U.S. charities and foundations are on edge about how the stated policies of the incoming Trump administration and the Republican-majority Congress will play out in the coming year.
Nonprofit groups could see the charitable-giving incentive at risk in an expected tax overhaul, and federal spending cuts would gouge support for nonprofits, especially those with government contracts, according to an analysis by The Chronicle of Philanthropy.
For their part, foundations might face escalating pressure to fill those gaps at a time when their endowments and “in perpetuity” life spans are coming under new scrutiny.
The Trump White House and congressional Republicans seem certain to pursue a major tax overhaul in 2017, with potentially big effects on nonprofit organizations.
These could include limiting the charitable tax deduction, which many in the nonprofit sector predict would reduce giving by wealthy individuals. Also likely are tax cuts for wealthy and middle-income families that could reduce their incentive to give.
The Chronicle noted that the message coming from the Trump camp has been ambiguous. On the campaign trail, Trump proposed a tax plan that called for a cap on all write-offs, including for charitable donations. But some of the president-elect’s advisors opposed limiting giving incentives.
Trump will release his first budget message during the first quarter.
The Chronicle said nonprofits have powerful supporters on Capitol Hill. The chairman of the House Ways and Means Committee, Rep. Kevin Brady, R-Texas, proposed a tax overhaul in June that appeared to maintain the charitable deduction.
Sen. Orrin Hatch, R-Utah, chairman of the Finance Committee, has expressed support for charitable giving incentives in the past.
Geoffrey Plague, vice president of public policy at the Independent Sector coalition of nonprofits and foundations, told The Chronicle that nonprofit leaders would keep tabs on changes to the standard deduction, whereby people can subtract a set amount from their taxable income without itemizing.
“If people are able to save more on their taxes by opting for the standard deduction, fewer people will itemize, eliminating an incentive to give,” Plague said.