How the new tax laws could affect Episcopal charitable giving

By Amy Sowder
Posted Feb 9, 2018

Donations come in all forms, starting with what church members place in the offering plate during services. Photo: Getty Images

[Episcopal News Service] “Oh, you can deduct it.”

That saying has reverberated across clothing donation boxes at the Salvation Army to the checks we write to our favorite social causes for the last century. While we give because God calls us to, it doesn’t hurt when there are tax benefits as well.

Charitable giving has long been something we can itemize as a deduction on our annual personal income taxes, a civic duty established in 1913.

The principle may no longer hold true — for all but the wealthiest of Americans, at least.

The Tax Cuts and Jobs Act passed by Congress in December nearly doubles the standard deduction to $12,000 for individuals and $24,000 for married couples when they file their 2018 taxes. That could simplify the filing process and benefit many low- and middle-income families, but it will complicate the giving strategies for filers who typically deduct their charitable donations.

Episcopalians involved in fundraising and nonprofit organizations have mixed opinions about what the fallout will be, if any.

Tara Holley

“We fundraisers are very concerned about the new tax laws, as every indication is that nonprofit organizations will be more dependent on the wealthy than ever before,” said Tara Holley, director of development for the Episcopal Church. “We are counting on and dependent on an enlightened 10 percent, as they hold 76 percent of the wealth in our nation.”

But there are always ways to navigate tax laws, and giving habits aren’t cut and dry.

Rick Felton is not so worried. He’s the executive director of The Episcopal Network for Stewardship, a network of leaders, churches and dioceses devoted to building healthier giving cultures for greater ministry impact.

“Being able to deduct is just a little gravy on top of giving to something you support. There’s just a little less gravy now. I don’t think giving will be affected by the tax law,” Felton said.

Rick Felton

The standard deduction, the amount taxpayers can subtract from their taxable income instead of listing or itemizing deductions on their tax returns, was created to simplify taxes.

About 30 percent of American households itemize their deductions, according to the Tax Foundation. Higher-income taxpayers are much more likely to itemize: Almost 80 percent of those earning more than $100,000 a year choose to itemize their deductions. That percentage rises to 94 for taxpayers with an annual income over $200,000.

Will the law help or hurt Episcopal Church ministries?

Jim Murphy, director of endowment management, planned giving and donor solutions at the Episcopal Church Foundation, doesn’t think parishes or Episcopal charities will be affected much either way.

Murphy expects most lower- and middle-income people to continue to give at their near-previous levels because tax deductibility is a minor issue for most who give to religious institutions and causes. “Some higher-income people may actually give more over time as more income may be available for giving and not paid in taxes,” Murphy said.

Jim Loduha, senior director of development and giving at All Saints Church in Pasadena, California, disagrees. “Charitable giving is going to go down. The question is how much,” Loduha said.

Despite altruism being a hallmark of the religious-giving culture, the predicted 25-percent drop in itemizing taxpayers could mean charitable giving will decline by nearly $13 billion annually, as millions of taxpayers will see no tax benefit for their generous contributions in 2018, he wrote in a Dec. 19 letter to the congregation. Loduha cited research published in May 2017 by the Indiana University Lilly Family School of Philanthropy.

“Beyond the financial impact that will have on organizations, an estimated 250,000 nonprofit jobs may be at risk, which drastically reduces the capacity those organizations have to carry out their mission to their communities,” he told Episcopal News Service. “All Saints Church is not immune from this, and pledgers at every level will be impacted.”

Giving based on income bracket

Loduha agreed with Murphy that major donors will probably still itemize their gifts, and they’ll save more money on their taxes, so there’s an opportunity to increase their giving.

The real challenge is for the mid-range gifts of $1,000 to $10,000, Loduha said. Most donors in that range did have the incentive, in part, of a tax benefit before the new tax law. And now they won’t, he said.

The Rev. Shay Craig, the Episcopal Diocese of Chicago’s associate for resource development, doesn’t think it matters.

“I’m a single mother, and my taxes are going up. That won’t change what I give to my church. It’s still my discipline. It will mean reorganizing things, sure,” Craig said.

Gifts from high net worth folks are almost always combined with some tax plan anyway, said Jim Simon, who sits on the boards of several nonprofit organizations and is chairman of the stewardship and finance committee at his parish, Church of Our Savior, in Akron, Ohio. He also will chair the House of Deputies Legislative Committee on Constitution and Canons at General Convention.

“That’s a fact of life when you’re dealing with high net worth individuals. There’s generally some review of tax considerations for giving. That existed before this tax law. That’s going to exist after this tax law,” Simon said. “I don’t think this is going to affect what’s put in the plates on Sundays.”

Besides doing the fundraising for the Chicago diocesan episcopacy and offices, Craig also teaches congregations about stewardships, planned and annual giving, and capital campaigns.

She’s heard the concerns of parishioners, but isn’t worried about a significant drop in giving overall. “Changes in the tax code don’t change the gift itself, just the timing,” Craig said.

The December rush

Some organizations saw a giving uptick in December, more so than the usual end-of-year boon.

Loduha saw a 40 percent increase in year-end giving at his Pasadena church, in part because some people wanted to maximize their 2017 tax benefit ahead of the coming changes. Loduha suggested in his letter to the Pasadena parish that those who typically itemize deductions “accelerate” their contributions by 2017’s end to get a larger income tax deduction. Some people prepaid a part, or all, of their 2018 donation to get the maximum tax benefit over the two years.

There are so many more ways to give than writing a check. Photo: Getty Images

Murphy noticed an uptick at the end of 2017, too. It came in a spike at year’s end for gifts of cash and securities to create life-income gifts like charitable gift annuities, as well as gifts to endowment accounts which the foundation manages for parishes, dioceses and other Episcopal entities across the country. More people, Murphy included, also created donor-advised funds.

In Chicago, Craig noticed a 2 or 3 percent uptick in year-end giving in the diocese, while Jim Simon did not see accelerated giving at the end of 2017 at his Ohio church, or prepaying 2018 pledges in order to accomplish tax savings.

Why people give

Most people donate to their parishes or Episcopal-related charities without motivations of tax benefit, Simon said.

“They do so because of their passion or their parish’s mission. Do they take advantage of the tax benefits? Absolutely,” Simon said. “But I do not believe people will give less because they may not save money in tax. That does not mean they may not make a gift in a slightly different way.”

Religious organizations have long received the largest share of American charitable giving. They received 32 percent of all charitable donations in 2016, according to the most recent estimates from Giving USA 2017.

“I maintain that people give to churches for a different reason, and that reason is more tax-code proof than others,” Craig said.

People respond where there’s a need and a connection, Felton said. Church leaders and fundraisers should appeal to their congregation and donors to think less about the tax benefits and more about the mission when deciding how to give.

“Of all nonprofit institutions, the church needs to be the one talking about the spirituality of giving, to lift up generosity as a response to God’s impact in our lives,” Felton said. “It’s a divine calling, not about dialing for dollars. Really, it’s not about meeting the church budget; it’s about giving generously as God as has been generous with us.”

Solutions

For church leaders in charge of fundraising, focus on the mission, said Murphy.

“People love their own parish and want to support it along with other charities, but those who demonstrate accountability and transparency to their constituents, in addition to showing the impact of their mission to make their community and world a better place, will gather more gifts,” he said.

The new tax law actually enhanced the tax deduction for some donors in some specific ways, Murphy said.

  • The Pease Amendment, which previously reduced the benefits of itemizing charitable gifts for high-income individuals, was repealed.
  • The annual adjusted gross income (AGI) limitation of 50 percent was raised to 60 percent for gifts of cash.
  • Qualified charitable distributions from individual retirement accounts (IRA) were not impacted by the tax changes and remain a great way for those older than 70 and a half to make gifts directly to charities from their IRAs while not increasing their taxable income.
  • A donor-advised fund, such as the Episcopal Church Foundation’s fund, is a good vehicle to help those who wish to “bunch” their donations while still continuing to support all of their favorite Episcopal Church charities in the future.

“As human beings, Christians and Episcopalians, we encourage everyone to give at any level, as it is giving itself that enriches our lives and makes us whole,” said Holley, the Episcopal Church’s director of development. “Giving of goods, money, service, affection an open heart … these are all ways to give and serve others.

“At the same time, we hope that those with the greatest capacity to make financial commitment to those in need will increase their giving as this climate has a serious impact on those with the greatest needs.”

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— Amy Sowder is a special correspondent for the Episcopal News Service and a freelance writer and editor based in Brooklyn. She can be reached at amysowderepiscopalnews@gmail.com.


Comments (11)

  1. Kenneth Scott Norris says:

    I do not understand the fear that Christians will reduce giving to their parishes. For most of us, the $24,000 standard deduction is greater amount than our itemized deduction total has been with our church giving. Therefore, we will have smaller taxable income with a lower federal tax. Consequently, we will have more money to give to our churches. For most Christians who are serious about stewardship, the new tax law is an opportunity to give more to our parishes.

  2. Father Charlie Grover says:

    Before 2017 ended we paid our 2018 church pledge in advance, and wiped out our 2017 income tax liability. Time will tell whether it helps to concentrate charitable giving in alternate years. Others have found it helpful in the past, but this is the first time we used it. Others may find it advantageous to begin contributing in advance this year.

  3. mike geibel says:

    Is this a tax break for corporations and the rich? Yes—and one that is overdue. The intent of the tax revision is to spur job growth. The theory is quite simple: We don’t need more taxes—we need more taxpayers. Trickle down economics? Sure, but it works. All boats rise on a rising tide. If people have more money to spend, then they will have more money to give.

    It cannot be denied that being able to deduct charitable contributions is a consideration when giving. But the deletion of deductions for charitable contributions will not be the primary cause of reduced giving to the Episcopal Church. The Chickens ultimately come home to roost—the Church must face the economic consequences of its decision to become leftist activists rather than preachers of the Gospel. Politicking by Bishops and Clergy has alienated members. Declining membership causes a decline in pledge money. Undoubtedly, there will be Bishops and Clergy who will “blame Republicans” and the rise of secularism, and ignore any fault of their own.

    I left the Episcopal Church because I refuse to give to my local diocese and to the national Church to pay the salaries of progressive ideologues chasing social Marxism, or to fund leftist “mission” work. I give to my new church because the money directly pays the salary of my pastor and is used to fund membership growth and spreading the Word. I also give to charities of my choice, such as Wounded Warriors, Operation Smile, Heifer International and NAMI, and I will continue to do so. These worthy charities do not appear on the radar screen of the Episcopal Church.

  4. Joe Parrish says:

    Opting out of one’s local church because of perceived directions at higher echelons seems an extreme and very ineffective means of protesting. The church is local and its resources in very great majority are directed locally. Churches elect delegates to dioceses, and dioceses elect deputies to General Convention, so if one wants to be more effective, begin now at the parish level where there is real power and get involved in choosing or becoming a delegate or deputy.

  5. mike geibel says:

    My opting out is not a protest. “Protest” implies the possibility of change. As a former life-long Episcopalian, member of the Vestry and part of the Average Sunday Attendance statistics, the post-election activism by the Church convinced me it will not and cannot alter its current political agenda. I believe the word “Episcopal” means run by bishops–the TEC is not a Democracy or even a representative Democracy.

    I recently returned to attend the ordination of a friend as an Episcopal Priest. The banner outside the cathedral railed against gun control, but not a word about Christ. The Bishop gave an insightful and inspiring Homily, but then ruined it with a swipe at Trump.

    AI find the politicking of the Church to be one-sided and divisive. I now attend a local church where politics are left at the door, and both Democrats and Republicans welcome each other to give thanks for our blessings.

  6. It is unclear what difference it will make. I was surprised to learn at my church’s annual meeting that about 60% of the congregation actually pledge and therefore receive pledge statements at the end of the year. But the amount received “in the collection plate” from church attendees who did not pledge is a larger amount than that received from the actual pledgers! You can use your pledge statement as proof that you contributed money to your church, but you do not have to provide this information unless you are “audited”. Personally I do not agree with the “tithe” requirement. 10% of income is too little from some people, while a real hardship for others. Those to castigate the church for being too “liberal” have obvious failed to carefully read the Gospels, especially Matthew chapters 23-25. Church attendees are among the largest givers to charities. Unfortunately, some correspondents who claim to be Episcopalians never seem to have heard of the Episcopal Relief and Development Fund? Also many dioceses have “partnered” with a diocese in a third world country and worked to help that diocese’s people. The goal is not just to provide for physical needs but also to lead people to know Jesus Christ.

  7. Glenna Kleinkauf & Ann Elizabeth Bishop says:

    We have been able to deduct our charitable giving when calculating our income tax ever since we have been together, nearly 23 years. As lifelong Episcopalians, we tithe. We give away at least 10% of our household’s income because Scripture and The Episcopal Church have declared that 10% — the tithe — is the minimum standard of giving. We take 10% off the top of any income that comes into our household. Almost all of that amount goes to our parish and other Episcopal organizations. In our conversations since the new tax regulations have been announced we have agreed that this tax situation is not going to change our giving. We give because it’s the right thing to do, and also because the practice of tithing has brought us great joy in our spiritual lives and the life we share together. It is our expectation, our hope, and our prayer that others will join us in this decision, giving and continuing to grow their giving, for all the right reasons – regardless of the tax breaks or lack thereof.

  8. mike geibel says:

    Dear Ms. Cummings:
    The Episcopal Church is indeed at its best when providing humanitarian and disaster relief. But that is not how most of its wealth is spent. The mission work was not the cause of my divorce—I left because of the divisive politics and activism where Bishops and Clergy presumed to speak for all Episcopalians on political issues, when they do not.

    Your admonishment that I read Matthew 23:25 is rather judgmental. How is it that you can accuse me of “greed and indulgence” when you don’t know me at all, you don’t know my income level or what I have done to achieve financial success, you don’t know how much I pay in taxes, and you don’t know how I spend or give of my time and money? It is always easy to vote to raise someone else’s taxes or tell others that they should give more—the apparent cornerstone of liberal thinking is to “take it from those who make it” so that we can spend the money to make sure everyone is equally poor and equally unhappy.

    As to your comment that some parishioners make too much money and should pay a tithe of more than 10%–I don’t believe God measures us exclusively by how much money we give to the Episcopal Church. I don’t see the logic of criticism if I join and give to a different Church which chooses not to agitate with a political agenda, but preaches the Word in a more traditional and welcoming manner.

    There is no threat that Episcopal Church will disappear due to the change in tax laws. It will merely metamorphize into a self-funded activist organization populated by like-thinking members and clergy. The Church is very “asset” wealthy, thanks mostly to the generosity of the congregants back in the 1950’s and 1960’s when membership exceeded 3 million. The Church only enacted the 10% tithe request in the 1980’s after seeing similar demands by other denominations and a decline in revenue. And that 10% was of “gross income” not “net income.”

  9. BD Howes says:

    I am aware of several instances where donations were NOT honored in the spirit given. A gift to a parish is ultimately a gift to the Church. Given that it is not unusual now to see vicious attacks on values which were until recently considered main stream, it would be delusional for anyone to take it for granted that the spirit of their giving will be honored in the future.

  10. I was citing Chapters 23 to 25. I was not personally accusing you of greed and indulgence. We are instructed to care for the hungry, thirsty, prisoners, etc. and told we do this for “the least of these” it is the same as doing it for Christ Jesus himself. You use the term “liberal” in a partisan political sense. This idea of helping the poor and needy obviously clearly pre-dates the Democrat Party and other left wing Parties policies.

  11. mike geibel says:

    Ms. Cummings:
    If I misconstrued your admonition, I apologize. I trust we both agree that generosity and compassion for the less fortunate are neither exclusively liberal nor conservative, Democrat or Republican.

    But for clarity, if you read my prior posts, I did not use the term “liberal.” To quote from your post: “Those [who] castigate the church for being too ‘liberal’ have obvious[ly] failed to carefully read the Gospels, especially Matthew chapters 23-25.” I’ve read Matthew Chapters 23 – 25, and I didn’t see the translation as using the term “liberal” or any word close to it.

    I did indeed assume you were referring to those, like myself, who take exception to the leftist politicking of the TEC, not because I necessarily disagree with every political position taken by the Church, but because the partisan rancor that ensues is divisive and hurtful. This sad state of affairs has prompted some conservative Episcopalians like myself to seek a safe harbor outside the Anglican Communion, while others have simply dropped their practice of the faith altogether.

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