Americans for the Arts

Today, Republican House members released their bill for tax reform, and it unfortunately does not protect charitable giving.

This long-awaited bill, H.R. 1, would overhaul the tax code in significant ways. Its impact includes nonprofits, individuals, and businesses. Attempted reform of this scale hasn't occurred since 1986. Republican leadership continues to anticipate that final legislation will be signed into law by year-end (December 2017).

What Does This Proposed Bill Mean for Artists and Arts Organizations?

There are a few tax provisions that we are closely tracking, including the longstanding charitable tax deduction that’s important to all nonprofits.

Here is more detail about these proposals, and what you can do:

Charitable tax deduction: Included only for itemizers and severely limited.

Americans for the Arts opposes the current proposal. Although the House bill retains the current tax deduction for gifts to charities for people who itemize, as we’ve shared before, other changes in the proposal have the effect of severely limiting this long-standing charitable deduction that’s served to help communities and benefit the millions of Americans who access services provided by nonprofit organizations for over a 100 years.

In short, right now, the charitable deduction is only available to taxpayers who chose to itemize their taxes. About 30% of taxpayers right now itemize. Under the House bill, an estimated 5% would still itemize and be eligible for the charitable tax deduction. Thus, 95% of taxpayers would no longer be taking a charitable tax deduction, resulting in a decrease of $13 billion annually to nonprofit organizations, including houses of worship, disaster relief, education, the arts, and more.

Historic Tax Credit: Proposed repeal.

The historic tax credit is a widely used redevelopment tool. It was permanently written into the tax code over three decades ago and has been a widely used redevelopment tool for cities, towns, and rural communities across the country. Since 1981, the credit has leveraged more than $131 billion in private investment, created more than 2.4 million jobs, and preserved more than 42,000 historic buildings.

Artist-Museum Partnership Act (H.R. 1830): Not included.

Americans for the Arts has been working on this issue of tax fairness for over a decade. The Artist-Museum Partnership Act would allow artists to take an income tax deduction for the fair market value of their work when they donate it to charitable collecting institutions. Right now, artists are specifically excluded while other collectors can take this deduction. Under current law, artists can only take the cost of materials. The Artist-Museum Partnership Act would fix this inequity and allow more works of living artists to be accessible to the public.

Self-created property: Proposed repeal for musical compositions and copyrights.

The option to treat musical compositions and copyrights in musical works as a capital asset would be repealed.

Estate tax: Proposed repeal in 5 years and an immediate doubling of tax exclusion.

The federal estate tax is an important incentive for charitable giving through charitable bequests. Charitable bequests accounted for about $30 billion in charitable giving in 2016.

State and Local Tax (SALT) deduction: Proposed repeal of the deduction for income and sales taxes, and the deduction for property taxes is capped at $10,000 per person.

What’s Next and What Can You Do

Today’s release is the start for an accelerated push to enact substantial tax changes before the end of the year. Take two minutes now to contact your member of Congress to let them know that you support charitable giving.

Here’s the current tax timeline:

November 2: Republican House members released their tax bill.
Week of November 6^th : Consideration of the House tax bill occurs in committee.
Week of November 13^th : Possible House vote on the tax bill, and a possible release of a Senate version of tax bill.
December: The House and Senate negotiated to arrive at a final tax bill. The Republican leaders’ goal is to pass legislation before the end of the year.

Take two minutes now to contact your member of Congress.

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