Tax Break for Charitable Contributions to Nonprofits Could Be a ‘Lifeline’

Food banks and other services are needed more than ever, even as the public-health crisis cuts down on contributors and what they can afford to give
Credit: (AP Photo/Jeff Chiu)
Even as food banks and other charitable organizations are providing increased services on the front lines of the pandemic, they are losing revenue.

New Jersey’s nonprofits are receiving fewer donations even as their employees are serving on the frontlines of the coronavirus pandemic: A proposal to establish a state tax break for charitable contributions would provide them with a “lifeline.”

That was the message shared with lawmakers on Tuesday by a representative of the state’s nonprofit community who fully supports their push to create a tax deduction to reward those making donations to charities during the pandemic.

“The charitable community has been absolutely decimated by this crisis,” said Linda Czipo, president and chief executive of the Center for Non-Profits, an organization that represents the state’s charitable organizations.

“We’re facing loss of revenues … loss of donations. Many, many charities have lost many millions of dollars and have already had to lay off staff,” Czipo told members of the Senate Budget and Appropriations Committee.

State-sanctioned support

Bipartisan legislation that would establish the tax deduction for charitable contributions is one of several bills that have been introduced in recent weeks as lawmakers have sought to better support the efforts of the state’s nonprofit community.

“New Jersey’s nonprofit organizations have proven themselves time and again to be worthy of both our awe and support,” said Senate Minority Leader Tom Kean (R-Union).

“We watched as local community organizations across the Garden State rushed forward to support our residents’ needs after 9/11, superstorm Sandy, and today as we struggle with COVID-19,” said Kean, who is a primary sponsor of the tax-deduction bill.

New Jersey has been hit hard by the still-unfolding pandemic, with 140,743 confirmed COVID-19 infections and more than 9,500 fatalities, according to the latest official update from Gov. Phil Murphy’s administration.

New claims for unemployment benefits have also surged in New Jersey, as strict social-distancing measures ordered by the governor to slow the rate of infections have shut down many businesses deemed “nonessential.”

Demand for services spikes

Not surprisingly, the demand for services provided by food banks, food pantries and other charitable organizations has increased across the state, even as individuals and companies have been cutting back on charitable giving to help ease their own economic hardships.

To help ease the blow and encourage more giving during the pandemic, the bipartisan tax-break proposal would offer New Jersey residents a new write-off on their state income taxes for contributions they make to state-based charitable organizations during the health crisis. Right now, New Jersey belongs to a group of states that don’t offer a state-level income-tax deduction for charitable contributions, as the federal government allows for U.S. income taxes.

The proposed state-tax deduction would be capped at $20,000 for a married couple filing jointly, and $10,000 for single filers, according to the bill. The tax break would be offered as long as a public-health emergency remains in effect in New Jersey.

A fiscal analysis estimating revenue that would be sacrificed by the state if the tax break were to be enacted has yet to be prepared by the Office of Legislative Services. But the sponsors estimate that nonprofits would receive $30 in donations for every dollar of revenue that the state would forgo.

“By allowing donors to write-off charitable contributions on their taxes, we hope to boost the number of people who financially support these organizations,” said Sen. Troy Singleton (D-Burlington). “The help is needed now more than ever.”

Fiscal muscle

Across the state, there are more than 34,000 organizations that are registered with the federal Internal Revenue Service as 501(c)(3) nonprofits, and they employ an estimated 324,000 people, according to Czipo’s organization. New Jersey’s nonprofits also spend an estimated $42 billion annually.

As she testified in favor of the proposed tax break, Czipo said many charitable organizations are losing revenue even while seeing increased demand for services, many of which are being provided on the front lines of the pandemic.

“This bill would provide a very important lifeline to charities at a time when we’re all looking to them the most,” Czipo said.

Moments later, the legislation received unanimous support from the Senate committee in an 11-0 vote. And as they voted, some lawmakers said they would like to see the proposed tax deduction eventually made permanent.

Meanwhile, lawmakers in the Assembly also voted earlier this week on a separate piece of legislation that seeks to aid nonprofit organizations by offering more flexibility to those that have entered into contracts with the state to provide certain services. That bill would permit the state to waive penalties for not meeting contractual obligations during the health crisis and for up to six months after the state of emergency is lifted. It would also allow for a modification of contract terms to provide nonprofit organizations with more flexibility during the pandemic.

“Our nonprofits are no strangers to the difficulties the current state of emergency has presented,” said Assemblywoman Yvonne Lopez (D-Middlesex).

“Providing more flexibility under this legislation will give some much-needed breathing room, so that countless nonprofits can get back to the work of helping others,” said Lopez, a primary sponsor of the bill.