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U.S. charities are feeling the full impact of the 2017 tax reforms as a drop in donations.
The law increased the standard deduction to allow more Americans to claim it. But that removed an important incentive for charitable contributions, which could reduce tax burdens.
Under the 2017 law, the standard deduction nearly doubled to $12,000 for single filers and $24,000 for couples. For most Americans, that increase meant that they no longer needed to itemize their deductions — including charitable contributions.
Many charities have reported declines in giving since the law went into effect. In the first half of this year, fundraising revenue was down 7.3% compared to the same period last year for more than 4,000 organizations tracked by the Fundraising Effectiveness Project.
And in 2018, total charitable contributions from individual Americans was down 3.4%, according to the Chronicle of Philanthropy.
“The sector is hurting,” said Steve Taylor, senior vice president and counsel for public policy at the United Way, the largest American charity.
“We believe there is a direct cause and effect between the tax law and the drop in giving,” said Taylor, whose organization receives donations from across the income spectrum.
On Giving Tuesday (Dec. 3 this year), when people around the globe are encouraged to donate to charity, Republican Rep. Mark Walker of North Carolina is expected to introduce the Universal Charitable Giving Act, which would allow more Americans to once again deduct charitable contributions.
“There are many reasons why households give,” said Una Osili, an economist at Indiana University’s School of Philanthropy. “Tax incentives are certainly a factor in how much people may give and the timing of their gift.”
Osili said this year is the first time charities are feeling the full effects of the 2017 tax law. So they’ll have a better idea of its impact at the end of the year.
While contributions may be down, not all charities are feeling the decline. The Los Angeles Regional Food Bank is on track for a record fundraising year, according to Roger Castle, its chief development officer.
A spokesperson for Feeding America, another major U.S. charity, said it has not felt a negative impact either. But it has heard anecdotal stories from food banks that are struggling.
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