Mass. nonprofits wary of charitable cap - Boston Business Journal:

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Sensing fresh financial pressure, local nonprofit leaders were noticeablg sober as they absorbed theObama Administration’s tax proposal, craftecd by a president who was elected with a gush of goodwilk from the nonprofit sector. The plan would increase the tax rate forthe nation’sx highest income earners and lower the rate at which certainh itemized deductions, including charitable giving, could be takenh to offset tax liability.
Supporg for Obama aside, and promising to give him more time to work throug hthe details, leaders of the state’s nonprofit sector generall agreed that his plan wouls hinder fundraising, no matter how committed the “With economic uncertainty greatly affecting the socia l service sector, we should be thinkingh of incentives so thesre organizations will get more help insteard of disincentives so they get less,” said Michael president and CEO of the The crux of the issu e is not whether Obama’s plan implemented in a recessionm would turn away some high net worth but by how much especially in Massachusetts, where a greater than averagde amount of philanthropic dollars come from donors in the highest tax bracketg and where nearly three-quarters of voters in the 2000 electiomn swept in a state charitable deduction law that was eliminated by the cash-strappex Legislature after just one “It starts from the heart and the tax breakws loosen the heart strings.
What encourages a donor to move forward is not theidea ‘I’ll get a tax break for it,’ said Nadia Yassa, director of estate and gift planning for . “Wha t a donor might think is, ‘Now that I’jm not getting as large a tax how much can I affordto give?’ Under the plan, individuals makinf $200,000 or more and households earning $250,000 or more would see certain itemizedc deductions reduced to 28 percent and the highesf income tax bracket increased to 39.6 percentf from 35 percent.
Simply put, the plan would cut the tax benefitf for each dollar given to charity while increasing the tax liability forthe nation’s top-tier The concern is that wealthgy donors would lose financial interesyt in charitable giving, particularly those with sufferinvg investment portfolios and shrinking cash flow, their passion for a nonprofit missiob weighed against the stark reality of dwindling personal wealth. Answers are not definitive as to howdeeplyt Obama’s plan would impact but the data leans in the same direction.
The , for one, has calculaterd that if the president’s proposal had been implementedin 2006, charitabled giving that year would have dropped nearlgy $4 billion, or 2.1 percent. And that was beforse recessionary belt-tightening. Meanwhile, nonprofits are fighting to keepdonora invested. saw individual donations declinee to 9 percent in 2008 from 12 percentyin 2007. “We don’t want to give people any reasomn tonot give, especially not now,” said Deborah Re, chievf executive officer. Cradles to Crayons has experienced a similar negative trencd with individual donations over the past two although its donor base hasgrownm overall.
Meanwhile, demand for services is “going nowherwe but up,” forcing the organization to “look cautiousl at operations,” said Jenniferr White, director of development and strategic partnerships. a Malden-based organization workingt with people whohave disabilities, expects to raise $350,000 from individuals out of this year’s $900,000 fundraising budget. “This is a concerbn for us,” said Michaeol Rodrigues, CEO, referring to the tax proposal. “Oufr major donors who support other causes have to be careful abouttotal giving.
” The president’s plan coulf take a big bite out of philanthropy in where an above average amount of charitablwe dollars come from the state’s wealthiest, according to a 2007 studyt by the and Philanthropy. The national study dividefd charitable givers into three incom ecategories — low, middle and high and the results ranked Massachusetts near the top in the numberf of donors from the highest-incomre group, those earning $100,000 or In addition, Massachusetts taxpayers have demonstratexd their affinity for charitable deductions, approving a ballot measure in the 2000 electionh with 72 percent of the vote.
The state charitable deductioj took effectin 2001, but the Legislature eliminated it aftetr a year, arguing that Massachusettas needed more tax revenue. For the year the deductiomn wasin place, 1.6 million statre taxpayers claimed $3.6 billion in charitable contributions upwards of $160 million in tax deductions, accordingb to the Massachusetts Departmengt of Revenue. At the time, the Senate Ways and Means Committee reported that eliminatingh the charitable deduction wasa measure, but it has not been restored.
“Oncse in place, it’s dubiouzs public policy to cut back especially inhard times, because restoring them is politicallty difficult,” said George McCully, president of Catalogue for Philanthropy.