January 20, 2018

What Tax Reform Means for Charity: more Money, Money, Money

Why Tax Reform Bill is Great for Nonprofits

What Tax Reform Means for Charity: more Money, Money, Money. The recently passed “Tax Cuts & Jobs Act” bill (which I have read in its entirety) is the greatest thing to happen to nonprofits in three decades. Especially for organizations who rely on MONEY to underwrite their programs. Consider the old adage, “there are things in life that are more important than money”, is about as silly as saying “there are things in life that are more important than AIR.” Money, like air, in and of itself is not very impressive, nor does it give life meaning. However, life has very little meaning…IF YOU CAN’T BREATHE. Money is oxygen. Without it, charities asphyxiate, atrophy and fail.

That’s why the recently passed “Tax Cuts and Jobs Act” is important for charities who know that capacity-building is the key to financial sustainability. Let me share you with you three reasons why more Money, Money, Money is about to be infused into the charitable sector.

First, for “Non-Itemizer’s”, the Standard Deduction Doubles…Giving Them More Cash

This one is easy. Small gifts are given from the heart not for tax purposes. These givers have always paid dollar for dollar when making a charitable donation. The “Tax Cut & Jobs Acts doubles the size of their standard deduction from $6,350 to a $12,000 for single taxpayers. Likewise, couples filing jointly jump from $12,700 to $24,000! Why is this significant? Because it gives small to mid-size donors more disposable income. They don’t give for tax reasons. These donors will have more money to give to your important mission. How Wonderful…How Marvelous.

Second, for “Itemizer’s”, the Charitable Deduction Increases from 50% to 60%…Giving Them More Money To Give

This one is even easier. 60% is more than 50%. The “Tax Cuts and Jobs Act” not only keeps the charitable deduction intact but INCREASES the limit on cash contributions from 50% to 60% of adjusted gross income when given to charity. There’s a false argument being bandied about that because the standard deduction has doubled less people will itemize and as a result give less charitable dollars. This is patently false, in that, the vast majority of itemizers are upper-middle-class individuals (not super wealthy) and aren’t trying to reach a charitable deduction tax-advantage. They too give from the heart. These donors are the ones who look back each year wondering how much they gave each year and report it accordingly. For donors in the higher-income brackets their CPAs will make sure that they take advantage of the charitable deduction which is now even higher.

Third, Corporate Taxes are Reduced from 38% all the way down to 21%. THANK YOU CONGRESS. Historic…Unbelievable!

The United States has the fourth highest corporate tax rate IN THE WORLD, levying a 38.91 percent tax on corporate earnings. The only jurisdictions with higher rates are the United Arab Emirates, Comoros, and Puerto Rico. The “Tax Cuts & Jobs Act” reduces corporate tax rate from 38% to 21% sparking a boom in business that ultimately lifts their own profits AND PAYCHECKS to employees WHO BOTH CARE & GIVE. Here’s what’s about to happen:

  1. Corporations will hire more “Non-Itemizers” whose increased disposable income can be shared with nonprofits.
  2. Corporations will hire more “Itemizers” who will use their increased tax deduction (50% to 60%) for to fund important causes.
  3. Corporations will have more “Marketing Dollars” to invest in charity. (100% write-off)
  4. Corporations will have more “Charitable Dollars” to invest in charity. (50% write-off)

It’s already happening. Within hours of the bill passing Boeing declared that they would spend $300 million on “employee-related and charitable investments” because of the tax plan. Wells Fargo announced that they would increase donations to nonprofits and community organizations in excess of $400 million in 2018.

In closing, people donate because they are passionate about a cause. NOT FOR TAX PURPOSES. In a recent survey performed by National Development Institute  major donors were asked “why” they give. The the answer “charitable deduction” came up so few times that the term “tax purposes” (as a reason for giving) didn’t even make it into their final report. (See Donor Motivation Matrix below.)

Donor Motivation Matrix

In conclusion, be of good cheer. I’m fond of saying “tax purposes” may be a reason some people give but its never a reason that they give to you. So enter 2018 by presenting donors the gift of a GREAT DREAM backed by a SOUND PLAN. Re-invigorate your CASE FOR SUPPORT knowing that the river of philanthropy is deeper and wider then its ever been and that there will always generous people with even more charitable dollars to invest in your mission.

Happy New Year to You and Yours – Jimmy LaRose

Jimmy LaRose’s passion for “people who give” has inspired philanthropists around the world to change the way they invest in nonprofits. His belief that donors are uniquely positioned to give charities what they truly need – leadership rather than money – is the basis for his work with individuals, governments, corporations and foundations, in the U.S., Europe, Asia & Middle East. Jimmy, in his role as author, speaker, corporate CEO & nonprofit CEO champions all of civil society’s vital causes by facilitating acts of benevolence that bring healing to humanity and advance our common good. Now, in his twenty-seventh year of service, his message that “money is more important than mission” and “donors are more important than people or causes” has resonated with policy institute scholars, social activists, doctoral students, business leaders who rely on him and his team of veterans to meaningfully grow their charitable enterprise. He’s the author of RE-IMAGINING PHILANTHROPY: Charities Need Your Mind More Than Your Money™ written to philanthropists who give nonprofits what they really need…business models that grow capacity and achieve financial sustainability. https://JimmyLaRose.com

4 Comments

  1. Jeff Bates says:

    Finally! I have read so many articles from charity/non-profit leaders saying the sky will fall on our sector’s head with the cuts. The lies and misrepresentations have been….shocking! So happy to read this article.

  2. SMALL family America,will love this Charity tax cut/ incentive for big hearted, giving homes.

  3. Ken Miller says:

    Probably around Feb/Mar of 2019 we will know who is correct in their assumption. I hope that you are correct the truth is in the numbers.

  4. Gabrielle Chick says:

    Wow! Well said. My husband and I itemize our donations. However, the amount we have given has never been driven by trying to get a tax deduction. We give because we believe in the organizations we are giving to and the impact it will make. We itemize because the standard deduction wasn’t high enough to cover the amount we gave. With the standard doubling, we intend to continue to give and definitely will give more . Plus, now we just don’t have to spend the extra hours during tax time to itemize everything. That is a blessing! This is a big win.

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