Memorial Day Musings

Memorial Day Musings

Despite the fact we have had some decidedly “unsummer like weather” in the Northeast, Memorial Day is the unofficial start of the summer.   It is also the start of the real negotiations on the tax bill currently  moving through Congress.  Speaker Mike Johnson has said he would like to get the bill to the Senate for a vote before Memorial Day.   The bill will change as it moves through the Senate and back to conference,  but let’s take a look at how the current provisions in the bill  might impact the not-for-profit  (NFP) world.

Congress appears to be ready to increase the allowable deduction for state and local taxes (SALT) on an individual’s federal income tax return.  This may have a positive impact on NFP organizations. The hike from the current $10,000 cap on SALT deductions  for married couples to $40,000 is substantial.  There is a phase-out for those making more. At the same time, the bill proposes a hike in the standard deduction to $32,000 for a married couple.  On the face of it, these changes could make it more likely individuals can  itemize deductions on their federal income tax returns. This means it will be easier to deduct charitable contributions again.  Previously, the low cap on SALT deductions precluded people from itemizing since the standard deduction is so high. If you live in a “Blue” State, you pay a pretty hefty state income tax and property tax, most of which is not deducible.  Increased charitable contribution deductions may mean more donations to qualified NFPs.  Onc can only hope at this point. 

There have been two other developments in the NFP space worth mentioning.  As I write this, the U.S. Supreme Court has deadlocked on the legality and constitutionality of state  funding of  charter schools. The whole issue of charter schools is a contentious one, with public school unions opposing any funding for them at all, let alone those schools chartered by religious groups. There was no opinion issued by any of the Justices, so it is difficult to determine exactly what their thinking was on the matter. The tie vote was possible because Justice Barrett, a practicing Catholic, recused herself from the case.  The Court affirmed the decision of the Oklahoma Supreme Court that state funding of a religiously affiliated charter school was unconstitutional. In recent years the Court has been very accommodating to  religious groups.  Perhaps there was something about this case that Chief Justice Roberts, the presumed swing vote, did not like. Only time will tell if this ruling will stand. For now, the ban on state funding of religiously backed charter schools  applies only in Oklahoma and not nation-wide. 

The second development is the cost-cutting activities of the Trump Administration.  Many have been blocked by  federal district court judges. The issue of the “universal injunction”  will also be decided by the Supreme  Court in the near future.  I believe some of the cuts will in fact be enacted. Which will survive and which will be blocked is still up in the air, as well as any impact on NFP organizations. 

In closing, I want to wish all of you a wonderful Memorial Day.  And remember to contribute to your favorite charity.  It is the American thing to do.  Even if you don’t get a tax deduction.