Tax Bill Could Impact Charitable Giving in Indiana

With all the debate around tax reform during the holiday season, what’s not widely discussed is major impacts the current tax bill could have on middle-class charitable giving.

Current tax proposals being considered in Congress may cause a significant reduction to charitable giving in Indiana and negatively impact the people philanthropy serves.

As we are reminded at this time of year, Americans are generous people. Every year, Americans donate billions to charities. This includes hospitals, schools, feeding programs, veteran’s organizations, museums, community projects, and civic institutions. No other country in the world is so generous.

But current tax reform proposals in Congress could threaten this American tradition of giving. 

The tax bills passed by the House and Senate would result in the charitable deduction no longer being available to 95% of all taxpayers. That’s because the proposed expansion of the standard deduction will mean only 5% of taxpayers will be able to access the deduction by itemizing their returns. 

We appreciate that the proposed legislation has not eliminated the charitable deduction altogether; however, research by the Indiana University Lilly Family School of Philanthropy estimates that adding a charitable deduction for non-itemizing taxpayers could generate up to $4.8 billion in additional charitable giving. The study further estimates a loss of $13 billion in charitable giving nationwide if only 5% of donors can take advantage of the charitable deduction.

According to IRS data, over 500,000 donors in Indiana claim this incentive, accounting for $3.2 billion in charitable contributions. If 95% of donors lose this tax incentive to give, it could mean less funding for food banks, homeless and domestic violence shelters, mental health and addiction treatment, services for people with disabilities, high-quality child care for low-income families, job training, and the many other areas philanthropy supports to improve quality of life in Indiana. These lost dollars for nonprofits with already tight budgets translate directly to reduced services for our communities.

As they work to finalize tax reform, we call on Senator Joe Donnelly, Senator Todd Young, and all members of the Indiana U.S. House delegation to support a charitable deduction for all taxpayers (sometimes called a universal deduction). This would allow taxpayers at all income levels to take advantage of the 100-year-old charitable deduction. Without such a tax incentive, charitable giving could decrease dramatically. This would have a devastating impact on the many Hoosiers helped by charities every single day in every corner of our state.

Now more than ever, we need to be encouraging more giving, not less.

Marissa Manlove, CAE, President/CEO of Indiana Philanthropy Alliance	Tina Gridiron, Board Chair of Indiana Philanthropy Alliance; Principal of TLG Solutions