President Trump has signed the 2017 Republican tax cut into law.  Here are the implications for nonprofits:

  • The law doubles the standard tax deduction for individuals which will likely lead to fewer Americans itemizing their taxes, effectively eliminating the charitable tax incentive for many Americans.  This may (or may not) have an effect on giving in 2018 and beyond.
  • There is a continued prohibition on nonprofits supporting or contributing to candidates and campaigns.
  • The estate tax exemption was doubled to $22 million, perhaps affecting how much wealthy Americans give to charity.
  • The law includes a 1.4% excise tax on investment income on some private colleges and university with large endowments.
  • Charities would be hit with an excise tax of 21% on compensation above $1 million for a nonprofit’s five highest paid employees.  This is expected to hit colleges with high paid coaches very hard.
  • No change was made to the excise tax on foundation’s investment income.
  • No changes were made to policies regulating donor advised funds.
  • Donors who itemize their taxes can receive a charitable tax deduction for cash gifts up to 60% of their adjusted gross income.  This is an increase from the current limit of 50%.