Early data shows charitable giving dipped slightly under Trump tax law

The Treasury Department on Monday released early data showing a slight drop in charitable giving in the first year under President Trump’s tax-cut law.

Treasury said that 501(c)(3) organizations reported $265.5 billion in gifts, contributions and grants on returns for the 2018 tax year that were processed through December 2019. That’s about 1.3 percent less than the $268.9 billion reported on 2017 tax returns processed through December 2018. Most tax changes in Trump’s law took effect for the 2018 tax year.

The giving amounts in 2018 and 2017 were both higher than they were in 2016, when organizations reported $251.6 billion on returns processed through December 2017. The gift amounts in 2016 and 2018 were each equal to 1.3 percent of gross domestic product (GDP) in those years, while the gift amount in 2017 was equal to 1.4 percent of GDP, Treasury said.

Treasury said in a news release that giving in 2018 “appeared largely unchanged from previous years.”

But stakeholders in the nonprofit sector expressed concerns, saying that Treasury’s data is in line with other studies that have shown that Trump’s tax law had a negative effect on charitable giving.

“A reduction in overall dollars is even worse when you factor in inflation. And this was just the first year under the tax law, when many individuals didn’t know how it would affect them yet,” said Rick Cohen, chief communications officer and chief operating officer at the National Council of Nonprofits. “We’d expect to see even more of a change for 2019, once people had a chance to file their taxes for the first time.” 

Steve Taylor, a senior vice president at United Way Worldwide, said that charitable giving should have grown at a rate that was equal to or greater than GDP growth in 2018, instead of declining.

“This drop in giving has real impact on the ability of all sorts of charities to help people and improve communities across the U.S.,” he said.

Nicole Kaeding, a vice president at the right-leaning National Taxpayers Union Foundation, said that it’s hard to know how much Trump’s tax law is to blame for the decrease in giving in 2018.

“Individuals likely accelerated their deductions into the 2017 tax year” in order to maximize their deductions before their tax rate was lowered, Kaeding said. She added that it would be helpful for Treasury to release data from years prior to 2016 to get a better sense of the trend.

Trump’s 2017 tax law preserved the itemized deduction for charitable contributions. However, because the law increased the size of the standard deduction, fewer people are now itemizing their deductions. That has led nonprofits and lawmakers on both sides of the aisle to have concerns that the law could lead to a reduction in charitable giving.

Bipartisan bills have been introduced in Congress to create a universal charitable deduction that taxpayers can take regardless of whether they itemize. 

Treasury said that the data it released on Monday only covers a portion of the nonprofits that will eventually file a return in a given tax year, and that complete data through tax year 2018 should be available after Oct. 15. The figures Treasury released for 2016 and 2017 amount to less than half of the total amount of gifts that nonprofits ultimately received in those tax years.