LGBTQ Orgs Must Cope with New Tax Law

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From food banks to churches to cancer research to LGBTQ organizations, the recently passed tax bill that was signed into law by President Donald Trump poses new financial challenges to non-profits that depend heavily on individual contributions. 

By increasing the standard deduction from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for couples, an estimated 33 million more people will choose the standard deduction over itemizing on their 2018 tax returns than they did in 2017.  For those who will not itemize, charitable contributions will no longer be written off.

Tim Delaney, CEO of the National Council of Nonprofits,  told NBC News   that several aspects of the plan are “disastrous” for the sector as a whole and cited estimates from the Tax Policy Center that the plan could result in $13 billion in lost revenue for nonprofits and more than 220,000 lost jobs.

Many LGBTQ groups are registered with the IRS as 501(c) (3) organizations, meaning that donations to these nonprofits are tax deductible and will continue to be so—except for those taxpayers opting for the standard deduction.  However, since the election of Trump, organizations have reported contributions from larger donors, which may mitigate potential losses.

A recent report by the LGBTQ think tank Movement Advancement Project found 39 of the leading LGBTQ organizations in the U.S. brought in $230 million dollars in revenue 2016, with more than 80 percent of the money going to 501(c)(3) organizations.

Individual contributions accounted for 35 percent of those organizations’ revenue, and the vast majority of individual donors (94 percent) were small donors who gave less than $1,000. These small donors are the ones who would most likely be disincentivized to donate by the doubling of the standard deduction, explains Delaney.

It is not only the mere election of Trump that has motivated donors but also his specific policies and actions, such as his attempt to ban transgender service members riled the LGBTQ community and allies. 

Matt Thorn, the executive director of the LGBTQ advocacy nonprofit OutServe-SLDN , told NBC News that tax incentives were the biggest drivers of donations but notes a shift.  “This year, in this climate, a lot of it has to do with the work we are doing. People are really generating their gifts based on the causes.”

To be sure, persuading donors to contribute based on the mission of the organization has always been the centerpiece of fundraising drives. The tax incentives added to the appeal. 

Now LGBTQ nonprofits (as well as nonprofits in general) must double-down their focus on mission-centric messaging to attract smaller donors.  Many LGBTQ organizations have seen a falloff in donations (and interest) once marriage equality was achieved, which created another challenge for these entities. 

There is so much more work remaining that is seemingly under the radar because these issues aren’t as glamorous as marriage equality.  Continued discrimination against LGBTQ people, homelessness among LGBTQ individuals, violence against members of the community particularly transgender individuals, bullying in schools, inequality in the juvenile justice and foster care systems, increase in hate crimes since the election of Trump, HIV/AIDS prevention and treatment—the list is long and daunting.

LGBTQ nonprofits provide vital services to their clients, especially marginalized populations and will require the funds to keep these programs running.  There will be more demand on these organizations because of a burgeoning LGBTQ youth population as well as a sharp increase in the number of LGBTQ elders—both groups depending on client-based services.  Communicating the organization’s mission and the rationale for the funds are essential to tackle the ongoing challenges.

Locally as well as nationally, LGBTQ nonprofits must strategize on how to mitigate the loss of individual contributions resulting from the new tax law.  Again, the mission must be the focus of any fundraising appeal.

Though it declined to specifically comment for this article, FreeState Justice announced in November the launch of the Maryland LGBTQ Legal Defense Fund to provide free legal services to those facing discrimination who could not otherwise afford representation.  

“The Maryland LGBTQ community continues to face troubling attacks and policies from the current federal administration,” FreeState Justice’s fundraising letter stated.

Tax Cuts and Jobs Act signed by President Trump

“We are not immune from the rescinding of guidelines protecting transgender students, condoning bigotry masked as religious belief, advocating in favor of discrimination in court, and targeting transgender service members.  Now is the time for our community to come together to confront vitriolic national rhetoric and defend equality in our state.  With the launch of this Fund, FreeState Justice is fighting back.”

Max Crownover, the new chapter president of PFLAG-Howard County,  agrees that the emphasis must be on the mission. 

“The message and the motivation has to be on the intangibles rather than the individual's tax benefit,” Crownover says.  “In the current sociopolitical climate, I believe PFLAG can convince like-minded people that contributing makes a difference—not just for the LGBTQ community, but also for our whole community and society. We are also working hard to make that difference very visible. With that in mind, we have kicked off a strategic planning initiative to identify how we can have a more significant impact in Columbia, Howard County, and beyond.”

Others see this tax law and other dangerous policies by the Trump administration potentially harmful to LGBTQ youth.

“We know that lower income households may lose the incentive to give if they can no longer write-off their donation,” says Jabari Lyles, executive director of GLSEN Maryland. 

“We do not expect the benefits of the tax breaks given to high income households and large corporations to ‘trickle down’ to us, as it has never trickled down to anyone. This could mean job losses or weakened programmatic impact.”

Lyles adds, “We are hopeful our supporters will continue to give due to the dire nature of our work and especially in response to the dangerous decisions this administration makes regarding LGBTQ youth.”