It’s January, and you know what that means - tax season is here. The Tax Cuts and Jobs Act took effect for the 2018 tax year, so this filing season is the first time many individual taxpayers will come face-to-face with new rules. Since the TCJA was signed into law in December 2017, our nonprofit finance experts have written several posts examining the potential impact of tax reform on nonprofit organizations:
In this article, our Nonprofit Audit & Accounting Advisor explores the key provisions of the Tax Cuts and Jobs Act that may affect not-for-profit organizations - for better or for worse. The changes include an increased standard deduction for individuals, increased estate/gift tax exclusions, increased limit on charitable contributions, imposing tax on certain fringe benefits (an unpopular provision for which some relief has been offered), lower corporate tax rate on UBTI, lower tax rates on political activities from 501(c)(4), (5), and (6) organizations, and new taxes on high compensation and higher education endowments.
When the TCJA was passed, our firm’s founder immediately understood why nonprofit organizations were concerned. The impact of the new law was expected to be great for high-income families, but not so great for larger families - and terrible for nonprofits. Even as we enter 2019, many questions still remain about the long-term fallout of this tax reform.
Lumping Donations for Tax Purposes: Donor-Advised Funds, Charitable Gift Annuities, and Charitable Remainder Trusts
For individual taxpayers struggling to reconcile the new tax rules with their charitable contributions, one option is to “lump” several years’ worth of donations into one larger gift. This would allow donors to continue to take advantage of available tax subsidies and to continue their charitable contributions - albeit on a less frequent schedule. For nonprofits worried about losing smaller gifts, it could be helpful to communicate with your donors about the options available to them.
There are many actions that nonprofits can take to address the impact of the TCJA. Especially for smaller nonprofits and community-based organizations - which may be taking the hardest hit from the new law - it’s important to stay informed. Evaluate your current approach to finance and fundraising to make sure your processes still make sense in the post-TCJA world.