Headlines like these just drive me crazy:
- The GOP tax reform will devastate charitable giving
By Bryan McQueeney
Dec 27. 201714:00 AM
LA Times
- Charities fear GOP tax plan could lead to loss of billions of dollars in donations
Robert ChannickContact Reporter
Chicago Tribune
- Nonprofits are the unintended victims of the new tax bill
By Chris Gates. opinion contributor — 12/29117 11:00 AM EST 141
The Hill
- Bad news for nonprofits: Will people still give or as much if they can’t get a tax deduction for their charitable giving?
By Michelle Sinelciary
December 14. 2017
Washington Post
In my 35 years of working in this industry I can count on two hands the number of people who made their charitable gifts based on their tax deduction or tax avoidance. All of those were very sophisticated Planned Gifts involving various trust vehicles to move one estate to an heir’s estate as tax free or significantly tax reduced.
In my dealings with individuals making charitable gifts, an income tax deduction was not in the top 3 or 4 reasons why they made the gift, though the deduction was always appreciated. Their giving was more intrinsic and personal! (To see why people really give watch the video at the end of this blog.)
The mainstream Press is claiming that because the standard deduction for a married couple is going from $12,000 to $24,000 and average tax rates are being reduced people are going to give significantly less and keep more of their money. I say POPPYCOCK!
I believe US tax payers are going to give more to charity – as will domestic corporations – because of their tax cuts. But first, let’s look at how individuals file their taxes.
According to recent IRS data, for the 2014 tax year:
- 1 percent of households chose to itemize their deductions (44 million returns).
- 5 percent of households chose to take a standard deduction (101 million returns).
- 6 percent of households had zero or negative adjusted gross income, and were unable to take any deductions (2 million returns).
These statistics show that most US taxpayers choose to take the standard deduction; in other words, they filed with no charitable tax deductions.
Here’s a breakdown of the average charitable deduction by income level, according to the IRS’s 2014 Statistics of Income (SOI):
| Adjusted Gross Income (AGI) | Average charitable deduction | % of AGI |
| Under $25,000 | $1,874 | 12.3% |
| $25,000-$50,000 | $2,594 | 6.8% |
| $50,000-$75,000 | $2,970 | 4.8% |
| $75,000-$100,000 | $3,356 | 3.8% |
| $100,000-$200,000 | $4,130 | 3% |
| $200,000-$500,000 | $7,424 | 2.6% |
| $500,000-$1,000,000 | $18,615 | 2.8% |
| $1,000,000-$2,000,000 | $43,944 | 3.2% |
| $2,000,000 or more | $382,953 | 5.6% |
Source: IRS Statistics of Income 2014.
So, if individuals have more money in their pockets, please explain to me why it is projected that they will give less – particularly since many don’t take charitable deductions in the first place. Also, let’s look at the individuals making $500,000 and above; their federal tax rates have decreased from 39% to 37%, increasing their spendable income by 2%. For a million-dollar earner that is a $20,000 increase in spendable income, allowing the individual to give even more money and still claim the charitable deduction.
Let’s quickly review 2016 charitable giving statistics.
Individual and Family Philanthropy:
- Americans gave $390.05 billion in 2016. This reflects a 4.2% increase from 2015.
- Corporate giving in 2016 increased to $18.55 billion – a 3.5% increase from 2015.
- Foundation giving in 2016 increased to $58.28 billion – a 3.5% increase from 2015.
- In 2016, the largest source of charitable giving came from individuals, for a total of $281.86 billion, or 72% of total giving.
- This was followed by foundations at $58.28 billion (15% of total giving), bequests at $30.36 billion (8% of total giving), and corporations at $18.55 billion (5% of total giving). (Giving USA 2017)
Adding bequest gifts to the individuals bracket, more than 80% of all giving came from individuals. Moreover, I have seen no research or statistics which indicate that the primary reason why people give is a federal tax deduction!
Assuming we are not headed towards an economic calamity or World War III, I predict that Charitable Giving is going to increase – just as it has for every year since 1957, except for 1974 and 2008!
Those Stingy Corporations
Before turning to the corporate world, a little background is worth having. In 1999, when that tax bill was presented to Congress, the media again went public and predicted the end of charitable giving as we knew it only to be rebuffed by this Philanthropy Roundtable article:
When Uncle Sam takes, do Americans give?
Philanthropy Roundtable – 1999
Before charitable groups rush to team up with H&R Block, the realtors, mortgage bankers, municipal bond traders, accounting industry, and nation’s multitude of tax attorneys and lobby against a reform of our current 8,000-page tax code, here is some reassuring news. Independent Sector’s (IS) track record in predicting the impact of tax changes on charitable giving has been wrong in the past every time. During the debate over the Tax Reform Act of 1986, IS predicted that the reduction in tax rates in that act would trigger an $8 billion decline in charitable contributions in 1987. Instead, charitable giving rose by $6.4 billion, or 7.6 percent, in 1987 after the top tax rate fell from 50 percent to 28 percent. Alan Reynolds of the Hudson Institute has noted that IS actually underestimated the impact of the 1986 tax reform act on charitable giving over the period 1987-94 by a gigantic $40 billion. Oops.
In this most recent study, Independent Sector and the Council on Foundations commissioned the Washington tax division of Price Waterhouse (PW) to run computer simulation models on how tax changes might affect giving. This is like asking Phillip Morris to prepare a study on the economic impact of abolishing cigarettes. Having worked in the trenches over the past four years on the flat tax and sales tax, I can personally attest to the fact that virtually every major accounting firm is an aggressive adversary of tax simplification. (end)
Corporate giving has been stuck at 5% for more than 30 years. Why is that? Maybe this will shed some light:
| US Corporate Tax Year | Tax Rate | % of Total Charitable Giving |
| 1995 | 35% | 5% |
| 2005 | 35% | 5% |
| 2016 | 35% | 5% |
As you probably know, the new Tax Act has cut the corporate tax rate from 35% to 21%. What was the first thing those money hungry corporations did with this information?
More than 318 companies (involving more than 4 million US employees) have given bonuses and increased their minimum wage. These companies have invested in research & development; committed to building new facilities; brought billions of off-shore dollars back to the US; and even hired more employees – just to name a few changes. The most amazing part about all of this is that their tax savings haven’t even kicked in yet!
There is one more thing: the following is just a partial list of companies starting or taking their charitable giving to the next level because of the new tax reform act.
Companies Starting or Increasing Current Charitable Giving By Amount
- Ally Financial, Inc. – $6 million
- Altria Group, Inc. – $35 million
- American Family Insurance – $10 million
- BB&T – $100 million
- Berkshire Hills Bancorp, Inc. – $2 million
- Best Buy – $20 million
- BMO Harris – 10% increase in 2018
- Boeing – $100 million
- Brown-Forman Corporation – $60 to $70 million
- Citizens Financial Group – $10 million
- Commerce Bank – $25 million
- Customers Bank – $1 million
- Ecolab, Inc. – $25 million
- F.N.B. Corporation – $5 million
- First Midwest Bancorp, Inc. – $2 million
- Fulton Financial Corporation – $2million
- Gate City Bank – $1 million
- JPMorgan Chase & Co. – $1.75 billion over 5 yrs.
- M&T Bank Corporation – $50 million
- MB Financial, Inc. – $7 million
- Meridian Bancorp, Inc. – $1 million
- PNC Financial Services – 200 million
- Regional Financial Corporation – $40 million
- Southwest Airlines – $5 million
- SunTrust Banks, Inc. – $50 million
- Umpqua Holdings Corporation – $2 million
- US Bancorp – $150 million
- Visa – will increase employee match by 200%
- Webster Financial Corporation – $1 million
- Wells Fargo – $400 million
- Zions Bancorporation – $12 million
Companies Starting or Increasing Current Charitable Giving
- 1st Summit Bank
- Advance Financial
- Aflac
- American Express
- Apple
- AT & T
- BancorpSouth Bank
- Black Hills Energy
- Central Bancompany, Inc.
- Cigna Corporation
- Comcast
- Discover Financial Services
- ES Bancshares, Inc.
- Evans Bancorp, Inc.
- Exxon Mobil
- Fidelity Bank
- First Farmers Bank & Trust
- First Federal Community Bank
- Flemington Car & Truck Family of Brands
- Great Western Bancorp, Inc.
- Gulf Coast Bank & Trust Company
- Home Bancshares, Inc.
- Hostess Brands, Inc.
- Humana
- Jordan Winery
- Kish Bancorp, Inc.
- Lawrence Paper Company
- Merck
- Mountaire Corporation
- NBT Bancorp, Inc.
- NexTier Bank
- Peoples Bank
- Saban Capital Group, Inc.
- SkyWest Airlines
- State Street
- TCF Financial Corporation
- The Charles Schwab Corporation
- Thermo Fisher Scientific
- Tri-State Trailer Sales, Inc.
- Unity Bank
- Wal-Mart
- YAM Worldwide
Americans for Tax Reform, found at www.atr.org/list
Charitable giving is not about income tax deductions – it is about relationship-building between your donors and your institution. Whether you’re talking about an online donor who makes a $25 gift, a married couple that donates $100 annually to your special event, a major philanthropist who gives $1 million to your capital campaign, or the couple that left you in their estate plan – in some way, you have built a relationship with each of them, which motivated them to give.
It’s a simple concept; it’s not rocket science. Building a long-term, mutually beneficial relationship with a donor involves the same qualities as those needed to forge a strong friendship – trust, authenticity, communication, and integrity – not a charitable income tax deduction.
Remember, at its essence charitable giving is all about making friends and communicating a need in a persuasive way which compels people to help meet that need.
Use the new Tax Reform Act to build more relationships – many Americans will have a few more dollars to invest in your mission.
Please view this YouTube video – I think you will be moved and enlightened about charitable giving. Click here: Why we make Charitable Gifts
I hope you have found this useful for your fundraising planning and if I can be of any further assistance please give me a call or drop me an email.
Ron Huddleston, FAHP, CFRE
President
(602) 920-3775