President’s Corner – New Tax Plan and Non-Profits

The year 2017 had no shortage of drama and debate in business, politics, or pop culture. My favorite moment last year happened at the very end of the year and was predictably sports-related. In the last game of the NFL regular season, Andy Dalton, the oft-maligned quarterback of the perennially woeful Cincinnati Bengals threw a touchdown pass to beat the Baltimore Ravens. Neither team made the playoffs, but the Bengals’ win sent the Buffalo Bills to the playoffs for the first time since 1999.

Usually, that does not elicit much of a response among fans or players. But in this case, Bills fans took their joy to another level. To show their appreciation, 15,000 Buffalonians flooded the Andy & Jordan Dalton Foundation with more than $350,000 in donations, many of which in $17 increments representing every year of the Bills’ postseason drought. The morning of the Bills playoff game against the Jacksonville Jaguars, the foundation received donations at a rate of 25 per minute. The money was supplemented by 1,440 chicken wings and nine gallons of wing sauce donated by Buffalo-based Duff’s Famous Wings and delivered to Autism Services at the Children’s Home of Cincinnati.

I bring this up because of the new federal tax plan beginning in 2018. The standard deduction has doubled which will effectively eliminate the charitable donation deduction on most of our tax returns. According to the IRS, only about 30% of taxpayers itemize their deductions. Some tax experts estimate that fewer than 10% will continue to itemize under the new law. Americans are by far the most generous people in the world, but the possibility exists that the tax rules going into effect will put a damper on charitable donations. In a high tax state such as California, the loss of the charitable contribution deduction will leave middle-income taxpayers less to donate.

As discretionary government services are being cut to the bone, the roles of nonprofits and foundations are filling holes in the social safety net. Charities have stepped up to provide emergency relief and long-term aid to victims of the California wildfires, the Gulf Coast and Puerto Rican floods and hurricanes, and the Las Vegas and Texas mass shootings. Routinely, these agencies work with immigrants, homeless people, abused women, hungry children, and disabled individuals.

I was on the board of directors of a social service nonprofit and experienced first-hand how difficult it is for those entities to maintain their funding or receive grants from other foundations. It will be more difficult to provide necessary services as the less successful nonprofits disappear because of lack of funding.

I have pledged to donate to charities at a greater rate than last year. I will not receive a tax deduction, but in return, I hope I can make my little corner of the world a little bit better place to live.

Many of the Bills fans’ donations to Andy Dalton’s foundation were most likely non-tax deductible. However, what is encouraging is that at that moment in time those fans/citizens/taxpayers did not care about how much taxes they may have to pay this year and in future years. They were changing lives, $17 at a time.

David M. Green
President/CEO
(925) 335-3802