Tax Reform Questions and Resources for Nonprofit Organizations

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For nonprofit organizations, the only thing that's certain about the new tax law is uncertainty. In a column for the Detroit News, Neal Rubin speaks with several nonprofit leaders and service providers (including our firm’s founder, Ryan Hagan) about the impact that the Tax Cuts and Jobs Act of 2017 might have on individual organizations and the nonprofit sector as a whole.

Many of the nonprofit questions regarding the new tax law are concerned about the standard deduction for 1040 filers, which has doubled. If fewer taxpayers are itemizing their deductions, will there be less incentive to donate to charity? Likewise, since the estate tax exemption has been doubled, there is concern that philanthropic bequeathments of estate wealth will also have less incentive. While the new law will likely be beneficial for high-income families, it's our opinion that increased wealth does not necessarily translate into increased generosity. The National Tax Policy Center agrees, estimating that charitable giving will decline by $12-$20 billion in 2018.

In an interview with NPR, Charity Navigator CEO Larry Lieberman expresses many of the concerns of local and community-based organizations. While large, well-established, and art-based charities may not see as much of an impact, smaller organizations (especially those providing social services) are justifiably worried. And many of these small organizations lack in-house financial experts capable of navigating the complex landscape of tax reform.

There are several actions that small nonprofits can take to prepare for the possible impact of the new tax law. First and foremost, if possible, we strongly encourage you to make an appointment with your accountant or financial advisors to discuss the impact of the law on your organization. The National Council of Nonprofits has also compiled a broad collection of resources on the Tax Cuts and Jobs act, including webinars, IRS documents, and an analysis of the law's impact on different types of organizations. Finally, take a close look at how your organization approaches fundraising. The nonprofit experts at Joan Garry Consulting stress a renewed focus on relationship building, especially through digital media. Donor retention may be the key to your nonprofit's continued success.

While no one knows for sure how the new changes will affect nonprofit organizations, it's always better to be prepared. Take this opportunity early in the year to develop a plan for your organization, and to educate yourself on the various possible impacts that the Tax Cuts and Jobs act might have on your nonprofit.