Early Tax Data Shows Drop in Charity Donations Under New Law

The Internal Revenue Service’s first official look at how charities fared during the first year of the new federal tax law shows nonprofits saw a 3 percent after-inflation drop in donations in 2018 over the year before.

The data is based only on charities that submitted their tax forms by the end of 2019. Not all groups have done that yet so the picture could change as more numbers are tallied. Still, the groups counted so far raised an inflation-adjusted $281.4 billion in charitable contributions in 2017, compared with $272.6 billion in the 2018 tax year.

To be sure, other factors affect donation levels. But nonprofit leaders and fundraisers have been concerned that the change in the tax law is depressing giving.

The law, passed at the end of 2017, limited the share of Americans who have access to the deduction by making it easier for most people to avoid itemizing their taxes. By doubling the standard deduction, fewer than 10 percent of taxpayers now itemize and therefore can write off deductions. Researchers say nearly a quarter of Americans itemized before the law changed.

Concern about the tax law’s impact is so widespread that 58 percent of nonprofit leaders said in a recent poll by the Center for Effective Philanthropy that they were troubled about the law.

Still, if the 3 percent drop is accurate, it could be a sign that predictions researchers made before the law passed, which suggested at least a 5 percent drop, were exaggerated.

One reason for that could be that in the first year of the new law, some donors might have decided to give twice as much as they did before to get access to the deduction, then contributed a lot less or nothing the following year, experts say, a pattern that could play out cyclically.

Leslie Lenkowsky, professor of public affairs and philanthropy at the Lilly Family School of Philanthropy and a Chronicle contributor, said people shouldn’t take the data too seriously yet. He noted that it does not paint a complete picture of the fortunes of the charitable world in 2018 or the long-term effects of the tax overhaul.

“Understand that to see the effects of the tax cut, you have to look out over a couple of years,” said Lenkowsky. “People who are interested in charitable giving need to be focusing on what’s going on in 2019.”