MANKATO — While the fiscal cliff circus plays out in Washington, nonprofits are left wondering how their worlds will change depending on what measures are used to fix the problem.
If a deal can’t be reached to extend the Bush-era tax cuts for the middle class, giving to charities that rely on a lot of small donations could get hit hard. And if tax rates to go up on the top earners — or those top earners see their tax situation altered by the removal of so-called tax loopholes — all charities could suffer.
“The fiscal cliff poses real challenges to local nonprofits and the vitality and quality of life that we all enjoy in Mankato,” said Vickie Apel of the MRCI Foundation. “People give from the heart, but tax incentives make giving more heartfelt.”
One of the things being talked about most is a cap on the amount of charitable giving that can be deducted on taxes. Both President Obama and challenger Mitt Romney had such a cap as part of their plan to solve the fiscal cliff problem. Now that approach is still being discussed.
“If Congress takes away charitable giving tax incentives by capping charitable deductions, who then will be able to give?” Apel said. “MRCI Foundation receives more than half of its Annual Appeal gifts at year end. Clearly people are thinking about their charitable deductions and the tax advantages. And again, if people are using their usual but now proposed limited or capped deductions, such as mortgage interest, there is little left for nonprofits.”
Jon Pratt, executive director of the Minnesota Council of Nonprofits, said he was in Washington earlier this week along with hundreds of other nonprofit leaders. Their goal was to meet with lawmakers and get their message across that any fiscal cliff solution that uses nonprofits to shoulder some of the burden will hurt both nonprofits and the people they serve.