It may be the holiday giving season, but Chippewa Valley charities remain worried about the volume of donations they will receive before the end of the year.
The main source of concern among nonprofit organizations is the impact of sweeping changes to the federal tax code approved by Congress last year.
The GOP tax overhaul, officially known as the Tax Cuts and Jobs Act, doubled the standard deduction that taxpayers can take — raising it to $12,000 for individuals and $24,000 for married couples filing jointly — and thus reduced the financial incentive for many people to make charitable deductions.
That change likely will shrink the number of households claiming an itemized deduction for their charitable gifts from about 37 million to about 16 million, or by 57 percent, according to the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution. Charities fear that could lead to a decrease in the number and size of donations to nonprofits.
“I am worried about it,” said Sara Antonson, CEO the Boys & Girls Clubs of the Greater Chippewa Valley. “This is the first time in my 12 years here that it looks like we will be severely underfunded.”
Leaders of other local nonprofits also expressed anxiety over the potential impact of the tax overhaul, with several saying they are keeping a close eye on their bottom lines as the year-end deadline approaches for charitable contributions that can be itemized on 2018 tax returns.
With just over two weeks to go in the year, it’s still too soon to know how the situation will play out, said Jan Porath, executive director of the United Way of the Greater Chippewa Valley. The organization typically receives an influx of gifts at the end of the year, but nobody knows if that will change as a result of the tax law changes.
As of last week, the organization had received pledges totaling $1.17 million toward its annual fundraising goal of $1.75 million.
“We are anxiously awaiting to see if those typical year-end gifts are still coming or if people are not going to be giving because they can’t get the tax deduction and may not need to itemize anymore,” Porath said.
The answer could make a big difference to the 23 nonprofits in Eau Claire and Chippewa counties that have received grant pledges from United Way.
If overall charitable donations drop by about 5 percent, as the Tax Policy Center and other research organizations have projected, that would mean a loss of $87,500 for the local United Way chapter, Porath said.
Need still exists
At Eau Claire-based Big Brothers Big Sisters of Northwestern Wisconsin, CEO Wes Escondo said the impact of tax reform is “definitely a concern,” although the organization has been able to offset any potential decline in individual donations by ramping up fundraising efforts targeting businesses.
Escondo said he presumes the standard deduction change will mostly affect lower and middle-income donors, with major donors likely still easily hitting the minimums for itemizing charitable donations. Congress boosted the size of the standard deduction in part to simplify the tax-filing process for middle-class taxpayers.
“Regardless of what the tax laws are, it doesn’t change the very important need that still exists in the community,” Escondo said. “There are a lot of phenomenal, responsible, very well-run nonprofits that really need your help.”
Antonson agreed about the abundance of nonprofits filling important needs in the community, but said the tax overhaul and a degree of donor fatigue have those organizations competing with each other for potentially smaller pools of donors and dollars.
Some donors may not recognize that groups such as the Boys & Girls Clubs, which serves more than 1,200 kids at locations in Eau Claire, Chippewa Falls, Menomonie and Black River Falls, rely on donations and grants just to keep the doors open.
While it’s not always popular to donate for operating expenses, the clubs have no revenue-generating fees and thus no base to fall back on, Antonson said, noting that attendance increased by nearly 30 percent when it moved to a new Eau Claire location in 2016.
“We’ve got great space and more kids, but that means we need to be raising more money for our annual budget,” she said.
Instead, Antonson said, the Boys & Girls Clubs are on pace to fall about $200,000 short in their 2018 fundraising. She is hopeful, but not sure, that a $75,000 matching grant recently offered by an anonymous donor will make up most of that deficit.
Service cuts possible
If not, the clubs will have to look at cutting programs, because even the nonprofit must be run like a business, she said.
“I don’t want to have to stop helping our kids. These kids are worth it,” Antonson said. “We’re giving these kids opportunities to change their lives. We can’t let them fall through the cracks.”
She pointed out that almost 60 percent of the children who attend the Boys & Girls Clubs qualify for free and reduced-price meals at their schools, and many of them get a good share of their food beyond the school day at the clubs.
“My message to the community is there are many great organizations to support, and I just ask people to give with their hearts to organizations they are passionate about,” she said.
Kelly Christianson, executive director of Family Promise of the Chippewa Valley, is also watching to see how much the tax law changes might affect the charitable contributions that help its Beacon House shelter in downtown Eau Claire provide temporary housing and services to homeless families.
The nonprofit is in the midst of its year-end fundraising campaign and hasn’t yet calculated how much donations might be lagging the normal pace. In theory, she said, people taking the higher standard deduction will have more money in their pockets that could be earmarked for charitable causes.
“We’ve kind of decided to take a wait-and-see approach, and then this year will probably be a good indicator moving forward,” said Christianson, who characterized her attitude as “concerned but not panicked.”
If donations take a significant hit, Family Promise would have to tap its cash reserves to meet expenses and then likely ramp up fundraising efforts, she said. The impact of a drop in individual contributions could be alleviated somewhat by its diversity of funding sources, including grants from United Way and local, state and federal sources.
Despite the uneasiness permeating the nonprofit world’s holiday season as a result of the tax law changes, leaders of local charities maintained a generally optimistic attitude.
“We’re lucky we live in a generous community,” Porath said. “I really feel like most of the people in our community who donate do so because they really want to help their friends and neighbors in the community.”
Escondo echoed that sentiment, saying, “I love that about this community. If people can give, they do.”