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New for 2018: Less-Charitable Laws for Charitable Giving

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New for 2018: Less-Charitable Laws for Charitable Giving

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Donations.jpegIndividuals and tax preparers need to be aware of a significant impact on charitable giving that likely will result from a provision in the Tax Cuts and Jobs Act (TCJA).

While the consequences of the law, passed in December 2017, might be unintended, they are no less real for taxpayers — especially for charities. Vikki Sprull, President and CEO of the philanthropic network Council on Foundations, projects the new law "will result in a decrease of $16–$24 billion in charitable giving every year."

Subtraction by Addition
The bad news for charities came about as a result of what was supposed to have been good news for taxpayers. Under TCJA, the standard deduction doubles to $12,000 for individuals and $24,000 for married couples.

But that increased standard deduction had a very large string attached: It effectively eliminates itemized deductions for the vast majority of American taxpayers, with some estimates as high as 95%. If you're in that group, you're free to continue with your charitable giving as before. You just can't claim it as a deduction anymore, because the standard deduction has already maxed you out.

Now What?
With the deductible charitable-giving option for individual taxpayers virtually eliminated, charities and their benefactors are now scrambling to find new ways to raise funds. There are a couple of ways for small businesses to donate to causes they support (although complex regulations are involved). Here are two of the most common avenues:

  • Commercial co-venture: Businesses may choose to donate some or all of the proceeds from a dedicated product line to a specific cause. If, for example, you ran a clothing store, you could donate the sales proceeds of a line of shirts to a charity or nonprofit group. But as CharityLawyer notes, laws regarding commercial co-ventures vary widely by state, and noncompliance can lead to criminal penalties in some cases. CharityLawyer offers a valuable checklist for small businesses that are considering commercial co-ventures, including vetting charities to be sure they're up to date with all regulatory requirements.
  • Endorsement arrangement: In this case, a nonprofit or charity receives a licensing fee in exchange for promoting a vendor's product. This option is more likely among larger corporations than small businesses, and many charities avoid it because of conflict-of-interest issues.

The CPA Journal wisely advises those on both sides of the charitable giving equation to proceed with caution. Consult your attorney and a bookkeeping services professional before entering into any charitable arrangement involving your small business.

Jane Lvovskiy

Author:

Jane Lvovskiy

Jane Lvovskiy, Managing Director of Supporting Strategies | Brooklyn - Staten Island, provides bookkeeping and controller services to businesses throughout Brooklyn and Staten Island, NY.

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This website is created by Supporting Strategies to provide general bookkeeping and accounting information only. Supporting Strategies does not provide tax, legal or accounting advice, and the information contained herein is not intended to do so. As such, the information provided should not be used as a substitute for consultation with professional tax, legal, and accounting advisors, and you should consult with a tax, legal and accounting professional before engaging in any transaction.