NORTHAMPTON — Some of the local organizations that rely on charitable donations for their survival are watching 2018 approach with trepidation.
The reason for their worry is the GOP tax measure recently signed by President Trump. Analysts suspect the new law could lead to a sharp decline in the number of people who give to charities.
The law raises the standard deduction to $12,000 for single filers and $24,000 for joint filers. That change may cause more people to take the standard deduction, and because those who do cannot itemize charitable tax deductions, fewer people might end up donating their money.
The change in the standard deduction and others could result in as much as a $513 million reduction in giving, according to the Massachusetts Nonprofit Network, whose members include a large number of Pioneer Valley charities, including CareerPoint and Community Action of the Franklin, Hampshire, and North Quabbin Regions. Itemized charitable contributions in Massachusetts totaled $5.7 billion in 2016, according to the group.
The change in tax law will begin with contributions made in 2018, so the nonprofit network is suggesting that its member charities scramble to get as many donations as possible before the end of this year.
Jim Klocke, the network’s CEO, said the new law is most likely to change the giving of middle- and upper middle-income households who have typically itemized their deductions.
“It’s going to depend on their donor base,” he said when asked which nonprofits would be most affected. If an organization gets most of its donations from low- or high-income households, it won’t necessarily see such a big drop-off in donations.
Nonprofits that get most of their money from middle-income households, however, are more likely to see a decline in giving. The problem, Klocke said, is that most nonprofits fit that giving profile.
One such organization that is worried about the tax law’s effect is United Way of Pioneer Valley.
“The vast majority of the dollars we raise come from individuals, and the concern is that that support may erode over time,” CEO and president Jim Ayres said. “We believe that people give because they want to and because they want to help. … Our concern is that people may not give at the same level as in the past.”
Even more concerning, Ayres said, is that lawmakers might next target the country’s social safety net programs, leading to an increase in need while organizations like his see charitable giving decrease. U.S. House Speaker Paul Ryan and other Republicans have already indicated that they want to slash Medicare, Medicaid and welfare programs, now that their tax bill has been signed into law.
Mindy Domb, executive director of the Amherst Survival Center, agrees that the $1.5 trillion deficit the tax law is predicted to create could be used as pressure to dismantle and defund social services.
“Given this context, the changes in charitable giving seem even more harsh since they may eliminate the incentive to donate funds to organizations that may be relied upon more heavily as a result of the new law,” Domb said.
“In the long run, the need for charitable dollars may go up,” said Clare Higgins, the executive director of Community Action. Like Domb and Ayres, she worries about cuts to Medicare, Medicaid and programs like housing, food and heating assistance.
Unlike United Way, however, Higgins said, Community Action’s donation revenue won’t necessarily be dealt a major blow.
Many of Community Action’s donations come from low- or moderate-income people who probably already take the standard deduction and aren’t donating with itemized deductions in mind in the first place, Higgins said. The average donation, she added, is around $100.
“We’re not like a college, which might be depending on people to give them a big donation to build a building or endow a chair,” she said.
“I don’t think it will necessarily harm us,” Higgins said of the law, “but I think there’s a lot of misguided public policy in that tax bill.”
Colleges and universities, which typically pull in lots of money from donations, are some of the biggest institutions that could be affected by the new tax law.
In a letter to the state’s congressional delegation, top officials from the University of Massachusetts system criticized the bill for many reasons. One of those reasons was that it would deter charitable contributions, “endangering vital financial support for UMass and our students.”
Despite the changing tax realities, though, some organizations feel that their donors come to them exclusively because of their mission, and will continue doing so.
“We know that people give to us primarily because they care about domestic and sexual violence,” said Lynne Marie Wanamaker, deputy director of the organization Safe Passage.
Wanamaker said the Republican tax law is just one thing happening in the current cultural moment. So is the #MeToo movement, which continues to raise awareness of sexual violence.
“We really feel like our donors are thinking about what we do,” Wanamaker said. “I don’t know that that changes.”
The Community Foundation of Western Massachusetts, which will organize Valley Gives again on May 1, has seen 31,000 individuals donate during the giving day since the inaugural event in 2012.
Ellen Leuchs, vice president for philanthropic services, said in an email that a lot remains unknown about the federal tax law and whether it will change people’s habits. She observes that the region is one where charity eclipses tax deductions.
“The tax code has absolutely spurred charitable giving, but also it’s signaled that generosity is an important value for our society,” Leuchs said. “We feel hopeful that that value will remain strong in our community.”
Still, as organizations struggle to figure out how to deal with the new tax policy, many are asking donors to maximize their contributions this year.
Domb said the Amherst Survival Center is encouraging people who may feel that they will lose the opportunity to itemize their charitable giving in 2018 to consult with their accountants, as they may choose to advance those gifts before Jan. 1.
“However, that’s not a sustainable strategy for nonprofits after 2018,” Domb said.
Others are also looking to ensure that donors know just how important their dollars are to the grateful organizations those donations support.
“I think what we need to do is continue to make the case of the value of charitable giving, and to continue to make clear the concrete impact that that giving makes,” Ayres, of United Way, said.
Staff writer Scott Merzbach contributed to this report.
Dusty Christensen can be reached at dchristensen@gazettenet.com.