tax bill

Recording of Tax Briefing on Sale!

We had 250 people on our live tax briefing today!

The session was very well received – here are a few of the comments we received:

“Thanks for the webinar today. Any chance you’d be interested in holding a seminar for donors about how the new tax bill might affect their charitable giving.”

“Nice job on the presentation today.”

“Thoroughly enjoyed and was educated by your webinar today.”

“Thank you so much for an informative session this morning!”

“Thanks so much for the webinar presentation today regarding the 2018 Tax Law changes — I found it to be very helpful.”

“Thoroughly enjoyed the presentation this morning and got a number of questions answered, plus good direction for the future with the 70 1/2s and their IRAs. Thanks!”

If you are still interested in the topic – you can now purchase the recording!


Excuses in French: Did I go overboard last time? More on the new tax law

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I probably could have been more tactful in my previous post.

Maybe I was little ornery about other things when I saw that statement?

So, after a strongly worded voice message from the unnamed firm that put out the statement, and some reflection, I want to address the issue again.

Here is the quote that I took issue with (regarding the impact of doubling of the personal exemption in the tax bill):   “Although the legislation maintains the current-law income tax charitable deduction, it will significantly reduce the number of taxpayers who itemize and effectively eliminate the income tax charitable deduction for a vast majority of Americans.”  (I especially disliked the part I bolded as it makes it seem like they just effectively took away the income tax deduction – which is not true!)

Clearly many Americans will no longer need to itemize on their tax returns, and therefore may have less incentive to give to charity. I say “may” because we really have no idea what impact this will have on contributions, particularly looking at the typical profile of those who may no longer itemize.

I can tell you that for those still in the workforce, who pay real estate taxes and mortgage interest, and/or pay for their own medical insurance and/or have dependent children, and for sure those households with significant income (let’s say $150,000+), will surely continue to itemize. In fact, the charitable deduction will be more important to those people as the bill limited some other deductions.  In other words, your major gift prospects will still be incentivized to make charitable gifts!

What about planned giving donors? The other provider I quoted in my last post claimed that “Planned giving donors are still expected to itemize their deductions.”  Now that my bias has been revealed, this statement doesn’t seem to be 100% true either.  For “planned giving donors” who are really major gift donors creating planned gifts like CRTs, yes – they are likely to continue to itemize on their tax returns.

But, the largest group of  planned giving donors are those who make simple bequests (over 80% of planned giving dollars to higher education from FY05 – FY16 came from charitable bequests – see my VSE talk from the summer).  In other words, many typical bequest donors are older and have already moved out of the workforce, may have downsized and no longer own real estate, and may in fact be the precise community in America which will have less incentive to make charitable gifts!

Of course, I have found that donors who average $50 gifts and have made 15 or more gifts to an organization (my own testing from various client situations) seem to be the best profile for a charitable bequest.

Is the $50/multi-year donor going to hold back on gifts because he or she may no longer be required to itemize? I doubt it but time will tell.

Clear take away message – these bequest planned giving donors are perfect for IRA direct rollover giving!!! So, start working on promoting it to compensate those who no longer itemize!  In any case, you may get gifts from those who still itemize.

Lastly, the Washington Post – the reigning anti-Trump champions who drive me crazy with their unabashedly biased reporting – published a piece on this topic (click here to see it) claiming that charities are seriously worried and upset that they will have to focus more on wealthier prospects (kind of ironic since that is already the case!). Of course, I disagree with anything the Washington Post has to say because everything that seems to come out of that paper is biased and agenda driven.

Nevertheless, while I still disagree with their premise, I do see something good coming from this mini-movement claiming that charities are getting hurt by the tax bill.  Maybe the Republicans can be shamed enough to throw nonprofits a tax bone or two?

How about allowing anyone age 59.5 and older the ability to use the IRA charitable rollover provision?

Or, a universal deduction for charitable giving? Change where it shows up on the tax return so it applies whether you itemize or not.

How about allowing IRA rollovers to establish planned gifts like CRTs or CGAs?

If something can be squeezed out of this hysteria, that would make the hysteria worth it.

So, do I apologize? Yes, for the tone and for singling out one provider (even though I didn’t mention their name).  But, I can’t back off on my critique of the substance.

For good summary of the changes in the tax law impacting nonprofits, check out this link from Lowenstein Sandler (NJ law firm):—tax—key-tax-exempt-organization-tax-provisions.pdf


Tax Deal: Does it impact fundraising?

Image result for tax plan cartoonIt looks like we’ll have a tax bill signed any day and now we are left trying to figure out what impact, if any, this may have on nonprofit fundraising.

While many final details are still to be revealed, here are the main items that may impact our donors and their giving:

  • “[T]he corporate tax rate would be cut to 21 percent, while the top tax rate for individuals would drop to 37 percent from 39.6 percent. The new rates would take effect next year.”  –  Highest earner get a bit of a break (but might very well get hurt by other things in the bill). For example, if your AGI is $500,000, you just saved approximately $13,000.  You will probably lose more than that if you live in an expensive neighborhood with a really big mortgage (i.e. your real estate taxes are more than $10,000 a year and your mortgage is over $750,000 – see below).
  • “The deduction for state and local taxes would be capped at $10,000 and taxpayers would be able to choose to deduct their property or income taxes, source said.” – Is the $13,000+ break from bullet point # 1 enough to offset the loss from this bill if you pay more than $10,000 in real estate taxes?  The irony of this point is that it really hurts the wealthier sector – something not reported in the media very well.
  • “The standard deduction would be doubled under the deal, to $12,000 for individuals and $24,000 for families.” – This may actually put more money in the pockets of your middle and lower middle earners!  Again, not reported in the media very well. Still, the question is if this disincentivizes charitable giving for those who now will no longer need to itemize?  I suspect not but I am ready to start touting the IRS rollover giving provision in a big way for those 70.5+.  You know what, I will be shocked if this hurts charities at all.
  • “Republicans senators leaving a GOP lunch told NBC News that the agreement would also set deductions for pass-through income at 20 percent.” – I am not sure what this means!
  • “Under the deal, the mortgage interest deduction would be allowed on loans up to $750,000, the sources said.” – Again, hurts our wealthiest sector.  Ironically, nonprofit fundraising could be hurt if this sector is feeling really poor after they finally realize what happened.  Not sure it will impact charity!

The verdict?

Still out.  I am leaning towards people on the higher wealth/earning end looking for more deductions and therefore more charitable giving!  Ok, I am an optimist.  Most likely result for nonprofits: no change.

Look for more posts on this topic as the final details come to light.