Tax Cuts and Jobs Act drives major changes for nonprofits

• Published date: 01 March 2019
• Date: 01 March 2019
• DOI: http://doi.org/10.1002/nba.30574

MARCH 2019 NONPROFIT BUSINESS ADVISOR

13

© 2019 Wiley Periodicals, Inc., A Wiley Company • All rights reserved

DOI: 10.1002/nba

2018–19 Exempt Organizations Tax Issues

Tax Cuts and Jobs Act drives major changes

for nonprots

Editor’s Note: This month, Larry Zimbler, MST,

EA, returns with Nonprot Business Advisor’s 2019

Special Tax Issue, reviewing important changes made

to laws and regulations affecting exempt organizations.

Be sure to read Zimbler’s analysis, and always seek out

competent, professional advice to safely navigate both

tax and nontax compliance requirements.

PL 115-97, the Tax Cuts and Jobs Act of 2017,

made once-in-a-generation changes to tax law as

we know it. Not only did the law make a signicant

impact on tax-exempt organizations directly, but it

also made changes that affect the activity of donors.

The nearly double increase of the standard deduc-

tion for individuals, the widening of individual tax

brackets and lowering of individual tax rates, and the

drop in the corporate tax rate work to lower, overall,

the economic benet to donors of any deduction for

charitable giving. Indeed, according to the Fundrais-

ing Effectiveness Project:

For the rst half of 2018, nearly every metric the

FEP measured was lower signicantly compared

to 2017, including number of donors, total rev-

enue from giving and donor retention rates.1

Further in the same report,2 the FEP says:

While total revenue was down 2.1 percent at

mid-year, giving totals are now ahead 2.6% of

2017 gures after the third quarter.3

and

The reason for the increase? Revenue from major

gifts ($1,000 and up) increased signicantly. Rev-

enue from this group in 2018 was behind year-

to-date gures by –2.1% at mid-year. But after

the third quarter, revenue from this group is up

3.1%. In contrast, revenue from general donors

($249 and under) and mid-level donors ($250–

$999) remains behind 2017 levels of giving.4

Of course, as this is written, it is not at all clear

where 2018 will end up, and of course your individual

experience may vary. It is the opinion of this author,

based on many years of dealing with donations by

1 Charitable Giving Rebounds in Third Quarter Due to In-

crease in Larger Gifts, Nov. 27, 2018, https://afpglobal.org/

charitable-giving-rebounds.

2 Ibid.

3 Ibid.

4 Ibid.

small individual donors, that most donors want the tax

deduction but are not motivated to give by the deduc-

tion itself. It is not economically viable reasoning to

donate because of the tax deduction, absent a donative

intent. Small-dollar individual donors may begin a

plan to bunch charitable contributions, doubling every

other year to offset the standard deduction limitation.

Individuals received an increase to their adjusted

gross income limits for cash donations to charitable

organizations from 50 percent to 60 percent. However,

donors that make contributions other than cash (e.g.,

property and appreciated securities) may not see this

increased limitation. The law is written so that non-

cash gifts do not count toward the limit and so the

10 percent AGI limit is not incremental to noncash

donations.5 This is a restriction not fully realized and

may affect giving for 2019 and later.

In a Feb. 28, 2018, letter to Congress requesting

technical corrections to the TCJA, the American In-

stitute of Certied Public Accountants pointed out,

“The current statutory language in the TCJA reduces

the allowed charitable deduction if assets other than

cash are donated. This reduction results in a total

percentage of 50%, rather than 60% of AGI. This

reduction is the result even if one dollar of non-cash

assets is donated (such as securities).”6

Relief From Reporting Donor Information

IRS Revenue Procedure 2018-387 modies “the in-

formation to be reported to the IRS by organizations

exempt from tax under § 501(a) of the Internal Revenue

Code, other than organizations described in § 501(c)(3),

that are required to le an annual Form 990 or Form

990-EZ information return. These organizations are

no longer required to report the names and addresses

of their contributors on the Schedule B of their Forms

990 or 990-EZ. These organizations, however, must

continue to collect and keep this information in their

books and records and to make it available to the IRS

upon request, when needed for tax administration.”

5 IRC 170(b)(1)(G)(iii)(II).

6 AICPA Sends Congress Recommended Technical Corrections

to New Tax Law, Feb. 22, 2018, https://www.aicpa.org/press/

pressreleases/2018/aicpa-sends-congress-corrections-to-new-

tax-law.html.

7 Rev. Proc. 2018-38, 2018-31 IRB 280 (07/17/2018).