J. Trump’s desk, where he is slated to sign it into law.
So when will the new tax bill go into effect? Fortune says that some of the tax bill’s impact will start in the beginning of 2018, but some of the bill’s elements will be effective in 2019 or later.
How Will Nonprofits Be Affected By the New Tax Reform?
There are many implications of the new tax bill, which the National Council of Nonprofits has detailed here. Some of the key ones are:
- The Johnson Amendment: The passing of the bill will either repeal or weaken the Johnson Amendment, which preserves nonprofit nonpartisanship. More information on the Johnson Amendment can be found here.
- Standard deduction for charitable giving: Charitable deductions would be out of reach for more than 90 percent of taxpayers. The Joint Committee on Taxation estimates that itemized deductions will drop $95 billion in 2018. In addition, it’s estimated that giving would decrease $13 billion or more per year and would cost 220,000 to 264,000 nonprofit jobs.
- State and local tax deductions: The new bill would limit the amount of state and local income and property taxes that can be deducted from federal taxes to $10,000. In turn, it would pressure state and local governments to enact tax and spending cuts, which will eliminate programs that serve people in need and increase burdens on charities and foundations to fill the gaps.
“The consequences of the tax bill will be devastating to the millions of people around the country who rely on charitable nonprofits for everything from food and shelter to faith-based sanctuaries and job training, to a safe place to escape domestic abuse and enrichment through the arts. With even more spending cuts for services people rely on coming shortly, organizations that already have been stretched too far to continue to provide services to an ever-growing number of people with ever-shrinking budgets are simply going to have to turn people away, discontinue vital programs and even close their doors entirely. All of these are the foreseeable results of a bill that fails to look past the short-term ‘win’ of cutting taxes to recognize the very high price the public will be expected to pay.” — Tim Delaney, CEO of National Council of Nonprofits, said in a statement.
The passing of the proposed tax bill no doubt will have some significant implications on our nonprofit sector. What are your thoughts on the tax bill? Stay tuned for insights from some key players in the nonprofit sector.