Trump

Tax Bill Imminent – Time to Take Action?

Image result for musical chairs winners losersThere still needs to be some negotiations between the House and Senate to come up with a final bill but they are pretty close. My accountant even told me to make sure I pay up my back state taxes owed since 2017 is probably the last year I can deduct them.

Ok – for Nonprofits – what is the bottom line?  Anything terrible? Any advice for our donors?  Good, bad or ugly for planned giving?

CLICK HERE TO SEE AN EXCELLENT FORBES ARTICLE GOING THROUGH THE VARIOUS PROVISION BY THE TAX GIRL BLOGGER (KELLY PHILLIPS ERB)

Here is my take on a few provisions that might be relevant to nonprofits:

  1. The “standard deduction” is definitely going up – probably doubling. As a head of household, I will get around a $24,000 standard deduction.  Seeing that I will still get the mortgage interest deduction as well as up to a $10,000 deduction on my real estate tax, I probably will still be an itemizer.  In other words, donors who have significant expenses like mine will likely not be impacted. My verdict: no impact on nonprofit fundraising.
  2. 529 plan expansion –  Under the House bill, parents may set up 529 plans for unborn children. Additionally, up to $10,000 per year of plan funds could be used for private elementary and secondary school expenses. Under the Senate bill, 529 savings plans could be used for public, private and religious elementary and secondary schools, as well as home school students. My verdict: might be very good for private schools – families with extra funds will be encouraged to park large sums in 529 plans to be used throughout private elementary and college years as a tax-free (on growth) fund.  No impact on fundraising that I can see unless people tell you that they are funding 529 plans instead of giving you charitable gifts.
  3. Estate tax repeal – Under the House plan, the federal estate tax would be phased out and completely disappear after 2024. Under the Senate plan, the federal estate tax would remain, but the exemption for federal estate and gift tax would double.  In other words, we will have an estate tax, just applying to even less people. My verdict: not great for planned gifts like Lead Trusts which are driven by estate tax avoidance but no impact on planned giving as a whole or other vehicles.
  4. Excise tax on big University Endowment Investment Income – Under House proposal, private universities with assets of more than $100,000 per student will pay a 1.4% excise tax on their net investment income. Small colleges will be exempt from the tax.  Not sure how the Senate addressed this issue but I suspect it won’t end up in the final bill.  For some reason it was not brought up in the Forbes article, it only impacts the biggest private schools (around 100 of them). My verdict: not sure.

I have been through too many “feared” tax law adjustments to be overly concerned about the impact on nonprofit fundraising. Since they are not tampering with the charitable income tax deduction, my hope is that those who benefit from the changes will be give more to nonprofits.

Still, there’s a lot of musical chairs scrambling going on here (fooling around with tax code under the current condition that is must be revenue neutral means there has to be winners and losers) so we won’t know the impact of the law for years to come.

 

The Dreaded Trump Tax Plan IS Coming

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I know everyone is scared. So many messages coming at us – how could we not be afraid for ourselves and/or the nonprofit sector with the dreaded Trump tax plan?

Well, I am here to tell you in a few words – don’t stress the unknown.  And guess what – the final tax bill that is bound to happen soon is STILL unknown.

If you are seeing nonprofit sector commentators making recommendations like donors should be fronting their gifts in 2017 to donor advised funds in anticipation of losing out on tax deductions in 2018 and beyond – my advice is to completely ignore it.

In fact, the way I am seeing things, the charitable income tax deduction may be one of the few deductions left intact and may be even more important in 2018 and beyond.

And, all of this talk about the negative impact on nonprofits of raising the standard deduction (because it may take some people out of being itemizers) is ludicrous! Those people who are barely itemizers are NOT your major gift donors.  They are the type of donors who will still send you a $50 or $100 a year annual check, regardless of the deduction.

So, don’t lose sleep over a tax law overhaul that is far from done and may end up benefiting the nonprofit sector.

See, that wasn’t so bad!

Planned Giving in 2017?

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I refuse to jump to any conclusions regarding this year in planned giving (or any year!).

Will Congress/President somehow waterdown or eliminate the charitable deduction?

Possibly but it’s possible that the charitable deduction will be more valuable to your donors than ever before if they limit other deductions but not the charitable one.  (Treasury Secretary Mnuchin already said there will be no tampering with the charitable deduction contrary to Trump’s campaign “tax plan”)

Will there be anything new and exciting for fundraisers to bring to donors?

This doesn’t look like a great year for creative charitable legislation. Let’s see if they really “fix” Obamacare or the tax code.

But, there are a few things I can guarantee will happen: the oldest baby-boomers start turning age 71 this year, the age when required minimum distributions (RMDs) from IRAs and other qualified retirement accounts start.  There are a lot more boomers than their predecessors, with a lot more IRA funds – IRA charitable rollovers and beneficiary designations should be high on every fundraiser’s wish list.

Bottom line: Planned Giving is turning a corner, Boomers are finally and officially Planned Giving Prospects. Maybe it’s time you and/or your organization realized that it is “now or never” for the Boomers? Train up the staff, invest in the Planned Giving program.

Oh, and check out our 3-part Planned Giving Boot Camp for Major Gift Officers! Next sessions start March 15, 2017 – click here to see how affordable it is to train up to 15 staff members in planned giving!

Charitable Deduction OK?

Treasury Secretary Steven Mnuchin speaks at a press briefing at the White House in Washington, U.S., February 14, 2017.  REUTERS/Kevin Lamarque

Finally a hint as to the potential fate of the charitable deduction under any tax reform: NO CHANGE – at least that is what U.S. Treasury Secretary Steven Mnuchin said yesterday.

Not that the media wants to cover such a mundane topic that doesn’t involve Russian espionage and various nefarious stuff.

Also, he said it looks like August is when we’ll have a tax reform so relax for awhile .