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TCJA Changes Cited for Charitable Giving Drop

Posted on June 19, 2019

Americans gave less to U.S. charities after enactment of the 2017 tax law, confirming the fears that many in the charitable sector expressed before the bill was passed.

American individuals, foundations, corporations, and bequests gave about $427.71 billion to U.S. charities in 2018, the year following enactment of the Tax Cuts and Jobs Act, according to Giving USA’s annual philanthropy report released June 18. That’s a drop of about 1.7 percent from 2017, when adjusted for inflation, the report says.

“The environment for giving in 2018 was far more complex than most years, with shifts in tax policy and the volatility of the stock market,” Rick Dunham, chair of the Giving USA Foundation, said in a statement. “This is particularly true for the wide range of households that comprise individual giving and provide over two-thirds of all giving.”

The TCJA made few direct changes to the charitable deduction, but nonprofit representatives had warned that the significant increase in the standard deduction and other charitable giving disincentives in the bill would cause donations to drop.

“One important shift in the 2018 giving landscape is the drop in the number of individuals and households who itemize various types of deductions on their tax return,” Giving USA said. “This shift came in response to the federal tax policy change that doubled the standard deduction . . . . Numerous studies suggest that number may have dropped to approximately 16 [million] to 20 million households in 2018, reducing an incentive for charitable giving.”

Independent Sector, a coalition of nonprofits, said June 18 that the Giving USA report “is a clear warning sign that unfair tax incentives are having a negative effect on charitable giving in the United States.” The organization called on Congress to act to protect the sector, saying, “Without immediate action, these trends will not only threaten critical services, but also fundamentally damage nonprofits, our work, and our communities.”

Individuals gave $292.1 billion in 2018 — a 3.4 percent decrease when adjusted for inflation, according to the report. Giving by corporations increased 2.9 percent when adjusted for inflation to $20.1 billion, an increase that Giving USA partially attributed to changes in corporate pretax dollars. The TCJA lowered the corporate tax rate from 35 percent to 21 percent.

The report follows a November 2018 Urban-Brookings Tax Policy Center estimate that the number of taxpayers claiming the charitable deduction would decrease from about 36 million in 2017 to roughly 15 million in 2018. The report estimated that charitable giving would decrease by $15 billion in 2018. 

Follow Asha Glover (@AshaSGlover) on Twitter for real-time updates.

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