The National Association of Free and Charitable Clinics has been closely monitoring the House and Senate actions as they discuss their Tax Cuts and Jobs Act package. The NAFC was very concerned with the direction both of the tax bills were taking prior to the Senate adding the repeal of Individual Mandate to their bill. This, in addition to the existing provisions of the bill, will have massive negative impacts on our member organizations.
Any piece of legislation that makes access to health care or health insurance and its affordability more challenging and any piece of legislation that makes it more difficult for individuals and foundations to give to charitable organizations such as Free and Charitable Clinics and Charitable Pharmacies is not something that the NAFC can support.
Specifically, the NAFC is concerned with the following provisions within the current proposed legislation:
- Standard Deduction for Individuals and Couples: The change to double the standard deduction, as proposed by both the House and Senate, will reduce the number of taxpayers who itemize and therefore significantly reduce the value of the charitable deduction leading to a decline in charitable donations to all nonprofits. Recent estimates found that up to 95% of Americans will no longer be incentivized to continue to give to charity if the standard deduction is doubled. The NAFC urges Congress not to double the standard deduction and support the introduction of a universal charitable deduction, which would increase giving by almost $6 billion.
- Increase Percentage Limit for Charitable Contributions of Cash to Public Charities: The House and Senate bills increase the 50% adjusted gross income (AGI) limit on cash contributions to public charities to 60% and retain the 5-year carryover. Increasing these limits will incentivize high-income donors to give more to charity. The NAFC supports the increase to 60% included in the House and Senate bills and urge you to support the higher limit.
- Increase in Estate and Gift Tax Exemption: The House and Senate proposals double the estate and gift tax exemption amounts by doubling the amount from $5 million to $10 million. This change will limit the estate tax so that it will only apply to a very small number of households. History has proven that the estate tax encourages charitable bequests and investments. In 2010, when it was temporarily repealed, bequests to charities dropped 37%. In 2011, when the tax returned, bequests increased by 92%. THE NAFC urges the House and Senate to maintain current law and not to make the proposed changes to the estate tax.
- Repeal of Overall Limitation on Itemized Deductions, Repeal of the Alternative Minimum Tax (AMT): The House and Senate bills both remove the overall limitation on itemized deductions for certain upper income taxpayers as well as the individual and corporate AMT. Removing these limitations may incentivize high-income taxpayers to increase their charitable giving. The NAFC supports the repeal of these limitations and urges the House and the Senate to include them in the final tax bill.
- Mortgage Interest and Repeal of Deduction for Expenses Not Paid or Accrued by Business: Both the House and Senate proposals make changes to the deduction for home equity indebtedness. Additionally, taxpayers will no longer be able to deduct state and local income or sales taxes, unless they are related to a trade, business, or producing income. These changes could greatly decrease the number of individuals who decide to file itemized returns, which would in turn decrease the incentives currently provided to give to charity. The NAFC urges the House and Senate to maintain current law and protect these deductions.
The NAFC has encouraged our member organizations to reach out to their Representatives and Senators to educate them on the implications that this over reaching tax legislation will have on their ability to provide to access to affordable health care to members of their communities and will continue to monitor the progress of this legislation.