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Tax Codes Changed, Giving Didn't

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FIVE years ago, the 1986 Tax Reform Act was being heralded as a catastrophe for charities, with nonprofit groups such as museums expected to lose a collective $11 billion due to fewer incentives in the new law for giving. Five years later, nonprofits are experiencing business as usual. Many nonprofits are facing budgetary difficulties because of the recession, but no one talks about that momentous change in the tax laws. Maria Giliotti, development director at the Philadelphia Museum of Art, noted that the 1986 tax code has had "no effect on our cash contributions or gifts of objects. They're continuing to rise." Larry TerMolen, vice president of development at the Art Institute of Chicago, also claimed that "we're ahead of 1986 in both cash and objects."

The new tax code was believed by some to threaten nonprofit groups and institutions by lowering the top marginal tax rate from 50 percent to 31 percent. This reduced the charitable deduction for every dollar donated from 50 cents to 31 cents for those in the highest income brackets. It also eliminated the non-itemized deduction for charitable contributions.

Independent Sector, a Washington-based lobbying group for nonprofits, which had calculated the $11 billion drop-off in giving, predicted a $6 billion loss in gifts by taxpayers who do not itemize deductions. This loss was never realized.

Results over the past five years appear to bear out the view of tax reformers that tax considerations do not figure in individuals' decisions about giving. It had long been recognized that corporate giving, for instance, is more tied to a variety of internal factors: a company's sense of social or community responsibility, a high-level executive within the organization who directs contributions to a certain area, or the prosperity of the business.

A study conducted by the Rockefeller Brothers Fund and financed by Independent Sector also concluded that, as long as they have disposable income, Americans will regularly make contributions to charities.

"There are countries all over the world where no tax breaks exist for giving, and people still do a lot of giving," noted Stephen E. Weil, deputy director of Washington's Hirshhorn Museum.


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