New tax law triggers fewer donations to nonprofits

While the economy is booming, some nonprofits are seeing a downturn in donations – a worrisome trend.

An Alliance of Arizona Nonprofits survey of 501c3 organizations statewide showed year-end and tax-deadline donations are down. We attribute this decline to the federal changes, which were, in principle, designed to save taxpayers money.

The new law nearly doubled the federal standard deduction for single and married taxpayers, eliminating the financial incentive to donate to nonprofit organizations because taxpayers can’t claim – and don’t need – the deduction on their federal returns.

We are encouraged by Arizona legislators’ efforts to adjust Arizona tax laws to allow individuals to deduct donations to nonprofit organizations even if they don’t itemize their tax returns, but we believe it’s important to understand the actual impact of federal tax laws changes on those organizations.

And, it’s not good.

Two Arizona nonprofits underscore the challenge.

Phoenix-based Feed Our Babies USA works with school districts to provide nutritious meals to low-income children and their families who are not eligible for public funding or food boxes from state-mandated food banks. Children and families are identified by school staff, and food boxes are brought to the schools for delivery to the families.

The Creighton School District, where 5,000 of the 6,000 children are on free and reduced lunch, is among the districts Feed Our Babies USA serves.

This all-volunteer organization operates on an annual budget of less than $120,000 and helped more than 20,000 families last year with support from more than 150 volunteers Valleywide.

Feed Our Babies USA is funded solely by individuals and corporate gifts. They organized a bake sale on May 11 to benefit their Thanksgiving Box event and Arizona school pantry programs. Two years ago, Feed Our Babies USA generated $15,000 in donations. This year, the total was $7,000.

“The loss of funding was huge for us, said Founder and Board Chair Joni Navarro Sucato. “We cut down our weekend lunch program to once a month because we didn’t have the funding. We’re a very small organization and we rely on every single dollar we get to buy food.”

Junior Achievement of Arizona serves 83,000 students statewide with programs designed to prepare them to succeed in work and life by teaching them how to manage their money, be ready to enter the workplace and think innovatively.

Donations to JA dropped 13 percent from the previous 12 months.

“Our cost average is $30 per child. For every $100 we don’t get, three children don’t get served,” said JA President Katherine Kemmeries Cecala.  “The number of kids we serve is directly tied to donations we receive. We are providing life-changing programs to kids and our programs are proven to make a difference. Our kids are 34 percent more likely to graduate college and will earn 20 percent more.”

JA relies entirely on donations and its 9,000 statewide volunteers, and the organization doesn’t charge the schools they work with.

Feed Our Babies USA and Junior Achievement are just two examples of the impact we’re seeing on nonprofits because of the tax-law changes. There are many, many more.

Our sincere hope is that our legislators continue on the path they’ve taken to adjust Arizona tax laws to benefit both the taxpayers and the nonprofit organizations they stand behind.

Kristen Merrifield is chief executive officer of the Alliance of Arizona Nonprofits..