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Nonprofits & The Fiscal Cliff

by Brenda Peluso

Help Congress understand the impact on the communities we serve.

Before the end of this year, Congress must act in order to avoid two major threats to charitable nonprofits:

  • Deep, arbitrary cuts in domestic spending programs
  • Charitable Giving Incentive Threats

Domestic Spending Cuts

$54.6 billion across-the-board sequestration cuts are scheduled to occur on January 2, 2013 if Congress fails to act. This will result in 8% – 10% cuts in virtually all domestic programs. According to a recent report from Sen. Tom Harkin, Chairman, Senate Appropriations Subcommittee on Labor, Health and Human Services, and Education, and Related Agencies, Maine’s share of cuts to just a few of the affected programs, looks like this:

  • Head Start: $2.5 million resulting in the loss of 82 jobs & 393 fewer children served
  • Child Care Development Block Grants: $600,000 resulting in 108 fewer children served
  • Substance Abuse Prevention & Treatment: $520,000 resulting in almost 1,400 fewer admissions to treatment programs

Additionally, the 2% cuts in Medicare reimbursements have been estimated to cause the loss of almost 3,000 jobs in our state by 2021 (The Negative Employment Impact of the Medicare Cuts in the Budget Control Act of 2011, American Hospital Association, September 2012)

Cap on Itemized Deductions

In order to raise revenues without raising tax rates, elimination of big tax deductions, such as those for mortgage interest, health care premiums and charitable contributions, is on the table. We have heard that policy makers are giving serious consideration to a bi-partisan proposal to cap all itemized deductions at a specific level, such as $17,000, $25,000 or $50,000 per individual taxpayer. Such a cap would eliminate tax incentives for donations to charities because the big fixed-cost deductions, such as for mortgage interest and state/local taxes, would eat away at most allowable deductions at the levels being discussed, leaving no room for incentives for discretionary gifts to the work of the charities.

According to the IRS Statistics of Income Data, 2010, all of these proposed caps would eliminate the charitable giving incentive for all Maine itemizers with income over $200,000. This group of taxpayers accounts for 36% of $433 million in reported contributions and their average deductions for mortgage & taxes alone exceed $54,000. A larger group of taxpayers, those with incomes over $50,000, are responsible for 88% of the $433 million in reported contributions and deduct over $20,000 on average in mortgage & taxes alone. That leaves no room at the $17,000 cap and very little at a $25,000 cap for charitable giving deductions and these estimates do not include other deductions such as health care costs.

According to recent White House estimates, such caps on deductions would cost charities at least $10 billion a year. For Maine, this could translate to a loss of at least $25.5 million or about 6% of total giving in Maine at a time when nonprofits are struggling to meet increased demand for their services with all sources of revenue diminished.

This excellent online resource, put together by the National Council of Nonprofits, provides great detail and more insights from the national perspective.

How You Can Help

Whether or not you believe Congress will act to avoid the automatic spending cuts and tax increases before the end of the year, now is the time to educate your representatives in Congress about the importance of strong charitable giving and effective federal funding to communities & causes you serve.

Call your representatives in Congress today. It is easy, legal* and effective. Tell them what reduced private contributions & across the board cuts in federal programs will mean for the people and causes you serve.

  • Senator Collins –
  • Senator Snowe – 1.800.432.1599
  • Representative Michaud (District 2) –
  • Representative Pingree (District 1) –

In the world of policy-making, silence is acquiescence. If we do not speak up, Congress and the President assume that we accept or agree with these proposals. Don’t feel you need to be an expert on tax policy to call. Your on-the-ground knowledge of how federal and private funding positively impacts the quality of life and the economy here in Maine is the most important message we can convey.

*This call could be considered lobbying which is perfectly legal for c3 nonprofits, within generous limits. Federal funds may not be used for lobbying. If you have any concerns, please call us at 207.871.1885 or read our “Raise Your Voice” toolkit.

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