A Real Example of The Effect of Charity Tax Breaks

By Gary Snyder
Michigan’s new tax laws have led to a significant drop in donations to nonprofits in Michigan. Contributors considered how Governor Rick Snyder’s 2011 tax policy changes eliminated the tax breaks for donations to certain nonprofits. Snyder said he needed to eliminate the tax credits to help balance Michigan’s budget.

The Food Bank Council of Michigan, which represents food banks across the state, said there’s been an average drop of 29% in donations specifically of $200; and a 47% decrease in donations of $400. “I think the donor who would normally donate the larger amount, just donated a lesser amount, because there wasn’t that incentive,” said Kareemah El-Amin, Food Bank Council of Michigan executive director.

WTVS Detroit Public Television also reports a drop from some categories of donors affected by the tax credit change, contributing to flat year-over-year giving, said Dan Alpert, senior vice-president for development and communications.

Donations to the Detroit Rescue Mission, said its CEO Chad Audi, have dropped from $6 million in 2011 to $5.4 million in 2012, a 10% drop that Audi attributes to the tax credit’s elimination. Nixing the tax credit, said Audi, has made donors “not give us as much money as they used to.” “The tax credit has impacted our donations to be decreased, especially from the larger donations,” said Audi. “We depend on people who donate to us. It will definitely impact the way they can allocate their dollars to helping the organization.” 

Rob Collier, who leads the Michigan Council of Foundations, said donations are down 28% overall for community foundations across Michigan. “Two community foundations got letters from donors that said because the state isn’t giving them a credit, they’re not going to give,” Collier said. “We anticipate that the drop will be more significant this year. There’s anecdotal talk that many folks made contributions this year, not realizing the credit was gone.” 

Charities overall are looking at another possible tax hit. President Barack Obama, in the budget proposal he released earlier this month, advocated cutting the top federal income tax deduction on charitable contributions from 35% to 28%. For some donors, that would mean a $280 tax credit for every $1,000 donated, instead of $350 now.

The Community Foundation for Southeast Michigan, which makes grants and works with nonprofits across seven counties, saw a 40% drop in donations to endowments for the 185 nonprofits with which they partner. Affected organizations range from the Berkley Public Library to domestic violence shelter HAVEN in Oakland County to the Arab American Museum in Dearborn, said Theresa Fraley, the communications director for the foundation. “That’s the behavior change among donors,” Fraley said. (freep)

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