A whirlwind day of giving – and pleading for donations – resulted in Sacramento nonprofits collecting a record $7.2 million during the 2017 Big Day of Giving.
If changes to U.S. tax law are implemented, local organizations may have a hard time matching that total in 2018.
Under the Republican tax overhaul, a significant number of households will lose the tax benefit from charitable giving because they will no longer itemize their deductions.
“People give out of the goodness of their heart, but clearly the tax deductibility is an incentive,” said Linda Beech Cutler, chief executive officer of the Sacramento Region Community Foundation, which runs the Big Day of Giving and encourages nonprofit donations year around.
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Though the compromise plan between the House and Senate was still being finalized late last week, Cutler said “the consensus is both of the bills are bad for charitable giving.”
The looming question is, just how many people will change their behavior absent the tax motivation? Charities have long emphasized the phrase “tax deductible” when encouraging donors to give.
Charitable deductions apply only to taxpayers who itemize rather than take the standard deduction. About one-third of tax filers currently itemize, according to the Tax Policy Center, a nonpartisan research group based in Washington. Of those filers, TPC estimates about 75 percent will no longer do so in 2018 under the Republican tax plan because the standard deduction will nearly double while other deductions face new limits.
It’s not yet clear how those projections would change under the compromise plan, which reportedly loosens the state and local tax deduction to include income tax but still caps the total SALT deduction at $10,000.
Officials at the United Way are hoping for changes before the tax plan faces a final vote that would help charitable giving. President Donald Trump has asked for a final version by year’s end.
“For our United Way, we should anticipate a 5 percent decrease in charitable giving which would be upwards of $500,000 that we could expect to lose,” said Stephanie Bray, president and CEO of the United Way California Capital Region.
Robert Yetman, a professor of accounting at UC Davis, said his research suggests the deduction is just one of the factors that impact giving, but “it would be a mistake to think that charitable giving won’t fall if we take away the deduction.”
The proposed changes to the deductions would have less impact on very wealthy donors who give large amounts, because they will still benefit from itemizing, he said.
It will be the donors who give in the hundreds or low thousands of dollars who may reduce their contributions. Organizations that make up a lot of their budgets with large amounts of small donations will feel the pinch, he said, such as Boys and Girls Clubs, social service organizations and churches.
Hardest hit, though, may be nonprofits geared toward people with higher incomes such as symphonies or operas, he said. His research shows donors to those sorts of organizations are most likely to care about tax deductions.
Last year, the Big Day of Giving generated $7.2 million through more than 40,000 donations to the nearly 600 participating nonprofits. The top fundraisers were the Placer Land Trust, which raised $141,000 through 290 contributions; the Sacramento Food Bank & Family Services, which took in $91,000 through 504 contributions; and the Sacramento SPCA with 773 donations raising $88,000.
Cutler said she remains optimistic that most would give again regardless of the tax benefit.
Whereas many of the contributions made during the Big Day of Giving are spontaneous donations inspired by a well-crafted email, compelling video on Facebook or positive peer pressure, one could argue donations made to the United Way are more at risk.
Much of what the United Way collects and shares with other charities comes through year-end planned giving campaigns. Bray said some donors give as part of their December tax planning. Removing the deduction incentive could change how much people give if they no longer have to do tax planning at the end of the year.
“This is the time of year when giving is very high,” Bray said. “There is a group of people who sit down with their family members and decide where to give.”
The United Way is the second largest charitable organization in the United States. Bray said funds they collect support an array of community functions not handled by government alone.
Julie Bornhoeft said as a community member she’s concerned the tax change will hurt the things that make Sacramento great – the ballet, the symphony, the arts. But as a spokeswoman for WEAVE, a Sacramento nonprofit that provides emergency shelter and other services to victims of domestic violence, she said the impact on safety net programs such as hers will be the most destabilizing.
She said it could mean less staff and training, longer waits for counseling and more people referred out to other providers.
“Even with the money we have now, we can’t serve all the people that need help. A greater number would not receive the care,” Bornhoeft said. “We don’t have luxuries at WEAVE. We have to operate 24-hour crisis lines. We operate a 24 hour shelter that has to have someone there. Those costs don’t change.”