Damper on DonationsCharities worry as tax overhaul removes incentives for giving...

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KEN SCHACHTERBYkenneth.schachter@newsday.com

Long Islandcharities—partic-ularly those relyingon largenum-bers of small donors— are brac-ing for a decline in 2018 individ-ual donations, officials say.

The reason: The sweeping taxoverhaul signed in December byPresident Donald Trump re-

duces or eliminates key financialincentives for many individualsearning middle incomes to giveto charity.

Theresa Regnante, presi-dent and chief executive ofUnited Way of Long Island,said that hearts may favor giv-ing, but financial resourcesdictate the terms. Individualswill give less, she said.

“Long Islanders will behard-pressed with discre-tionary income,” she said.“Charitable dollars typicallyfall into that bucket. Most peo-ple give because they have thecapacity to give.”

Charities — some of whichsay they already have beenwarned by donors to expectlower contributions — say they

may respond by focusing moreon corporations or high-incomeindividuals, who will benefitmore from the tax overhaul. Oth-ers say the changesmake itmoreimportant for them to connectwithdonors over the importanceof their cause.

“We do expect a drop in do-nations because of” the newlaw, said Robert Misseri, presi-

dent and founder of Guardiansof Rescue, a Smithtown animalrescue and welfare organiza-tion. “We’d be lying if we saidwe weren’t worried about it.”

Misseri said his organizationdepends on smaller donorsrather than wealthy contribu-tors and grants.

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The Tax Cuts and Jobs Act,which rewrote the tax code, re-tains deductions for charitabledonations.

But, importantly, it nearlydoubles the standard deduc-tion. That means that individu-als or married couples candeduct $12,000 or $24,000 ontheir tax returns for 2018 with-out itemizing any deductions.More people are expected touse the standard deductionrather than itemize.

Because these people arenot itemizing their charitablegifts, their tax payments won’tbe reduced if they donate to acharity.

Under the new law, only thetop 5 percent of tax filers na-tionwide will have sufficientitemized deductions to claim acharitable deduction, accord-ing to an analysis by Philadel-phia law firmMorgan Lewis &Bockius LLP, which has servedas tax counsel to the TrumpOrganization.

That projection compareswith 24 percent of taxpayerswho reported a charitable gifton their 2015 tax returns, accord-ing to an analysis of IRS data byTheChronicle of Philanthropy.

Income growth laggingThe tax changes come at a

time of slow income growth onLong Island as the economycontinues to pivot towardlower-paying service-sectorjobs.

Average annual wages for in-dividuals on Long Island (notadjusted for inflation) have in-creased from $52,060 in 2012to $56,670 in 2016, an averagegain of 1.8 percent a year.

And charitable donationshere have seesawed in recentyears. Long Islanders donated$2.80 billion to charities in 2015,according to the latest datafrom the Internal Revenue Ser-vice. That was a decline from$2.87 billion in 2014. Donationswere $2.58 billion in 2013 and$2.70 billion in 2012.

The not-for-profit sector ac-counts for a large and growingslice of Long Island’s econ-omy, even apart from the ser-vices it provides.

John Rizzo, economist forthe Long Island Association,the region’s largest businessgroup, calculates that the not-for-profit sector accounted foralmost 161,000 Long Islandjobs in 2016, 14.7 percent oftotal private-sector jobs. Em-ployment in the sector grew19.5 percent in the prior 10years, outpacing the 3.2 per-

cent employment growth atfor-profit businesses, accord-ing to New York State LaborDepartment data.

Not-for-profit salaries (notincluding benefits) jumped 26percent in that period to $8.6billion, almost 14 percent ofthe total for private industry.

No one knows precisely howmuch the tax overhaul will af-fect donations in 2018, but ex-perts onLong Islandandnation-ally forecast a downturn.

“I don’t doubt for a secondthat charitable giving will beaffected,” said Tony Basile, asenior accounting and tax

professor at Hofstra Univer-sity and president of the Nas-sau County chapter of theNew York State Society ofCPAs. “There’s no doubt thatthere will be less resourcesand charitable organizationswill have to be more creativein their fundraising.”

Hadar Susskind, senior vicepresident of government rela-tions for the Arlington, Vir-ginia-based Council on Founda-tions, said that “billions of dol-lars” will be lost to not-for-prof-its because of the new tax law.

“We’re not the pharmaceuti-cals industry,” he said. Charities

won’t suffer “a loss in profit . . .It’s fewer beds in charitable hos-pitals. It’s fewer programs for re-turning veterans.”

Randi Shubin Dresner, chiefexecutive and president of Is-land Harvest Food Bank, ahunger relief organization, saidseveral major individual con-tributors have contacted theBethpage not-for-profit to warnof possible reductions in giving.

One said that in some caseshe was cutting his gifts in half.

“It’s not just Island Harvestthat’s impacted, Dresner said.“It’s other organizations aswell.”

Some charities are appeal-ing for legislative relief.

Suzanne LeBlanc, presidentof the Long Island Children’sMuseum in Garden City, saidshe will be meeting with NewYork lawmakers on MuseumsAdvocacy Day in February todiscuss potential solutions. Oneproposal: allowing a charitablededuction for all taxpayers.

The business sourceAn alternative source for

charitable contributions isbusinesses, which made outwell in the tax overhaul. Thetop tax rate for corporationsfell from 35 percent to 21 per-cent, and some partnerships,limited liability companiesand sole proprietorships got anew 20 percent deduction onqualified business income.

That should leave manybusinesses flush with cash, al-though it will give them less in-centive to lower their tax billswith charitable donations.

Melville-based medicalproducts distributor HenrySchein Inc. has sought to incor-porate philanthropy into itscorporate culture.

In 2016, Henry Schein,whose revenue of $11.6 billionthat year makes it Long Is-land’s largest public company,made $10.5 million in cash andin-kind donations. It said itdoes not expect to change thelevels of its donations basedon the new tax law.

Going after corporate sup-port is a good idea “in theory,”said Misseri of Guardians ofRescue, but “so many organiza-tions are going after that cor-

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Predicting aPINCH

Charities expect people to donate less under the newtax code, which could mean less help for those in need

United Way CEO Theresa Regnante: Long Islanders will be hard-pressed for discretionary income.

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CEO Randi Shubin Dresner said several major individual contributors have warned her hunger relief organization of possible reductions in giving this year.

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porate sponsorship and theycan support only so many.”

The same holds true forwealthy donors who mightclear the threshold for a deduc-tion. “It’s a struggle,” he said.

Charities that rely less on in-dividual donations have lessconcern.

Health care giant NorthwellHealth, based in New HydePark, is easily Long Island’slargest not-for-profit — it has66,000 employees and is thelargest private employer in thestate. Cash donations in 2017accounted for more than $110million out of a budget ofabout $10 billion.

Brian Lally, senior vice presi-dent and chief development of-ficer, said some donors “front-loaded” their gifts to take ad-vantage of 2017 tax provisions,but he said that he doesn’t ex-pect the tax law to have “ahuge impact” though he isn’tcertain.

At Bethpage-based Adults &Children with Learning andDevelopmental Disabilities,the tax law is not a major con-

cern because most fundingcomes from governmentsources, and less than 10 per-cent comes from fundraising,said Aimee Keegan, directorof development and commu-nity relations.

Widening the focusBut other charities are re-

thinking their fundraisingstrategies in response to thenew tax landscape.

Historically, United Way,which funds a variety of chari-ties, has conducted workplacecampaigns. On Long Islandthe not-for-profit raises about$5 million of its $16 million an-nual budget from individuals,with the rest coming fromfoundations, corporations andgrants.

Regnante said the Long Is-land unit has about 25,000 indi-vidual donors, but she isheightening her focus onother types.

“We have to have a muchmore aggressive plan to workwith corporations, businessesand foundations, because it is

more likely that they’ll havemore assets than individuals,”she said. “It’s not going to bean uptick year for individuals.You have to go where the wellis fuller.”

Tony Di Spigno, a PortWashington resident who is se-nior vice president of resourcedevelopment for Columbia,Maryland-based EnterpriseCommunity Partners Inc., aprovider of affordable hous-ing, said some higher-incometaxpayers will continue to takecharitable donation deduc-tions and appeals will con-tinue to carry the message thatdonations are “tax deductibleto the full extent of the law.”

“Large donors like to tellpeople at a cocktail party thatthey’ve given so much moneyto XYZ,” said Di Spigno, whohas served in the fundraisingarms of Habitat for HumanityInternational and OutwardBound USA. “You should getmore big gifts.”

But Di Spigno said chari-ties should focus on theirmission and its impact when

communicating with lesswealthy contributors.

“For smaller donors we em-phasize that we have a causehere that’s solvable,” he said.“Nonprofits have to stress thatit’s about the cause and yourgift can make a difference.”

Some charities askeddonors to increase their giftslast year, when tax treatmentwas more favorable.

OnDec. 29 Island Harvest is-sued a last-minute email pleafor donors to accelerate theirdonations before the end of2017.

“A special gift in 2017 can as-sist so many of our neighborsliving in hunger in 2018,” theemail said.

That approach is now over.The Rev. Gideon Pollach,

rector of St. John’s EpiscopalChurch in Cold Spring Harbor,said the timing of the tax law’spassage caught the church“flat-footed,” coming so closeto Christmas.

“There was a level of exhaus-tion from our own program-ming,” he said. “We couldn’t re-

spond in a meaningful way.”

Uncertainty aheadThe rector said the tax law

“introduces an incredibleamount of uncertainty” as thechurch seeks to run programsincluding food drives, clothingdrives and anti-opioid-abusecampaigns.

Edward McWilliams, taxmanager at Cerini & AssociatesLP, an accounting firm thatserves many Long Island not-for-profits, said someofhis indi-vidual clients may donate at alower level, but others will reapbenefits from the tax law andfeel “flushwith cash.”

“With a lot of my clients,there was a feeling . . . thatcharitable donations beingdeductible was a cherry ontop,” he said. “They lost thecherry on top.”

But Pollach and leaders ofother not-for-profits see thefundraising climate in moredire terms.

“We’re expecting the worstand hoping for the best,” hesaid.

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BYTHENUMBERSLong Island charitabledonations

$2.80B2015

$2.87B2014

$2.58B2013

$2.70B2012Source: Internal Revenue Service

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