Donald trump’s administration and congressional Repub- licans are likely to push for a sweeping tax overhaul in 2017 — and the plan they propose could have big implications for nonprofits. It’s likely some members of Congress will call for limiting the charitable tax deduction, a move many in the nonprofit
field predict would reduce rich individuals’ largess. Tax cuts for
wealthy and middle-income families that could affect donor
incentives are also likely.
So far, Mr. Trump has sent mixed messages about his view of
the deduction for donors. The tax plan he touted during the
campaign calls for capping all write-offs — including for
charitable donations — at $100,000 for single people
and $200,000 for married couples. But some senior
advisers to the president-elect’s campaign said they
did not want to limit giving incentives, says Steve
Taylor, counsel for public policy at United Way
Worldwide and a former congressional aid.
Mr. Trump’s position will become more clear when
he releases his first budget in February or March, says
Sandra Swirski, executive director of the Alliance for Charitable Reform, a group that represents grant makers and donors.
No matter what Mr. Trump’s views are, nonprofit leaders appear to have some powerful congressional allies who could help
guard against limiting the charitable deduction.
Rep. Kevin Brady — chairman of the House Ways and Means
Committee, which has jurisdiction over tax legislation — said at
a recent Bloomberg BNA lunch that House Republicans would
preserve the deduction and were “looking to see if there’s a way
to unlock more charitable giving.” The Texas Republican drafted
a blueprint for a tax overhaul in June that appeared to maintain
the charitable deduction.
“We certainly welcome that expression of support from the
chairman,” says Geoffrey Plague, vice president of public policy
at Independent Sector, which advocates for nonprofits.
Mr. Plague says Independent Sector and other charity
groups will continue their call for extending tax breaks to those
who do not itemize their donations. Mr. Brady’s recent comments indicate some congressional support for that move, he
Ms. Swirski expresses confidence that the Senate will also pro-
tect charitable deductions. She says Utah’s Orrin Hatch, chair-
man of the Finance Committee, has expressed support for
charitable giving incentives in the past.
Mr. Plague says charity leaders will also track
changes to the standard deduction, which allows
people to subtract a set amount from their taxable
income without itemizing. If people are able to
save more on their taxes by opting for the standard
deduction, fewer people will itemize, eliminating an
incentive to give, he says.
“It’s part of the reason we have been talking to lawmakers and their staffs about extending the deduction for
all taxpayers irrespective of their filing status,” he says.
Republicans are also likely to cut income-tax rates. It’s unclear
how large the reductions might be, but experts say tax cuts would
reduce charitable donations from the wealthy in the short run because giving would become less valuable from a tax perspective.
In the long term, more money in wealthy donor’s pockets might
Nonprofits that serve poor communities should also be paying
attention to proposals that affect low-income people, like any
changes in tax credits for renters or for child care, says Mr. Taylor
of United Way. — TIMOTHY SANDOVAL
Many social-service groups fear that the federal well will run dry. Nonprofits that serve poor populations or that directly receive federal grants face a period of austerity if Donald Trump makes good on his promise to reduce domestic spending.
“This election has really upended what a lot of affordable-hous-ing groups were expecting over the next four years,” says Sarah
Mickelson, director of public policy at the National Low
Income Housing Coalition. She isn’t the only nonprofit
leader bracing for cuts.
On the campaign trail, Mr. Trump pushed a
“penny plan” that would reduce nondefense domestic spending by 1 percent each year for 10 years.
So-called entitlements, such as Medicaid, Medicare,
and Social Security, would be excluded from the required cuts. He also proposed ending a budget detente,
which lasted through much of President Obama’s t wo
terms in office, in which caps on federal spending were apportioned equally between defense and nondefense programs. Mr.
Trump has said that he would lift the caps on military spending.
As a result, every other aspect of domestic federal spending
faces potentially deep cuts, including food stamps, housing aid,
and federal support for education. The Committee for a Responsible Federal Budget calculated that Mr. Trump’s plan would reduce
spending by $1.2 trillion over 10 years.
Cuts that deep would make recent federal budgets “seem like
the New Deal” in comparison, says Tom Sheridan, who runs a
lobbying firm that represents nonprofits.
Particularly worrisome, he believes, is the prospect of turn-
ing Medicaid, the health-care program for the poor, into a block
grant. Under such a scenario, pushed by the Trump campaign,
the federal government would stop providing states with a fixed
percentage of their Medicaid costs and instead would provide a
Sending states block grants would give governors an
incentive to kick people off the rolls, says Kay Toran,
president of Volunteers of America’s Oregon office.
“You’re really going to put people in harm’s way,”
she says, adding that the application of Medicaid pol-
icy under block grants would vary greatly from state
Perhaps the biggest potential cut in federal spending
is Mr. Trump’s proposal to end the Affordable Care Act,
commonly known as Obamacare.
In California, nearly 5 million people gained access to health
care after the act was passed, according to Sandra Hernández,
president of the California Health Care Foundation.
In a letter posted on the group’s website in the days following the
election, Dr. Hernandez rallied public officials, health-care leaders,
and consumer advocates to stand firm against changes in the law.
“With so many Californians using this new coverage to gain
Taxes and the Charitable Deduction