The 2017 Tax Act doubled the standard deduction individuals automatically get when they file their taxes — a change that put more money in many taxpayers' pockets but also reduced the tax advantages of charitable giving for many.
The new tax plan doubled the standard deduction from $6,350 to $12,000 for a single filer and from $12,000 to $24,000 for married couples. In response, the Tax Policy Center predicted that the number of households claiming an itemized deduction for their gifts to nonprofits would decrease from about 37 million to 16 million.
Some local nonprofit officials said they haven't felt the crunch yet, though. The United Way of Greater Chattanooga, The Community Foundation, Metropolitan Ministries and the Hamilton County Baptist Association all said that giving throughout last year was better than expected and even above previous years.
So far, it would seem that Chattanoogans give to make a difference and not for the tax break.
Dennis Culbreth, director of missions for the local Baptist association, said there was record giving at some of the local churches and others had giving comparable to previous years. Culbreth said he and the association's church leaders are optimistic that the tax plan will have a positive impact on the economy and save people money overall.
"Some it might affect, but the majority of folks give not as much for the tax break as they do for the ministry," he says.
Suzy Anthony, vice president of finance and operations at United Way, said giving for the nonprofit was up the entire year and she doesn't expect to see a change, if there is any, until people begin filing taxes in 2019 and 2020. While there are fewer tax benefits to be claimed with a higher standard deduction, Anthony said there seems to be a "misperception" that people's taxes are going to go up or they will have a larger tax liability if they can't deduct charitable donations.
"If a couple was itemizing in the past with $15,000 or $18,000 then now they can still make the same donations and enjoy a $24,000 deduction instead," she explained. "My hope is that people won't notice it, see it or feel financially impacted."
The Community Foundation of Greater Chattanooga didn't see any decreases in giving in 2018 and actually saw an increase in donor participation, said Tina Curtis, who is the senior director of giving strategies. In 2018, the foundation added 25 new funds, just shy of about $12 million in assets.
"Chattanooga is a very charitable community, and I think that no matter who you are, if you've got a giving spirit, you are going to give no matter what the tax situation is," she says.
Curtis also believes it will take a few years for donors to fully understand how the tax law changes will affect them. The foundation works with donors and connects them to nonprofits and missions they want to support. They also provide grants and funding for local organizations.
The Community Foundation does provide donor-advised funds, which could help some taxpayers under the new law. Donor-advised funds are more flexible and personalized and allow donors to give and take a tax deduction in the same year, but the foundation could then disperse the donation to nonprofits over several years.
Without a donor-advised fund, a donor could "bunch," or just give more in one year to rise about the standard deduction and see more tax savings, but then that might leave the nonprofit in a hard spot the years the donor decides not to give.
Anthony also said she thinks there could be an increase in group donations and multi-year gifts that nonprofits can spread out over time.
Metropolitan Ministries, or MetMin, is a local nonprofit that provides emergency financial assistance along with crisis-prevention services. Executive Director Rebecca Whelchel wrote in an email that the nonprofit was anticipating a less generous year-end giving response but actually saw a stronger response than in previous years.
Whelchel said the overall number of givers was down and they didn't hear from some of their usual, "steadfast" donors, but they received a rather large anonymous gift that helped to put them ahead of 2017 figures.
"Yes, the change in the tax law is more than a little terrifying for nonprofits, but it's also an opportunity to engage and empower new givers who have an infant vision of making things better for fellow community members who struggle," Whelchel says.
Whelchel thinks it's more of a "paradigm shift" in donor giving that has less to do with tax laws and more to do with a change of heart. The way people give is changing, and so MetMin has focused the past year on honing their online presence and other development skills to gain new monthly donors.
"I think all nonprofits must take the daily pulse of the community's givers and teach the nongivers about the impact that their blooming generosity has on the real, live people each agency is missioned to care for," Whelchel explains.