SHERIDAN — Increases in standard deductions might be wins for local taxpayers, but nonprofits see potential negative impacts for their organizations.
President Donald Trump’s Tax Plan increased the minimum for standard deductions by almost half for all individuals filing taxes. The new plan increases single filers deductions from $6,350 to $12,000 and joint filers from $12,700 to $24,000.
If a taxpayer’s mortgage interest payments, charitable contributions and other tax-deductible items exceed the standardized deduction rate, they receive a larger deduction from income taxes. Sheridan’s H&R Block franchisee Barbara Hodgson said the tax plan changes will see about 60 percent of the community switching over from itemizing to taking the standard deduction.
The changes look positive for taxpayers who deduct under the minimum amount each year and benefit from upping their deduction totals to the standard. Those itemizing to receive more than the standard might be less open to give as much in year-end contributions. The potential of losing those individual contributions worries the nonprofit sector.
In 2013, Wyoming’s 1,074 reporting nonprofits relied on government contracts and program service funding for nearly 50 percent of their budgets. Individual contributions, gifts and grants totaled 43 percent of their budget source. The other seven percent of the nonprofits’ budget came from dues, sales, investment income and special events.
The Wyoming Nonprofit Network’s report said Wyoming depends more on individual contributions than the nation’s 21 percent average.
WNN managing director Jody Shields said the tax changes might not necessarily stop giving, but may make a difference in year-end planning. Shields said the National Council of Nonprofits estimated a yearly dip nationwide of $13 billion or more in charitable donations to nonprofits.
“It’s kind of a wait and see,” Shields said. “Nonprofits need to make sure they’re doing their communication with their donors and making their case so that donors will continue to give even though they’re no longer itemizing.”
Shields said the Network reached out to the U.S. Congressmen representing Wyoming to make them aware of the unintended consequences of the new tax plan. She encouraged other nonprofits to reach out as well to show the senators and representative the large impact of those changes.
Shields anticipates less change in donations coming from philanthropists, as their deductions will most likely exceed the standard line.
“But it’s for all the rest of us that won’t be itemizing, which is a big percentage of the donors that give to their community nonprofits,” Shields said.
Another option for the Wyoming Nonprofit Network, in conjunction with the National Council of Nonprofits, might be universal deduction.
“Regardless if you itemize or not, there would be an opportunity to claim a charitable donation,” Shields said.
The entities started discussions about the initiative years ago, but so far nothing has hit concrete plans.
On the other side of the tax spectrum, decrease in federal taxes also established by Trump’s tax reform means decreases in government revenue and, thus, spending. Shields said spending cuts in the past translated to cutting social programs like many of the nonprofits seen in Wyoming. The government cuts spending or entire programs, but needs remain in the communities in which the nonprofits serve.
Nonprofits continually work on running “lean and mean” programs and stretching the dollar. Cuts just mean tighter belts and more creative ways to gain income from local donors.
The hit from possible decreased contributions and government cuts looms over organizations in Wyoming, but Shields encouraged her team of nonprofits statewide to continue showing past and possible future donors why their contributions matter to the community as a whole.