Nonprofits Combine Voices to Speak about Tax Reform in Utah

19 August 2019 Published in News & Updates

On Monday, August 19, 2019 UNA presented the following letter to the Utah Tax Restructuring and Equalization Task Force. This letter, signed by 83 Utah nonprofits, asks the task force to mitigate the effect of tax reform on Utah's charitable nonprofits. 

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Recommendations to the Tax Restructuring and Equalization Task Force from Utah’s Charitable Nonprofits
August 19, 2019

Senator Lyle W. Hillyard
Utah State Senate District 25
595 S Riverwoods Parkway, Suite 100 Logan, UT, 84321

Representative Francis D. Gibson
Utah State House District 65
208 S. 680 W. Mapleton, UT, 84664

RE: Mitigating the Effects of Tax Reform on Utah’s Charitable Nonprofits

Dear Co-Chairs Senator Hillyard and Representative Gibson:

We, Utah’s charitable nonprofits, need your leadership to ensure that unfair tax burdens are not placed upon us so that Utah continues to be the top giving state in the nation. Without your action, Utah’s charitable nonprofits face a future marked by declining individual giving, compounded by potentially unfavorable State and Federal tax laws.

Tax reform will drive future economic growth, determine what services the state provides, impact how taxpayers spend their money, and directly influence the resources available to our charitable nonprofits to complete their missions in service of Utah’s communities. As emphasized in the June statement to the task force, we provide programs that are important to you and everyone in the state.

Nonprofits are everywhere. You worship in them. A person you know may utilize them for their opioid addiction. You may attend a fine arts performance. You or someone you know receives life-saving medical care in them. You take your kids or grandkids to a museum. You volunteer to feed the homeless with them. You adopt a rescue animal from them. Utah's nonprofits do all of this and more, because they matter to those they serve, and they should matter to the state too

Utah’s nonprofits are an important part of Utah’s economy. In 2018, the number of nonprofits was 10,014, earning a combined $14.2 billion in gross revenue and holding $30 billion in assets (dollar figures are from those who reported). Close to 99% of them are small organizations earning below $500,000 in revenue. Even though there has been growth in numbers and revenue, federal tax law changes and national giving studies released in July of this year complicate this impressive picture. The largest decrease in tax liability was given to people making over $250,000, but those making less saw a significantly lower or negligible decrease. The percent of taxpayers itemizing their taxes shrunk from 30% to 10% because of the higher federal standard deduction, resulting in $54 billion in charitable donations not itemized and low-and-middle income households effectively not claiming charitable tax deductions. This has resulted in Foundation and corporate giving increasing by 4.7% and 2.9% (adjusted for inflation) respectively, with individual giving declining by 3.4%, (adjusted for inflation), and overall giving declining by 1.7%, (adjusted for inflation), for a total of $427.71 billion for the sector in 2018.

Collectively, we are concerned that state tax reform will compound declining individual charitable donations and harmful federal tax policies. Without favorable state tax policies to redirect the individual giving trend, our charitable nonprofits will have to seek more funding from less sources. If state funding, in the form of grants and contracts is reduced or eliminated, more community needs will go unmet. Furthermore, any increase in taxes will constrain our already strained budgets that we work hard for. The consequence of not addressing these concerns will mean fewer resources available to help you, your families, and all Utah communities.

To support what we do as charitable nonprofits for Utah, we call upon both of you and members of the Tax Restructuring and Equalization Task Force to include the following recommendations in tax reform legislation:

1. Protect Existing State Charitable Nonprofit Tax Exemptions: Charitable nonprofits are exempt from various provisions under Federal and State tax law. Although exemptions result in a loss of tax revenue for the government, the benefits of providing these tax exemptions to our organizations outweigh lost tax revenue. We can continue providing needed services in all of Utah’s communities with these exemptions. Losing or eroding any of the tax exemptions would threaten that. We call upon you to protect existing charitable nonprofit tax exemptions in State law.
2. Continue Providing Resources to Charitable Nonprofits Working with the State: The State legislates that its agencies carry out specific duties. Yet oftentimes these agencies rely on charitable nonprofits to complete those mandates. A reduction in state funding will limit the intended impact of services like, affordable housing and homeless resources, work trainings, education programs, arts and cultural activities, and much more. We call upon you to continue providing grants and contracts, with the needed funding, for charitable nonprofits working with the state to fill the unmet needs of Utah’s various communities.
3. Decouple the State Unrelated Business Income Tax (UBIT) from the Federal UBIT: Many of us rely on unrelated business income to fund our services. We understand the need for unrelated business income taxes, but UBITs can be burdensome if the rate is set too high. The Tax Cuts and Jobs Act of 2017 placed a 21% UBIT on nonprofit employee transportation benefits and disallowed tax-exempt organizations from combining all unrelated business income streams for tax purposes. While there are bipartisan bills in Congress to repeal those provisions, there is no guarantee those will pass anytime soon. This year, Hawaii and Minnesota acted to decouple their UBIT laws from Federal UBIT laws on nonprofit transportation benefits. We call upon you to do the same and decouple the State UBIT from the Federal UBIT on nonprofit transportation benefits, and if applicable, match the UBIT rate to the new income tax rate.
4. Include a Non-Itemized Charitable Tax Deduction: Less people giving and fewer people itemizing their taxes means less money available for nonprofits and the communities they serve. In support of their nonprofit communities, states have already acted to bolster nonprofit revenue. Colorado has had a nonitemized charitable tax deduction since 2005 that kicks in when an individual’s total giving amount is over $500. In June, Arizona passed and signed into law a non-itemized charitable tax deduction that makes 25% of an individual’s total charitable giving amount eligible for the deduction. Additional state legislatures are also considering non-itemized tax deductions. We call upon you to follow suit and include a non-itemized charitable tax deduction that incentivizes giving by all Utahns to Utah’s charitable nonprofits.

We thank both of you and members of the Tax Restructuring and Equalization Task Force for considering the needs of Utah’s charitable nonprofit community. Please know that we are ready to provide examples of our work, answer questions, and promote passage of legislation that includes these recommendations.

CC:

Senator Curtis S. Bramble
Utah State Senate District 16

Senator Kirk A. Cullimore
Utah State Senate District 9

Senator Lincoln Fillmore
Utah State Senate District 10

Senator Karen Mayne
Utah State Senate District 5

Representative Joel K. Briscoe
Utah State House District 2

Representative Tim Quinn
Utah State House District 54

Representative Mike Schultz
Utah State House District 12

Representative Robert M. Spendlove
Utah State House District 49

 Mr. Gary Cornia

Ms. Kristen Cox

Mr. M. Keith Prescott

Mr. Steve P. Young

Signatories (UPDATED AUGUST 22, 2019)
Action Utah 
AdventureVet 
Bad Dog Arts 
Canyonlands Field Institute 
CAPSA 
CenterPoint Legacy Theatre 
Clever Octopus Inc. 
Code Shelter 
Community Action Partnership of Utah 
Comunidades Unidas 
Easterseals--Goodwill Northern Rocky Mountain Inc. 
English Skills Learning Center 
Epicenter 
Food and Care Coalition 
Friends for Sight 
Friends of the Moab Folk Festival 
Golden Rule Project 
Good Deed Revolution 
Historic Draper Playhouse 
Holy Cross Ministries 
Humane Society of Utah 
Iron County Care & Share 
Kids Who Count 
Lillies of The Field 
Memory Matters Utah 
Midwives College of Utah 
Mundi Project 
National Federation of the Blind of Utah 
National Tongan American Society 
Neighborhood House 
Nonprofit Legal Services of Utah 
Northeastern Utah Avian Education Center 
Ogden Nature Center 
Park City Community Foundation 
Peace House 
Pioneer Craft House, Inc. 
Pioneer Theatre Company 
Playworks 
Recycle Utah 
Rescue Mission of Salt Lake 
Ride with Respect 
Ririe-Woodbury Dance Company 
RiteCare Utah 
Root for Kids 
RRCI 
SALT Contemporary Dance 
Senior Charity Care Foundation 
Slow Food Utah 
Springville Museum of Art Association 
Spy Hop Productions 
Team Utah Snowboarding, Inc. 
The Christmas Box International 
The Community Education Partnership of West Valley City, Inc. 
The Epilepsy Foundation of Utah 
The Family Support Center 
The Shimmer Sparkle Shine Project 
The Sugarhouse Community Council 
The Utah Clean Air Partnership (UCAIR) 
Treehouse Children's Museum 
Umbrella Theater Company 
Utah Academy of Family Physicians 
Utah Afterschool Network 
Utah Arts Festival 
Utah Association for the Education of Young Children 
Utah Children's Theatre 
Utah Classical Guitar 
Utah Development Academy 
Utah Filmmakers Association 
Utah Food Allergy Network 
Utah Food Bank 
Utah Head Start Association 
Utah JumpStart Coalition 
Utah Museums Association 
Utah Nonprofits Association 
Utah Open Lands 
Utah Operation Lifesaver 
Utah Public Health Association 
Utah Rivers Council 
Utah Society for Environmental Education 
WabiSabi 
Warm Springs Alliance 
Weber Pathways 
Wild Utah Project 
Wildlife SOS 
YMCA of Northern Utah 

References

Albrecht, L. (2019, July 11). Americans slashed their charitable deductions by $54 billion after Republican tax-code overhaul. Retrieved from https://www.marketwatch.com/story/americans-slashed-their-charitable-deductions-by-54-billion-after-trumps-tax-overhaul-2019-07-09

Blackbaud Institute. (2019, February). Generous Donors Continue to Grow Philanthropy. Retrieved fromhttps://institute.blackbaud.com/wp-content/uploads/2019/04/charitable-giving-report-2018-infographic.pdf

Giving USA. (2019, June 18). Giving USA 2019: Americans gave $427.71 billion to charity in 2018 amid complex year for charitable giving. Retrieved from https://givingusa.org/giving-usa-2019-americans-gave-427-71-billion-to-charity-in-2018-amid-complex-year-for-charitable-giving/

National Council of Nonprofits. (2019, June). Federal Charitable Giving Incentive. Retrieved fromhttps://www.councilofnonprofits.org/trends-policy-issues/federal-charitable-giving-incentive

National Council of Nonprofits. (2019, June). State Charitable Giving Incentives. Retrieved fromhttps://www.councilofnonprofits.org/trends-policy-issues/state-charitable-giving-incentives

The NonProfit Times. (2019, June 18). Giving USA: Overall Philanthropy Increased Despite Decline From Individuals. Retrieved fromhttps://www.thenonprofittimes.com/fundraising/giving-usa-overall-philanthropy-increased-despite-decline-from-individuals/?utm_source=Full+NPT+Active&utm_campaign=199cd2c80f-EMAIL_CAMPAIGN_2019_06_06_02_38_COPY_01&utm_medium=email&utm_term=0_639f323152-199cd2c80f-96884483&mc_cid=199cd2c80f&mc_eid=b27d625701

Utah Economic Council & Utah Nonprofits Association. (2019, January). Governor's Economic Report. Retrieved fromhttps://utahnonprofits.org/images/pdfs-doc/2019_ERG_Nonprofit_Chapter.pdf  

WRAL. (2019, July 30). Nonprofits nervous as giving declines with new tax law :: WRAL.com. Retrieved fromhttps://www.wral.com/nonprofits-nervous-as-giving-declines-with-new-tax-law/18540196/