Update as of December 15: The final H.R. 1, Tax Cuts and Jobs Act was released on Friday, December 15, 2017. The tax plan will not repeal the Johnson Amendment and does not include the Universal Charitable Deduction, however it does maintain the current charitable giving incentive for itemizers.
Ad*vo*cate: a person who speaks or writes in support or defense of a person, cause, etc.
Lob*by*ist: a person who takes part in an organized attempt to influence legislators.
The difference between the two feels quite nuanced doesn’t it? And, to add to the confusion, the rules for private foundations are slightly different than the rules for charities. With the extraordinary proposals coming down in the federal tax reform effort, my organization, the Council of New Jersey Grantmakers, is spending a lot of time in this space right now. Truth be told, everyone that works in, benefits from, and supports our social sector should be in engaged as well.
One of the primary roles that the Council plays for our members is that of advocate. The proposed changes to the federal tax code include a number of elements that either directly impact the operations of foundations or stand to dramatically impact the work of grantees or both.
We have done a lot of outreach to New Jersey’s Congressional delegation and senators to let them know CNJG’s perspective on those issues that affect or concern foundations.
For instance, a key aspect of the legislation is to raise the standard deduction. Sounds like a good thing right? Except that now far fewer people will be able to itemize their tax return — which means they can’t take advantage of the charitable deduction. In fact, it means that 95 percent of tax filers will actually pay tax on their charitable deductions! It is for this reason that so many of us are concerned — if the incentive to give to charities goes away the loss in charitable giving is estimated to be as much as $13 billion.
Perhaps you’ve heard about the proposal to create a Universal Charitable Deduction, which would not only counter this loss but in fact open up the incentive to all taxpayers. It didn’t make it into either the House or Senate versions, but we are hopeful it might be taken up again when they take up welfare reform, which is apparently up next.
Or, perhaps you’ve heard about the effort by a very small group of conservative churches to have the Johnson Amendment repealed. This amendment, named for then-Senator Lyndon Johnson who championed the law, assures that charities are not allowed to endorse candidates or engage in “electioneering.”
There has been a large national movement to explain to elected official why repealing this amendment is very, very bad idea. Can you imagine the influence a donor, looking to advance one candidate over another, could exercise over a charity to endorse “his guy”? Or the boardroom of a charity now faced with the question of whether to endorse the current Mayor or the challenger? For a private foundation that wants to provide general operating support how can they be assured that a grantee won’t sign onto endorsing a candidate that the foundation has no interest in supporting? To learn more read an op-ed that my colleague Linda Czipo of the Center for Non-Profits and I authored in NJ Spotlight.
From taxing charities with supposedly “highly compensated” employees and flattening the excise tax that private foundations play, to requiring increased reporting for donor-advised funds, we are watching closely the negotiations between the Senate and House as the legislation comes through conference committee.
As this landmark tax legislation moves forward it is critical that all those who give to, work in, and steward our nation’s charities which are essential and integral threads of our society’s fabric — understand what these far-reaching changes will mean. Fortunately, there are a lot of resources and organizations (many that I’ve linked to here) that can help you understand and help you to connect with your elected officials to share your thoughts.