BORROWED FROM “HORIZONS, INC.”

“New Tax Law is Said to Endanger Billions of Gifts to Private Groups.”

Fortunately for the nonprofit sector, that predication was wrong:

gifts to charity over the next two years actually increased!

What impact will the new tax law have on

Saint Anna Greek Orthodox Christian Church?

The long-term impact on philanthropy of the Tax Cuts and Jobs Act of 2017 (TCJA) remains

unclear. However, a strategic giving summit, led by Robert Sharpe of the Sharpe Group,

highlighted new opportunities for donors made possible by the new law. Also, Sharpe suggested

several strategies to grow giving to compensate for changes in the law. Here is an overview of

Sharpe’s perspective on the law and the most effective ways to give going forward.

ESPECIALLY AS IT RELATES TO CHURCH BUILDING FUND ACQUISITION

First, the reality. The new law was the most comprehensive revision in the tax code in over 30

years. The changes included a doubling of the standard deduction and a reduction in the

mortgage interest and state/local tax deductions. Also, the cap on cash gifts was raised from 50%

of Adjusted Gross Income (AGI) to 60%. Limits on deductions for high income donors were

suspended until 2026 and home equity interest deductions were eliminated. As a result, it is

expected that half of the people who itemized their deductions in 2017 will not itemize in 2018.

However, high income donors who will continue to itemize may find expanded opportunities and

incentives for larger charitable gifts.

So, how can churches guide donors? What can be done to salvage the tax benefits for those who

no longer itemize and promote new opportunities for those who do? Sharpe suggested three

strategies: bunching, boosting and bypassing. The only two of these three that helps Saint Anna’s

Building Fund are boosting and bypassing.

BOOSTING

Boosting is most applicable to capital campaigns. Some high capacity donors may choose to

make asset gifts that boost them to itemizer status for a number of years. Donors choosing this

option lock in current market values, bypass capital gains taxes, and save a substantial amount on

state and federal taxes. Boosting makes sense for donors who have highly appreciated assets that

pay minimal dividends and who want to make a larger gift to a capital campaign.

BYPASSING

Bypassing is the way to take advantage of the changes in the tax law. Donors can enjoy a

“deduction equivalent” by making gifts that bypass their income stream. The most common form

of bypassing is the IRA rollover provision in the tax code. People age 70 ó and older who have

IRAs are required to take a yearly minimum distribution (RMD) that is taxable as ordinary

income. These people are now able to make a yearly gift of up to $100,000 directly from their

IRAs to churches and charities. This gift counts as their RMD, avoids the taxes, and reduces their

AGI on which many other deductions are based. Although the IRA rollover provision predates

the new tax law, its importance has been amplified by recent changes and by the increasing

number of Boomers becoming eligible.

Finally, Estate and Gift Tax Laws{commonly known as “the death tax”} remain essentially

unchanged. However, by doubling the exemption amount ($11.18 million per individual and

$22.36 million for married couples in 2018) and indexing it for inflation, the TCJA eliminated

federal estate taxes for 99.9% of Americans.

(For some perspective on the scope of this change,) the exemption was $600,000 as recently as

2000. As a result, it is likely more discretionary assets will remain in the typical estate. Surveys

show that donors with such increased assets probably will split the tax savings between family

and church or charity. Saint Anna Church will stress bequests to the building fund.

So how should churches respond to these changes? Here are some suggestions for pastors and

church leaders:

Educate yourself, your staff, and donors about the changes that impact charitable gifts. The TCJA

left the charitable deduction intact while repealing and limiting many others. In fact, some

benefits were actually expanded! Many denominational and community foundations have staff

whose primary job is providing advice and resources for their constituents. THIS IS PRECISELY

WHAT GEORGE PAPAILIAS IS PREPARED TO DO FOR SAINT ANNA CHURCH.

Take advantage of this free service. “Talk to your financial advisors” should be your church

leader’s mantra in 2018 and 2019!

To maximize benefits of the new tax law for Saint Anna members we want to promote the

benefits of gifts of appreciated securities and other non-cash assets, such as IRA rollovers.

Because about 8,000 Baby Boomers turn 70 ó every day, appreciated asset gifts will be

increasingly important in funding our ministry. Remember the IRA rollover provision allows

eligible donors to enjoy the tax benefits of their gifts regardless of whether they itemize.

However, Saint Anna Church will not receive asset gifts unless a conscious effort to educate

members about these opportunities is openly stressed. We must tell members how these gifts

make a substantial difference to your mission and ministry. Colleges and non-profits are making

the case for why they should receive these gifts. Saint Anna needs to be sure you are doing the

same.

Inform our donors that the federal estate and gift tax has, for all practicable purposes, been

eliminated. Many donors created estate plans based on the old tax laws. Those plans usually

included insurance or assets in trusts to pay the necessary taxes. Any bequests to family and

church were made from the remaining assets. The higher estate tax exemption means members

can leave more to charity and increase the amount distributed to family members! We do hope

George will successfully position Saint Anna Church to be the recipient of these "extra savings."

.

The new tax law does not mean your giving will be negatively impacted. But growing giving

requires being informed about the best ways to give. Too many church leaders are operating

under the assumption that the TCJA will have a negative impact on giving. Robert Sharpe

reminded us that the “sky has never fallen” except during major economic downturns. It is clear

the opportunities made possible by the new law outweigh the threats created by it. Churches need

to tell that good news in order to enhance their ability to proclaim THE Good News! Tom

Norwood, D.Min, CFRE is a Senior Vice President with Horizons.

Edited for St. Anna by Gary Arnold, CFS