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Arts and Culture Public Officials Breakfast 2015

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The Federal Tax Bill…And Us.

Over the weekend, a tax reform bill was passed by the U.S. Senate. Now, a conference committee has been charged with reconciling that bill with one previously passed by the U.S. House of Representatives. The objective is to produce a bill that the President can sign before December 25. There are a number of provisions that affect those of us working in nonprofits and public service. The Arts Action Fund has a helpful analysis of the bills and how the arts could be affected. We wanted to make sure that you are aware of a few of those provisions and to provide you with some resources to find out more information.

1.)    The bills are likely to affect charitable giving due to doubling of the standard deduction. The charitable deduction is available only to individuals who itemize deductions on their federal return. Both the House and the Senate bills call for an increase in the standard deduction, which would further limit the pool of individuals able to deduct charitable donations from their returns – which has long been an incentive for charitable giving. CPAC’s Culture Pulse report on arts and culture nonprofits in Cuyahoga County showed that 48% of all contributed support from 2011-2015 came from individuals. Further limiting access to charitable giving could have serious detrimental effects on arts and culture nonprofits.

2.)    Proposed Elimination of the State and Local Tax Deduction. The State and Local Tax Deduction allows individuals who itemize deductions on their federal income tax returns to deduct state and local real estate and property taxes as well as state income taxes and general sales taxes. Income taxes fund the majority of state and local government. And we rely on property taxes to fund many significant assets to our region – such as schools, libraries, parks, health and human services, port, and etc. Even the Regional Arts and Cultural District Code that governs public funding for arts and culture in Cuyahoga County allows for a property tax as a possible revenue stream. The elimination of the state and local tax deduction has important implications for Ohioans, who could face a higher tax bill. That could in turn create more pressure on state and local governments that rely on those taxes.

3.)    Proposed Repeal of the Johnson Amendment. The Johnson Amendment is a provision of the U.S. Tax code that prohibits 501(c)3 nonprofit organizations from endorsing or opposing political candidates. The current Johnson Amendment protects nonprofits from being used for partisan politics.

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Categories: advocacy, public policy, tax

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