Tax Cuts and Jobs Act of 2017: Charitable Giving Implications for Nonprofits

1. Johanna J. Allex, Esq. Stafford Rosenbaum LLP 608-259-2664 jallex@staffordlaw.com www.staffordlaw/attorneys/johanna-j.- allex/ Tax Cuts and Jobs Act of 2017: Charitable Giving Implications for Nonprofits © 2018 Stafford Rosenbaum LLP

4. Temporary Provisions 12/31/2025 • Increase in standard deduction from $6,350 to $12,000 for a single filer and from $12,000 to $24,000 for joint, married filers • combined with elimination of personal exemption • 10,000 cap on itemized deduction for state and local taxes • Elimination of itemized deductions subject to 2% of AGI floor © 2018 Stafford Rosenbaum LLP

5. Temporary Provisions 12/31/2025 • Reduction of tax rates at most levels • Increase in exemption amount to $11,200,000 per person for estate, gift and generation skipping transfer taxes © 2018 Stafford Rosenbaum LLP

7. Temporary Provisions 12/31/2025 “Let’s do the numbers” • Married couple filing jointly • AGI = $80,000 • State and Local Taxes (SALT) = $15,000 • Mortgage Interest = $8,000 • Charitable Contributions = $1,500 • Unreimbursed employee business expenses = $2,000 • Two personal exemptions = $8,100 © 2018 Stafford Rosenbaum LLP

8. Temporary Provisions 12/31/2025 SD 2017 Itemizer 2017 SD 2018 Itemizer 2018 AGI $80,000 $80,000 $80,000 $80,000 Personal Exemptions $8,100 $8,100 __ __ Standard Deduction $12,700 __ $24,000 __ Schedule A __ $26,500* __ $19,500** Taxable Income $59,200 $45,400 $56,000 $60,500 * SALT = $15,000, Mortgage Interest = $8,000, Charitable Contrib. = $1,500, Unreimbursed employee business expense = $2,000 ** SALT = $10,000, Mortgage Interest = $8,000, Charitable Contrib. = $1,500 © 2018 Stafford Rosenbaum LLP

9. Temporary Provisions 12/31/2025 SD 2017 Itemizer 2017 SD 2018 Itemizer 2018 AGI $80,000 $80,000 $80,000 $80,000 Personal Exemptions $8,100 $8,100 __ __ Standard Deduction $12,700 __ $24,000 __ Schedule A __ $26,500* __ $19,500** Taxable Income $59,200 $45,400 $56,000 $60,500 Tax Due $13,089* $7,909* $6,339** $6,879** * 25% tax bracket ** 22% tax bracket © 2018 Stafford Rosenbaum LLP

10. Temporary Provisions 12/31/2025 Implications: • Reduction in the % of itemizers • Reduction in financial giving incentives – lifetime and estates • Significant reduction in overall charitable giving • Loss of jobs in the charitable sector © 2018 Stafford Rosenbaum LLP

11. Temporary Provisions 12/31/2025 • Charitable contribution deduction limits increased • 50% AGI increased to 60% AGI • Overall limitation on itemized deductions suspended (“Pease” Limitation) © 2018 Stafford Rosenbaum LLP

12. Permanent Provisions • Denial of deduction for amounts paid in exchange for college athletic event seating rights • Private colleges and universities will at least 500 students and endowments worth at least $500,000 per full-time student must pay a 1.4% excise tax on net investment income © 2018 Stafford Rosenbaum LLP

13. Possible Legislative Correction: Universal Charitable Giving Act of 2017 H.R. 3988; S.2123 • Deduction with a cap of up to 1/3 of the standard deduction ($4,000/$8,000) for taxpayers who do not itemize • Introduced by Rep. Mark Walker R-NC, 10/5/17 • Introduced by Senator James Lankford R-OK, 11/14/17 • Referred to the Senate Finance Committee • 2% Chance of Enactment (Skopos Lab) © 2018 Stafford Rosenbaum LLP

14. Lemonade: Where to See It/How to Make It • Embrace the 365-day giving cycle • Strengthen your membership database • Plan your communication strategy • Know your target audience • Refine your message • Update your website and be present on social media © 2018 Stafford Rosenbaum LLP

15. Lemonade: Where to See It/How to Make It • Include middle income donors in your legacy planning strategies • Network within and outside of your community • Build partnerships rather than close transactions © 2018 Stafford Rosenbaum LLP

16. Lemonade: Where to See It/How to Make It • Be willing and able to contact your legislator – S.2123, H.R. 3988 • www.gov.track.us • https://www.finance.senate.gov/about/membership • Senator Tammy Baldwin: 202-224-5653; www.Baldwin.senate.gov/feedback • Senator Ron Johnson: 202-224-5323; www.ronjohnson.senate.gov/public • Representative Mark Pocan: 202-225-2906; pocan.house.gov • © 2018 Stafford Rosenbaum LLP

17. Lemonade: Where to See It/How to Make It • Change + Creativity = Opportunity • “Barn’s burnt down Now I can see the moon.” ~ Mizuta Masahide, 17th c. Japanese poet and samurai © 2018 Stafford Rosenbaum LLP

Tax Cuts and Jobs Act of 2017: Charitable Giving Implications for Nonprofits

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