Charities not yet feeling predicted donation pinch due to tax law changes
Predictions that changes to federal tax laws would discourage people from making charitable donations so far appear to be off the mark, local and national charities report.
“Our traffic is up and, in fact, donations through our website are up,” said Larry Lieberman, chief operating officer of Charity Navigator.
The New Jersey-based nonprofit evaluates charities and serves as a watchdog for those organizations. Donors use Charity Navigator's rating site to check out groups before donating.
About 11 million people each year use CharityNavigator.org to check its ratings and link directly to groups to make contributions, Lieberman said. The average donation made through the site in the first quarter of 2017 was $82. So far this year, that figure is up to $91, he said.
“It's absolutely an affirmation that generosity, compassion and philanthropy are not driven by tax refunds,” Lieberman said.
The bulk of donations, however, are made between Christmas and New Year's Eve. So it could be that the impact of the tax changes that took effect this year hasn't kicked in yet, he said.
The Tax Cuts and Jobs Act — pushed by President Trump and passed solely by Republicans in Congress — potentially affects charitable contributions in several ways. Most significantly, it nearly doubles the standard deduction while eliminating a $4,050 personal exemption. Income excluded from taxes will increase by about 15 percent as a result.
A taxpayer filing under single status would see income exclusions go from $10,400 in 2017 to $12,000 in 2018. A married couple filing jointly would see income exclusions go from $20,800 to $24,000.
The amount of deductions needed to make itemizing worthwhile increases from $6,350 to $12,000 for a single person and from $12,700 to $24,000 for a married couple filing jointly. The law also eliminates or caps several types of itemized deductions, making it harder for people to cross the threshold.
Nationally, about 16 million households are expected to file itemized deductions for charitable gifts in 2018, which is 21 million fewer than under the old law, according to estimates from the Tax Policy Center . The group predicted charitable giving overall could drop by $12 billion to $20 billion this year.
In December, the United Way of Southwestern Pennsylvania and the Pittsburgh Foundation predicted that the new tax law could cause a 5 percent drop in donations locally. That would amount to about $60 million in this region, which saw about $1.2 billion in charitable contributions in 2015, the most recent figures available at the time.
Even four months in under the new law, it is too early to tell what its overall effect will be on donations, said Bob Nelkin, CEO of United Way of Southwestern Pennsylvania, which covers Allegheny and Westmoreland as well as Butler, Fayette and southern Armstrong counties.
John Tamiggi, executive director of New Kensington-based Habitat for Humanity Allegheny Valley said there has been a “small decline” in individual donations to his organization since the tax law passed.
“It could possibly have some effect – I can't say that for sure,” he said. “Certainly I would think there'd be certain elements that could be a causation to that. I haven't had anyone directly state that to me, but there has been a drop in the donations.”
Tamiggi said working in a financially distressed area like the Alle-Kiski Valley is always a challenge, and the organization is focused on trying to control aspects and areas that they can.
“We're trying to work and leverage with some of the area and local corporations to kind of fill that void,” Tamiggi said. “We hope that some of the changes that have taken place with the corporate tax structure, that they can utilize some of that additional revenue to support Allegheny Valley Habitat for Humanity. That's kind of how our strategy … has shifted.
“We understand the politics and certain things we can and can't control, so in part we have worked on developing strategies that really (try) to engage some of the corporate segments or sectors of the Allegheny Valley into supporting our initiatives, (to) try to fill some of those gaps. That's really where a lot of our focus has been placed.”
Most nonprofits get the bulk of contributions in small amounts, said Peggy Outon, executive director of the Bayer Center for Nonprofit Management at Robert Morris University.
Many of those donations already come from people who don't itemize — and even those who generally don't rely on their charitable contributions to meet the requirements to itemize, she said.
The main effect of the new tax structure would be on higher-income taxpayers who donate thousands of dollars or more as part of a financial strategy, she said.
“There's no doubt that this tax law is going to have a major effect on major donors,” Outon said.
For everyone else, the deduction is of less interest than the efficiency and effectiveness of the charity, she said.
“All of the rest of us tend to support nonprofits because of their cause, not because of the tax law,” Outon said.
Staff writer Madasyn Czebiniak contributed. Brian Bowling is a Tribune-Review staff writer.