Tax Cuts and Jobs Act of 2017 Impact on Charitable Giving 

Arizona’s charitable community may lose approximately $170 million in giving due to the federal tax law changes. As business owners and professionals who engage with the nonprofit sector as board members, sponsors and donors, it is important to consider the impact this will have on nonprofits you support. It is also critical that we continue to make our much-needed financial contributions to ensure nonprofits are able to keep serving our communities and our most vulnerable populations. As Arizona policymakers consider changes to conform the state tax code to the new federal tax law, we urge you to encourage them to preserve and incentivize charitable giving in Arizona. 

Background 

The federal Tax Cuts and Jobs Act of 2017 preserves the charitable deduction, a 100-year-old provision that encourages individuals to give away more of their income to help people in need. Unfortunately, the new tax law does not preserve the full scope and value of the charitable deduction. Although the law maintains the charitable deduction for taxpayers who will continue to itemize, the charitable deduction will NO LONGER be available to 95 percent of all taxpayers because of the expansion of the standard deduction. 

That means: 

• More than 30 million taxpayers will no longer have the charitable deduction available to them. 
• Charitable contributions will decline by $13 billion or more per year, a 5 percent decrease in overall giving. 

Arizona Impact: In Arizona, 701,330 Arizona taxpayers (24.1 percent of all Arizona returns filed) claimed the charitable deduction in 2015, accounting for $3.4 billion in contributions, the most recently available IRS giving data show. A 5 percent loss resulting from tax reform would mean $170 million less to fund private food banks, homeless or domestic violence shelters, childcare or job training. 

Why it is important to Support Arizona’s Vibrant Nonprofit Sector 

• Arizona’s nonprofit sector generated more than 8 percent (more than $22.4 billion) of the state’s Gross State Product in 2014, positioning its contribution on a par with the state’s entire retail sector. 
• Nonprofits are Arizona’s fifth-largest non-government employer. 
• Nonprofits directly and indirectly generated approximately $2.1 billion — 9.5 percent — in state and local taxation in 2014. 

Source: Arizona Nonprofits: Economic Power, Positive Impact, L. William Seidman Research Institute at the W. P. Carey School of Business at Arizona State University 

We continue to urge Congress to make the charitable deduction available to all taxpayers. A 2017 study by Indiana University Lilly Family School of Philanthropy found that making the charitable deduction available to all taxpayers could increase annual giving by up to $4.8 billion. Companion bills introduced in 2017, HR 3988 and S 2123 would establish an “above-the-line” charitable deduction for non-itemizers. 

Protect the incentive to give in Arizona. 

As state policymakers consider conforming changes to Arizona’s tax code, we encourage you to urge them to weigh carefully the impact of any modifications on charitable giving. We stand ready to work with Governor Ducey, the Arizona Department of Revenue and lawmakers to protect charitable giving and ensure our vibrant nonprofit sector can continue to serve people in need.