The Center for Effective Philanthropy (CEP) has released a new report measuring how nonprofit and foundation leaders view the new tax legislation passed by Congress at the end of 2017 and what they perceive as the role funders need to play in helping grantees respond to the changes.

The Tax Cuts and Jobs Act that went into effect Jan. 1 doubles the standard deduction that taxpayers can claim in their tax returns (to $12,000 for singles and $24,000 for couples), eliminating the tax incentive for all but the wealthiest Americans to donate to charity.

"A charitable deduction available only to the most affluent donors may not be politically sustainable," suggests C. Eugene Steuerle, Institute Fellow and Richard B. Fisher chair, Tax Policy Center. He predicts the number of households taking the charitable deduction will fall from 37 million to 16 million.

Among other tax bill provisions affecting nonprofits, the Act also doubled the estate tax exemption to $22 million for couples.

The CEP report, Bracing for a Downturn: Nonprofits, Charitable Deduction Worries, and How Foundations Can Help, shows nonprofits and foundations are equally concerned about a potential reduction in individual donations. 

Key findings:

• More than half of the foundation and nonprofit leaders surveyed (53 percent for each group) are concerned about a decrease in charitable giving, though 30 percent of respondents from both groups say they don’t fully understand the legislation yet or are unsure how it will affect giving.
• Foundation leaders suggest two primary roles for how they can best help nonprofits: supporting nonprofits’ capacity to respond (39 percent) and educating nonprofits and the public about the legislation and its effects (20 percent).
• Nonprofit leaders agree that foundations can help them directly with more capacity building (33 percent) both generally and specifically through stronger fundraising and marketing and through education about the legislation (25 percent). They also identified a third role for foundations that none of the surveyed foundation leaders mentioned – broadly promoting the value of nonprofits, the importance of their work and the needs of their beneficiaries (36 percent).

The report, based on findings of a survey conducted with 170 nonprofit CEOs and 187 foundation staff, shows nonprofits value the trusted position foundations have in the nonprofit sector to advocate for increased support of nonprofits among a variety of audiences, including legislators.

“As highly visible and often well-resourced organizations, foundations could take advantage of their name recognition and trusted status to directly appeal to individuals and other sectors to recognize and continue all the good that giving does in our society,” said study co-authors Kevin Bolduc, vice president, assessment and advisory services, CEP and Ellie Buteau, vice president, research, CEP, in a recent blog post. 

“We hope that sharing these findings helps stimulate important conversations about joint approaches to preparing the charitable sector for whatever effects this legislation will ultimately have on giving.” 

One such conversation was held May 22 during the "Washington and Tax Impact" webinar led by Rob Collier, president and CEO, CMF and Donna Murray-Brown, president and CEO, MNA with Lori Boyce, managing director, Deloitte. They led a 90-minute program highlighting opportunities and challenges with the new tax act for nonprofit organizations, including private and public foundations. CMF members can access the webinar online at no cost.

Want more?

Download the CEP report.

Read the blog post by the report's co-authors. 

Access the free CMF and MNA webinar on tax impact.