Written by The Business Journal Staff
The new GOP tax plan this year introduces changes to how donations made to nonprofits and charitable organizations figure against tax liability — a transition that is leading to preparations in the Central Valley.
Under the new plan, the standard tax deduction will go up to $12,000 from $6,350 previously for individuals and up to $24,000 for married couples. This is expected to lead to more taxpayers taking the standard deduction rather than itemizing individual deductions such as charitable donations.
“The result of the charitable deduction would probably be out of reach for 87 percent of taxpayers,” said Yolanda Leamon, who runs Leamon Business Services in Madera. “So they estimate itemized deductions are going to drop about $95 billion in 2018, so they think that the unintended result of this has been a negative impact on charitable foundations.”
An analysis by the National Council of Nonprofits estimates a shrinking of charitable nonprofit giving by $13 billion each year, costing around 220,000 to 264,000 nonprofit jobs. Despite these worries, local nonprofits remain hopeful that their operations will continue without too much hindrance.
“Our hope is that the people who give us the smaller donations who may now take a standard deduction instead of itemizing may continue to do so — I think it’s really out of the goodness of their hearts that they give to us anyhow,” said Sylvia Coyle, executive director for Infant of Prague Adoption Services in Fresno. “More higher-end taxpayers will probably continue to itemize and if they do, they they’ll continue to donate, but it really depends on where they fall based on what the deduction does for them.”
Infant of Prague is licensed to operate in 17 counties in California. Though they do charge for services to adoptive families, Coyle said that as a charity, they rely heavily on donations. Coyle, however, argued that it is their purpose that motivates people to donate rather than hope of a tax break.
“I think our larger donors give because they care about our mission and want to continue to see us do well,” she said. “They realize that we’re a charity and have been since our inception, and we rely heavily on the support of the community. So I don’t expect them to suddenly change their minds.”
This sentiment was shared by Neighborhood Industries’ Executive Director Anthony “AP” Armour. Neighborhood Industries, which runs both a thrift store and a recycling center, is an organization in the Tower District staffed by people brought in by Pathways to Employment. They also run a $10 bag sale every year, in which customers are able come into the store and fit as many items into a bag as possible for a cost of $10.
“For us, we always hope that people want to give to our cause because they believe in the cause,” Armour said. “And they give to us because they see where their money goes and the work we do.”
Armour, however, believes that the new tax plans will incentivize and encourage the type of industry that he’s involved in — that of the social enterprise. Unlike standard charities and nonprofits, social enterprises seek to enact community and social change while at the same time being a self-sustaining business.
Though they receive donations, the majority of Neighborhood Industries’ income is drawn from their business.
“I’m not sure how this is going to affect us directly, but I would say that it probably creates the needs for social enterprises,” Armour said. “At least to be a traditional nonprofit model.”
Armour further speculated that the tax changes will result in a further prioritization of how nonprofits spend.
“I can see how there might be panic in that, but whenever your pockets get lighter, you have to start thinking of solutions,” he said. “So hopefully this will inspire people to look at how they steward their resources and what they’re doing with that.”
“So far, we don’t really know that far into the future,” Coyle said. “We’re always reasonable with our funds, we don’t overspend, we’re very thoughtful on how we use our funds.”
Leamon added that there might also be a silver lining in the new tax bill for those paying their taxes.
“I discovered that most people that I do taxes for would be greatly benefited,” she said. “Their tax burden would be significantly decreased, which is interesting. I didn’t expect that because the news has been very negative on this bill, but actually, I see mostly middle class people and it’s actually very helpful to those people.”
“I do know it’s been a benefit in some ways to employees,” Armour said. “Less is being taken out of their checks and stuff like that, so that’s a benefit — I think — from a business side of things.”