“GOP’s new tax law encourages campaign donor secrecy”

Ellen Aprill oped in the Hill:

As a result of these changes, estimates of the percentage of taxpayers who will itemize has fallen to somewhere between 5 percent and 10 percent. The vast majority of taxpayers will benefit more from taking the standard deduction. Those taxpayers with income between $100,000 and $200,000 will show a particularly large shift from itemizing to taking the standard deduction, dropping from over 50 percent to under 20 percent.

The nonpartisan Tax Policy Center estimates that charitable contributions will decline by about $12.3 billion to $19.7 billion per year. Charitable organizations most dependent on the middle class, which includes organizations that provide social services, are now likely to have few itemizers among their donors.

A number of nonprofit law experts believe that those interested in social services and other activities supported by the middle class may well decide to form new section 501(c)(4) organizations or encourage contributions to an existing section 501(c)(4) organization. (The National Rifle Association, the Sierra Club and the ACLU are existing among the many groups that have both 501(c)(3) and 501(c)(4) arms).

For donors not itemizing the deductions, there is no tax disadvantage to giving to a section 501(c)(4) organization instead of a section 501(c)(3) entity. But there are advantages. Tax-exempt section 501(c)(4) organizations can not only do good and lobby legislatures freely on issues important to them, but give considerable support to candidates for election who share their positions on key issues.

Thus, given the coming conflict in Congress over the size and scope of the social safety net, the ability to engage in not only in unlimited lobbying but also and especially campaign intervention through a section 501(c)(4) social welfare organization will hold enormous, perhaps irresistible, appeal, as such organizations will undoubtedly explain in fundraising. Recent scholarly work has underscored the importance of fundraising efforts by 501(c)(4) organizations.


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