New president and tax reform may mean changes in charitable giving rules

Kyle Penney

As you enjoy the Thanksgiving holiday with family and friends, I hope you take the opportunity to express thanks for the blessings you have experienced this year. The East Texas Chapter of the Association of Fundraising Professionals took the opportunity to express thanks at its annual Philanthropy Day luncheon and awards ceremony on Nov. 16.

The room at the luncheon was filled with gratitude for the outstanding businesses, volunteers and fundraising organizations that support the important work of charities in our region. A sense of gratitude also permeated our final board meeting of the year last week at East Texas Communities Foundation as we elected board members and approved new leadership appointments for the coming year. I am humbled and grateful to work with many great volunteer board members, such as our outgoing chairman, Gordon Northcutt. ETCF has a committed volunteer board and dedicated professional staff members who work, often behind the scenes, to help implement charitable plans for many generous donors in our community.

One thing is for certain this Thanksgiving, whether the candidate you were pulling for won or lost, I’m sure you will join me in being thankful that this contentious election is over! With the election behind us, we can focus our attention on Mr. Trump’s tax plan and its impact on charitable giving. Unfortunately, until campaign rhetoric becomes tax law, there is still significant uncertainty about the possible outcomes.

Tax reform in 2017 is almost certain, and is likely to result in lower taxes, but while lower taxes sound great, they may also bring reduced incentives for charitable giving. Members of Congress from both sides of the aisle have been working on tax reform issues for several years, but 2017 will usher in a rare opportunity for significant reform in which the House, Senate and president are all on the same side of the issues. Ken Kies, former chief of staff to the Joint Committee on Taxation and now managing director of the Federal Policy Group, said there is an 80 percent chance that tax reform could be completed by August 2017. Historically, most new administrations work hard in their first year to implement changes they promoted during the campaign.

President-elect Trump has proposed a tax plan that would impact charitable giving in several ways. Trump and House Republicans have proposed tax plans that would keep the charitable deduction, which provides a significant incentive for charitable giving, but both plans also call for an increase in the standard deduction, which would reduce the incentive for charitable giving. Trump has also proposed lowering tax rates, which also would reduce the incentive for charitable giving, because taxpayers would not be looking as hard for ways to reduce their own taxes. Trump also has proposed capping itemized deductions at $200,000 for married-joint filers, which could reduce giving by major donors because it significantly reduces the tax savings that can be experienced with larger gifts. Overall, Trump’s tax plan may result in a reduction in philanthropy because it reduces the incentive to minimize taxes through charitable giving. However, whether the House and Senate will ultimately craft and pass a tax plan that incorporates all of Trump’s proposals remains to be seen. When comparing the current tax system to Trump’s tax plan, gifts in 2016 may enjoy more favored tax treatment than gifts in 2017 and beyond.

Another end-of-year charitable giving opportunity may relate to proposed family partnership regulations that will reduce the effectiveness of estate-planning techniques that have been used for many years to protect and transfer assets among family members. The IRS has proposed new regulations that are soon to take effect, so the next several weeks may be the last opportunity to take advantage of these family partnership estate-planning techniques. There is certainty that these regulations are scheduled to take effect soon, but there also is uncertainty because Trump has proposed a moratorium on new federal regulations. The race is on, however, because this pending regulation may be implemented before Trump can issue his moratorium. If you have been considering an estate-planning strategy using a family limited partnership, you should call your adviser to get his or her opinion on the matter.

If certainty is one of the things you are thankful for, you should call your accountant or estate-planning attorney in the next few days to see if taking advantage of the certainty of 2016 tax laws and regulations is your next best opportunity to give well.

Guest columnist Kyle Penney is President of East Texas Communities Foundation and a Chartered Advisor in Philanthropy. The mission of ETCF is to support philanthropy by providing simple ways for donors to achieve their long-term charitable goals. To learn more about ETCF or to discuss your charitable giving, contact Kyle at 866-533-3823 or email questions or comments to etcf@etcf.org. More information is available at www.etcf.org.

 
 

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