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House Tax Reform Bill Negatively Impacts Charities

Posted on: Nov 1, 2017

Republican leaders of the House Ways and Means Committee pushed through the release of their official tax reform bill H.R. 1 in Congress today to overhaul the American federal income tax system. While it will take several days to fully analyze this 429-page bill and its potential impact on charitable giving, nonprofit organizations and professional artists, we encourage you to continue checking this page frequently as we post updates and further analysis.

Topline Proposed Change:

The Solution:

  • Encourage your Senators and House members to include a “universal charitable deduction” to the tax reform bill so that all taxpayers (not just the highest income individuals) are encouraged to give to their favorite charities and make the contributions a tax-deductible gift.

Latest Updates:  Additional Analysis of the H.R. 1 Bill

  • Four individual tax rates would be created: 0%, 12%, 25%, 35%, and 39.6%
  • Standard deduction would be doubled for individuals and married couples
  • Personal exemption deductions would be repealed
  • State and local property tax deductions would be capped at $10,000
  • State and local income tax deductions would be completely repealed
  • Home mortgage interest deduction would be preserved for existing mortgages and thereafter for new mortgages, the home mortgage interest would only be deductible for newly purchased homes up to $500,000
  • Estate tax earning exemption would be doubled in the first year and the estate tax would then be permanently repealed over the next five years (decades of research show that the estate tax has actually created huge incentives for taxpayers to plan major gifts to charities)  
  • Medical expense deductions would be repealed
  • Retirement saving account tax incentives would be retained
  • Pass-through business income tax on small businesses and entrepreneurs would be reduced to 25 percent, instead of the ordinary income tax rate (this could have a positive impact on working artists and arts businesses)
  • Corporate tax rate would be reduced from 35 to 20 percent
  • Entertainment, amusement, recreation and membership dues expenses related to a business purpose or meeting would be repealed, except for food and beverage (this could have a negative impact on both the commercial and nonprofit arts)
  • Foundations would be required to pay a streamlined 1.4 excise tax yearly on their net investment income with no exceptions. The provision would also extend for the first time to the net investment income of most private colleges and universities
  • Only churches, and not any other charities, would be allowed express political speech during sermons from the pulpit without jeopardizing their nonprofit, charitable status
  • Lifetime education credits, tax deduction for interest on student loans, and tuition waivers from income for graduate and PhD students would be eliminated.

This tax reform package is projected – at minimum - to put the country $1.5 trillion deeper in deficit as a result of the lost revenue generated by the new tax cuts. Americans for the Arts and the Arts Action Fund are members of the Charitable Giving Coalition, which released the following statement to the media. Charities are the bedrock of our society, dedicated to advancing the public good. Please consider contributing to the Arts Action Fund as we lobby to #ProtectGiving in this fast-moving tax reform legislation.