Pure disasters are putting communities throughout the nation, seemingly every day. At all times on the entrance strains of response and restoration from these disasters are the nonprofits in these communities. Proper now, charitable nonprofits name on Congress to do what it at all times does within the aftermath of devastating storms and different acts of God — enact pure catastrophe tax aid so community-based organizations have the sources they want, together with personal donations and employment retention tax credit, to offer aid, restoration, and help.
At this time, lava is flowing in Hawai`i. Final month, hurricanes devastated swaths of the South and freak blizzards shut down elements of the Northeast. All through the summer season and fall, drought, fires, floods, and mudslides disrupted the lives and livelihoods of our fellow People. The Nationwide Oceanic and Atmospheric Administration studies there have been 15 climate catastrophe occasions this 12 months producing losses exceeding $1 billion every and inflicting 342 deaths. As of this writing, the Federal Emergency Administration Administration studies not less than 20 declared disasters simply since Labor Day.
These occasions exacerbate the already difficult actuality for charitable organizations. The Federal Reserve’s newest survey of entities serving low- to moderate-income communities revealed that 70 p.c of responding nonprofits reported larger calls for for his or her companies and 43 p.c reported considerably larger calls for. People are counting on charitable nonprofits in growing numbers and nonprofits are counting on Congress to ship aid.
Pandemic fatigue has led many to query the necessity for restoring any of the help applications initially included within the CARES Act and related legal guidelines. However most of the core tax provisions affecting the power of charitable nonprofits to serve didn’t originate with COVID-19. They’ve been, and proceed to be, important bipartisan coverage responses to pure disasters which have an actual and significant influence on communities.
The clearest examples of those catastrophe aid tax provisions – relationship again to Hurricane Katrina – are two charitable giving incentives that carry the tax-law caps on giving again to hurting communities. One measure permits people who itemize on their tax returns to deduct charitable donations as much as 100% of their adjusted gross revenue, an enchancment from the present AGI restrict of 60 p.c for money donations. The opposite permits companies to deduct charitable donations as much as 25 p.c of taxable revenue, a hike from the same old cap of 10 p.c. This may allow and encourage folks and companies to extend the assistance they will present.
A 3rd incentive for giving throughout crises — the Common Charitable Deduction (UCD), additionally known as a nonitemizer deduction — displays modified tax realities ensuing from the 2017 tax legislation that elevated the usual deduction and lowered the share of taxpayers who itemize to fewer than 12 p.c. An American Enterprise Institute evaluation discovered that the 2017 tax legislation didn’t generate larger charitable giving amongst upper-income taxpayers as predicted; in reality, charitable giving went down after its enactment. The UCD addresses that downside. Though a bigger nonitemizer deduction has been sought on a bipartisan foundation for the reason that fall of 2017, Congress enacted a $300 charitable deduction for money presents from nonitemizers for that 12 months as a part of the CARES Act and prolonged the deduction by means of 2021 whereas growing the cap to $600 for joint filers.
Information present that the UCD labored precisely as deliberate — offering a robust incentive for people to help the work of charitable organizations of their communities. The IRS reported in June that 42.2 million households took benefit of the UCD in 2020, producing $10.9 billion in charitable giving that 12 months. Practically 1 / 4 of these donations got here from taxpayers with adjusted gross revenue of lower than $30,000. Additional, information from the Fundraising Effectiveness Venture (FEP) reveals a rise of seven.5 p.c in particular person presents of $300 in each 2020 and 2021, in comparison with 2019. Moreover, presents of $600 elevated 5 p.c in 2021, in comparison with 2019.
Charitable nonprofits urge Congress to resume all three charitable giving incentives not less than by means of 2022 and considerably enhance the cap on the common charitable deduction, as proposed within the bipartisan Common Giving Pandemic Response and Restoration Act (S.618/H.R.1704).
One other necessary tax provision constantly integrated in pure catastrophe aid since 2005 is the Worker Retention Tax Credit score (ERTC). The newest iteration of the ERTC, a refundable payroll tax credit score, is designed to assist nonprofit and for-profit employers preserve employees on the payroll throughout making an attempt instances and keep away from layoffs. For charitable nonprofits, the instances stay making an attempt as extra residents search help whereas sources aren’t maintaining with demand and inflation, all of which compound the extreme nonprofit workforce scarcity disaster.
Regrettably, Congress retroactively repealed the ERTC for the fourth quarter of 2021, imposing super prices and losses on 1000’s of employers. With out restoration of the promised aid, layoffs at community-based nonprofits have been essential, deterring restoration and inflicting a discount within the very important companies on which our fellow residents and communities rely. Recognizing this problem, representatives and senators from throughout the political spectrum have sponsored the ERTC Reinstatement Act (H.R. 6161/S. 3625) to revive what Congress initially promised. Going ahead, the ERTC is as essential now as through the pandemic to assist alleviate the pressure on employers brought on by current and future pure disasters.
Practically three years into a worldwide pandemic and after responding to repeated, devastating pure disasters, charitable nonprofits are experiencing elevated demand for companies that far outpace obtainable funding and staffing. Our nation’s charities want larger incentives for charitable giving and worker retention assist greater than ever. Pure disasters preserve coming. It’s gone time for Congress to revive pure catastrophe tax aid provisions which might be confirmed to empower nonprofits to be the forces for good that our communities want.
Tim Delaney is president and CEO of the Nationwide Council of Nonprofits, the nation’s largest community of charitable nonprofits.