Charitable tax deduction changes may hurt nonprofits
Proposed changes to charitable tax deductions may limit the ability of nonprofit healthcare institutions to raise funds, according to a survey by the Association for Healthcare Philanthropy.
The AHP, which represents more than 4,700 directors of philanthropic programs at 2,000 nonprofit healthcare providers in the United States and Canada, surveyed members in February about some of the proposed changes to charitable tax deductions.
President Barack Obama’s proposed 2011 budget would cap charitable deductions at 28 percent, and the Bowles-Simpson Deficit Reduction Commission recommends reducing the tax incentive for charitable giving to a 12 percent tax credit for donations exceeding 2 percent of a taxpayer’s adjusted gross income.
"Combined with growing state and federal cuts in funding for social services and uncertainty over implementation of the Patient Protection Act, these Draconian tax proposals – if enacted – add up to a triple threat to America's not-for-profit healthcare providers," said William C. McGinly, PhD, CAE, the AHP's president and CEO, in a statement.
Forty percent of survey respondents indicated they expect a reduction in front-line community services, such as free clinics. Sixty-one percent said they expect their organizations won't be able to pay for or will delay purchasing equipment. Fifty-nine percent said their organizations will be unable to pursue or will delay pursuing hospital renovations and expansions.
"More than 60 percent of fundraisers believe that tax code changes will reduce donations, and most predict that reduced funding will impede buying much-needed hospital equipment and paying for hospital improvements and expansions, during a time when our communities' healthcare needs are increasing and the demands on nonprofit hospitals continue to grow," said Mary Anne Chern, FAHP, ACFRE, president of the White Memorial Medical Center Charitable Foundation in Los Angeles and the AHP's board chairperson.
"These concerns are being expressed by fundraisers who work on behalf of a wide range of healthcare institutions, including local community hospitals, medical centers, medical schools, children's hospitals, nursing homes and assisted living facilities," she continued. "The impact of any changes that reduce tax incentives for giving could be devastating for healthcare in the U.S."
Nine out of 10 members responding to the survey said they believe the Bowles-Simpson tax changes would cause “significant reductions” in overall giving to their organizations. About 40 percent estimated their donations would decrease between 10 percent and 30 percent if significant changes are made to charitable giving tax incentives – translating into a drop of more than $1.07 billion in annual giving to nonprofit hospitals, per AHP’s 2009 giving statistics.
Philanthropic directors are also concerned that changes to the charitable deductions tax code will decrease how much donors give.
"This is especially true of major gifts and planned giving, where donors consider the impact on their tax liability," McGinly said. "These tax code changes would compound the current fiscal problems that most nonprofit hospitals face, particularly for healthcare providers serving in-need communities, where in some cases nearly 50 percent of the patients rely on charity care or some form of assistance beyond what federal and state programs provide."
Read the survey here.
