The Infrastructure Bill … Nothing to See Here for Charities
Late last Friday, with bipartisan support, the House of Representatives passed the “Infrastructure Investment and Jobs Act” (HR 3684). What is the impact on charitable gift planning and year end giving? Not much. While there is much good for the country expected from it, the bill includes almost no tax changes, only one of which is even tangentially related to charitable giving: a provision requiring additional reporting for cryptocurrency transactions beginning in 2024.
Some commentators have welcomed this as a return to the “regular order” – hard fought negotiations, compromises, and bipartisan votes both for and against. That may be, but action on the other key piece of legislation, the “Build Back Better Act,” which includes several proposed tax changes affecting individuals, has been postponed to allow additional time for analysis by the Congressional Budget Office. Leadership has indicated a House vote on the Build Back Better Act could occur before Thanksgiving with Senate action to follow. Time is running out for action before year end, especially in light of holiday schedules.
As we’ve noted before, uncertainty is challenging for fundraising. Passage of the Infrastructure Investment and Jobs Act removes some significant amount of uncertainty, although wrangling over the Build Back Better Act will continue in the weeks ahead. So, what’s the story for our donors as they contemplate their 2021 year-end giving?
First of all, it’s important to maintain focus on mission and the reasons to give and avoid the temptation to bury the lede with speculation about pending legislation and political machinations. Donors want to hear the story about the mission of your organization. Donors give because they feel passionately about the mission and trust your organization to make a difference. Historical data suggest little correlation between charitable giving and tax changes alone. There’s no reason to expect that this legislative cycle will be different.
Help donors appreciate what an extraordinary year 2021 has been for the investment markets. While Congress was finalizing the Infrastructure Investment and Jobs Act last Friday, the Dow closed up more than 14% for the year and 28% from a year ago. The S&P has performed even better, up nearly 19% for the year and a jaw dropping 34% over a year ago. What a great time to suggest a contribution of appreciated securities. And remember, even donors who do not itemize their deductions can still avoid long-term capital gains tax with a charitable contribution of appreciated assets.
For donors over age 70½, a Qualified Charitable Distribution (QCD) from an IRA remains a simple and highly tax-efficient way to support your mission. These tax savings are available to donors whether or not they itemize. As an added bonus, if your donor is subject to Required Minimum Distributions, QCD gifts reduce the taxable amount the donor is required to withdraw.
Finally, don’t forget there are two special incentives for 2021 only. Those who do not itemize can still deduct cash contributions this year up to $300 (or $600 for a married couple filing jointly). For those who still itemize, the maximum allowable income tax deduction for cash contributions to public charities in 2021 has been increased to 100% of Adjusted Gross Income.
‘Tis the season for giving and sharing. No doubt, there are bumps and diversions in the legislative road ahead, but now is the very best time to engage your donors in conversation about their passions and the reasons why their charitable gift plans ought to include your organization. We will continue to monitor the maneuvering at the Capitol and keep you posted, especially with the Build Back Better Act that is poised to have some more interesting twists and turns with the tax code. In the meantime, good gift planning will increase the quality and quantity of giving for your organization.