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Michigan Non-Profit Organizations Hope for Big Giving Finish as Credits End

United Way Executive Sees Doom for Charities in Deduction Elimination

November 27, 2011       Leave a Comment
By: Dave Rogers

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Tax reform legislation passed by both the Michigan Senate and House on May 12th, was signed by Governor Rick Snyder May 25.
 

Nonprofits across Michigan are in a big holiday push for financial donations, hoping to fill the Christmas sock before a hole appears Dec. 31.

That will be the last time donors will be able to take advantage of a state charitable tax credit.

"The elimination of the charitable tax credits will reduce the ability of Michigan's nonprofit sector to serve those most in need," states Kyle Caldwell, president of the Michigan Non-Profit Association (MNA).

Tax reform legislation passed by both the Michigan Senate and House on May 12th, was signed by Governor Rick Snyder May 25.

The bill eliminates the charitable tax credit, replaces the Michigan Business Tax with a 6 percent corporate income tax, and taxes pensions.

Non-profits have a reason to be thankful, perhaps, for the so-called Super Committee's failure to reach agreement recently. As part of the deficit reduction compromise, the Select Joint Committee for Deficit Reduction considered eliminating charitable giving tax incentives. MNA along with its national partners are fighting to preserve charitable giving incentives.

The National Council of Nonprofits composed a letter to send to legislators on the Super Committee, urging them to protect charitable deductions. Even though deliberations of the Super Committee are over, the council urges contact with legislators to reinforce the benefits of non-profit giving.

The CEO of United Way Worldwide has written an article entitled "Eliminate Charitable Deduction and The Poor Will Pay," stating a generally accepted position of non-profit executives. Gallagher testified before the committee:

"Recent studies indicate that a cap on the deduction could result in loss of charitable giving of between $2.9 billion and $5.6 billion each year. A variety of other proposals to limit the deduction have been circulated this year. Each proposal has two common elements: 1) they limit the value of the deduction for some group of donors, and 2) they will result in reduced giving to charity to the detriment of individuals and families who rely on our help.

"If the $5.6 billion number is correct, and I believe that it is, that equates to eliminating all of the private donations each year to the Red Cross, Goodwill, the YMCA, Habitat for Humanity, the Boys and Girls Clubs, Catholic Charities, and the American Cancer Society combined.

"I am not arguing that those organizations would not survive limitations to the charitable deduction; United Way and these other major charities would. However, the services charities provide would be reduced at that scale.

For United Way, we calculated that a mere 2.5 percent reduction in revenue "would result in 1.3 million fewer times that we can provide job training services for an unemployed worker, home care for an elderly citizen, service supportive housing for a single mother, or a mentor or tutor for an at-risk young person."

Mr. Gallagher concluded: "Over the long term, investments in social services can help our nation recover and prosper. There can be no sustained economic success without human success. We in the non-profit sector are investing in human success. We need to preserve the charitable tax deduction and support the charitable spirit that defines us as Americans."

In more positive news, the MNA observed that Michigan's Earned Income Tax Credit will not be eliminated. Instead, filers will receive a 6 percent match of the federal EITC, rather than the 20 percent match as the credit stands now.

While this is a reduction, this legislation preserves the spirit of the EITC. The original legislation zeroed out the credit, later to be changed to a $25 per child tax credit. The 6 percent state EITC will still help low-income families.

As Michigan Radio's Mark Brush reported, "the credit allows Michigan taxpayers to essentially double their contribution when they give to community foundations, homeless shelters, food banks and public institutions (such as Michigan universities, museums, public libraries, and public broadcasting stations).

For a single filer, half their contribution can come off their Michigan tax bill up to a $200 contribution. Joint filers can take half of a $400 contribution."

But come January 1st, that tax credit will be no more.

Caldwell says getting rid of the tax credit won't necessarily discourage people from giving, but it will greatly influence how much they give to food banks, homeless shelters and public institutions like libraries and public radio stations.

Scholarships from community foundations will also take a hit:

"The repeal of the Michigan tax credit will negatively impact people's ability to get scholarship funds because there'll be fewer funds available," said Mr. Caldwell.

Donations from individuals and foundations make up about 70 percent of nonprofits' funding, according to the MNA.

Meanwhile, Gov. Snyder has revamped his cabinet and is launching a new initiative bringing together state government and Michigan's foundation community to help support environmental programs and initiatives, economic and workforce development, sustainable local food systems, parks and recreation projects and more.

"Foundations have been a tremendous asset to this state and we need to find new ways to bring government and grant makers together in a unified way to achieve both our goals," said Dan Wyant, MDEQ director. "Foundations can't replace government funding, but they can provide a much needed financial support and expertise to find new and successful ways to address the many issues and problems facing our state today."

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Dave Rogers

Dave Rogers is a former editorial writer for the Bay City Times and a widely read,
respected journalist/writer in and around Bay City.
(Contact Dave Via Email at carraroe@aol.com)

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