Joint Statement on the Charitable Tax Deduction
November 17th, 2011
Grand Rapids Community Foundation and Heart of West Michigan United Way have issued a joint statement regarding the possible threat and erosion of the charitable tax deduction. This is an important issue and could have negative implications for our community.We have forwarded this to Rep. David Camp and Rep. Fred Upton who are on the SuperCommittee and represent districts in Michigan with the following message:
"Attached you will find a combined statement from Grand Rapids Community Foundation and the Heart of West Michigan United Way regarding the charitable tax deduction.
In your Joint Select Committee on Deficit Reduction deliberations please keep in mind the repercussions of any change in the charitable tax deductions. We believe that preservation of this incentive for giving is vital to the work of both the Community Foundation and the United Way. Our ability to make grants and provide programming depends on charitable gifts. The economic downturn has made our work more challenging, not only from a service provision standpoint but from a fundraising perspective as well."
Please read and take action!
Threat to the Charitable Tax Deduction
October 17th, 2011
Over the years, I have either participated in or witnessed the "great debate" around why people give to causes and various nonprofit organizations. Recently, I had a lively conversation on Facebook with a woman who was adamant that people would give to causes regardless of having a tax incentive or not. I acknowledged that while many do give because they believe so strongly in the cause, if we lost the ability to offer a charitable tax deduction frankly I do believe that would have a tremendous negative impact on the nonprofit/social sector.Given the fact that both at state and federal governmental levels, there exists a serious deficit problem, it is no wonder that many proposals and legislation are being introduced to try to stem the tide of financial woes. For the 4th time, President Obama is proposing a change on the charitable tax deduction for households with income greater than $200,000 or net worth greater than $1 million. This is part of the President's formal recommendations to the supercommittee charged with developing a deficit reduction plan by November 23rd.
According to the Council on Foundations:
"The administration has proposed disallowing any charitable deduction to the extent such a deduction reduces the income tax liability of the donor by more than 28% of the donation. Individuals subject to the highest tax rates - currently 33 percent and 35 percent, and scheduled to increase to 36 percent and 39.6 percent in 2011 - would see the tax benefit of their charitable deductions reduced significantly."
This is a big issue for the philanthropic community! I believe that this proposal could be the beginning of a slippery slope; merely the start of undoing the charitable tax deduction which has been in existence for more than 100 years. I am wary that if the charitable tax deduction is reduced once, it will continue to be whittled away over time. Even if a small portion of donors take advantage of itemizing their charitable donations, we don't need a reason to take away giving particularly at this moment in time! We need to encourage people to give! I will write more on this issue - this could have the impact of billions of dollars to the philanthropic sector across the country.
Penny Wise?
August 10th, 2011
I recently had a friendly debate with a woman on Facebook about whether tax incentives really matter when it comes to charitable giving. My summary of the discussion was "it doesn't hurt!" The headline for a strong case for giving to a nonprofit organization certainly includes transparency as well as what impact is being made because of the programming of the organization. As I have written in past blogs, the reality of really getting the message out to the community on the good works of organizations is tough given constraints on budgets but really necessary.In early May, the Michigan Legislature passed the Governor's tax reform package in a close vote and this bill eliminates the three charitable tax credits for gift to community foundations; public institutions, such as universities, libraries and public radio; and food banks and homeless shelters. These changes to the charitable tax credits are effective on January 1, 2012. Gifts made before midnight on December 31, 2011 may be used for the tax credit. We will be promoting these credits until the end of 2011.
The tax credit pertaining to community foundations has been in existence since 1988 having been passed in 1987. It provides up to a $200 State tax credit for gifts of $400 to community foundations for married couples and a $100 tax credit for gifts of $200 for a single person. Businesses can take a tax credit up to $5,000 on gifts of $10,000. In order to qualify for the tax credit though, all gifts have to go to permanent endowment only and does not include any "pass through" donations.
Michigan was the first state to have such a tax credit for gifts to community foundations and frankly it has been instrumental in growing the endowment of the Grand Rapids Community Foundation as well as the agency funds that we hold. The entire cost to the state of Michigan for the tax credit since its inception in 1988 has been $50M. HOWEVER, the endowed assets of Michigan's community foundations have grown to exceed $2B due in part to the offering of the credit.
So when we are working in partnership with the public sector, our dollars have definitely made a difference in braiding funding and leveraging dollars for our communities! We have definitely added tremendous value!
Yes I know the opposing view to this could read: "What do you expect the state of Michigan to do when revenues are severely diminished and we are all struggling to keep our state moving forward?"
The Grand Rapids Community Foundation will continue to grow and provide needed financial support and strong leadership in our area. We will miss the opportunity to introduce people to the community foundation using the tax credit as an incentive to come to know us and gain an understanding of philanthropy. It did provide a terrific way for us to establish relationships with new donors. We do feel confident though that our current and future donors will continue to support the work we do and to support the strength of building our community's endowment!
The looming concern on the horizon is the preservation of the federal charitable tax deduction which if eliminated or somehow diminished could have a devastating impact on the entire nonprofit sector in our country. But that's a topic for another blog entry!