Note: This guest post is adapted from a recent article by Kim Klein, one of the nonprofit community’s most clear-eyed thought leaders (and a terrific fundraising trainer). Having heard many concerns about the new tax law, I found Kim’s perspective to be helpful. Regardless of your political views — I generally agree with Kim; perhaps you disagree — her fundraising advice is spot-on.

The Tax Cuts and Jobs Act (TCJA) signed into law by President Trump in December is one of the worst pieces of legislation ever passed, mainly because it so dramatically widens the already obscene gap between rich and poor. You can find many critiques of this bill, including an excellent short article from Dollars and Sense.

Nonprofit leaders are raising the wrong concerns

Let’s focus specifically at how the TCJA changes tax law as it relates to nonprofits and the charitable tax deduction.

I feel an enormous irritation at the way that so many nonprofits, including organizations that advocate on behalf of the nonprofit sector, have focused almost exclusively on the charitable tax deduction.

Here’s a much more harmful impact: many organizations will become even more overwhelmed, trying to meet the growing needs of Americans who are struggling to survive.

Most donors never itemize their deductions

Prior to the passage of this law, 70% of Americans filed an IRS short form for their tax return, meaning they did not exceed the standard deduction and thus received no tax benefit for their charitable giving.

With the doubling of the standard deduction, about 85% of Americans will file the short form.

I am not convinced that this will cause giving to shrink. Studies about the impact of the charitable tax deduction show a variety of results depending on who is asked and how the questions are framed.

Frankly, those who believe that tax incentives make a big difference should be advocating for higher (rather than lower) tax brackets: the higher your bracket, the more you save when you give.

For nonprofits, the really terrible part of this law is the virtual elimination of the estate tax. Granted, few people paid the estate tax, even under previous presidents. Given that the estate tax is our nation’s oldest tax and one of the few that truly redistributes wealth, we should all be organizing to reinstate a more equitable estate tax.

How nonprofits can respond

What are nonprofits – especially social justice groups – to do, now that the TCJA is law?

● Stop saying that donors will stop giving because they won’t be able to deduct their contributions. No one believes that the charitable tax deduction was ever the primary incentive for giving.

● Without the modest added incentive of giving to a 501(c)(3) nonprofit, the door is open to raise a lot more money for (c)(4) advocacy work. (Donations made to 501(c)(4) organizations have never been tax deductible.) Nonprofits working on government policy change won’t face a fundraising disadvantage.

● Important incentives remain in the tax law. For example, too few organizations promote the Individual Retirement Account (IRA) Rollover Provision.

When individuals with IRAs reach the age of 70½, they are required to take annual withdrawals from their IRA, then pay income tax on that withdrawal. However, if they give directly from the IRA to a nonprofit charity, they don’t pay tax.

Donors already give lots of non-deductible gifts

● Many people give money where they see a need, aided by crowdfunding platforms: to help shelter an undocumented family, to pay the legal bills of someone fighting an unfair eviction, or to help those dealing with out-of-control medical costs.

If we want people to continue to support our organizations, we need to help donors better understand the added value of giving to a 501(c)(3) nonprofit.

● All nonprofits will have to work harder to maintain relationships with donors – something we should be doing anyway.

● We need to educate ourselves about what a fair and just tax system might look like, and then advocate for a better system.

Giving is driven by mission, not tax policy

At the end of the day, we don’t know all the ways the new tax plan will affect our work.

Here’s what we know: the fight for justice and equity should shape and propel our fundraising and our giving.

For a very thorough run-down of all the ways the TCJA affects nonprofits, please read this article on our website.