The nonprofit community has to be feeling the cross-hairs of the fiscal cliff.  Both parties are mentioning capping of deductions as a possible solution; Republicans and Democrats are searching for an easy way to  increase taxes without political liability.  Instead of raising taxes, let’s just lower tax refunds for deductions.  Obama has been floating this idea for years (click here to see commentary on the 28% deduction cap idea).  Even Mr. Romney talked deduction caps!

Problem for the nonprofit world is that of all the available income tax deductions, only the charitable deduction is truly optional for most.  I mean – people will still have mortgage interest and real estate taxes (two huge deductions).  Medical costs, children – not much control over these?  But, how much you give to charity?  That is a decision you make every year.

How much will it actually cost the nonprofit world in fundraising dollars?  Check out this pre-election press release from the Charitable Giving Coalition claiming that U.S. charities would lose $5.6 billion in contributions under President Obama’s deduction limit proposal. The Independent Sector is even organizing two days of rallying on behalf of the charitable deduction in D.C. (click here to see their action alert).

And, the mainstream media seems to be buying into this option.  Here is a link to a CNN article on why we need to “reform” the charitable deduction.

Any upside for nonprofit fundraisers?  Maybe.  Let’s hope that financial advisors start suggesting that people accelerate their charitable giving for 2012 to take advantage of the current favorable charitable deduction.  You never know – maybe the deduction cap idea fails anyway.  This “end of year” was looking pretty down but this is a ray of hope, however slight.