MCA opposed three parts of the federal tax bill recently passed by Congress and signed by the President. While the nonprofit community succeeded in eliminating two provisions, the final version of the bill could negatively impact charitable giving. See below for other provisions that may affect artists and nonprofit arts and culture organizations:
- WIN: We opposed striking low-income artist housing from the list of qualified groups who can benefit from federally subsidized low-income housing (the kind of work done by ArtSpace, based in Minnesota). This provision was defeated.
- LOSS: We opposed reducing tax incentives for charitable giving, but unfortunately these provisions remained in the bill. The bill increased the standard deduction to $12,000 for individuals and $24,000 for married couples filing jointly so that many more Americans will no longer itemize deductions on their tax returns. Some donors are motivated by the deduction, and since they will no longer be able to deduct their charitable giving, may reduce giving in the future. Itemizers are far more likely to donate to charity than non-itemizers (83% vs. 44%). It is estimated by the Independent Sector that this will reduce charitable giving by 1.7% to 4.6%, a national reduction of between $4.9 to $13.1 billion. In addition, the estate tax was reduced by doubling the exemption, which may have the effect of reducing the incentive to make donations to charities in estate plans. It is estimated that this change will reduce charitable bequests in 2018 and later.
- WIN: We opposed undermining the guarantee of nonpartisanship. The House bill included language that would allow nonprofits and churches to participate in partisan politics and become conduits for dark political money. This provision was defeated on technical grounds. (Partisan politics, which is funding and advocating for the election or defeat of candidates or political parties, is not allowed in nonprofits, unlike issue advocacy which is what we do together through MCA).
Other provisions that may affect artists or nonprofits in the final bill:
- WATCH CAREFULLY AND ACT WHEN ASKED: By dramatically increasing America’s budget deficit by over a trillion dollars, pressure has been created for massive cuts in next year’s budget, which could affect funding for the National Endowment for the Arts (NEA), Institute for Museum and Library Services (IMLS) and other cultural agencies. While President Trump already has proposed eliminating the cultural agencies, in the current year budget Congress voted to maintain more or less stable funding, so the hope is that Congress will continue to protect the cultural agencies. We will have to fight to maintain cultural funding on the federal level.
- CORRECTION: OF CONCERN FOR ARTISTS: Self-employed artists should talk to their accountants about the new tax reform law and the changing landscape for many deductions for business expenses. Generally, if you file Schedule C and deduct expenses for your arts business, you may want to consider loading up on those expenses in the last hours of 2017 while they are still deductible at current tax rates. Some of these are likely to have lower tax rate benefits in 2017 and others (like entertainment) might be more restricted or entirely nondeductible.
about the final bill’s elimination of many deductions for business expenses. Generally, if you file Schedule C and deduct expenses for your arts business, you may want to consider loading up on those expenses in 2017 while they are still deductible. You have only a few days to do this, however.
- MORE NONPROFITS MAY HAVE TO PAY UBIT: Tax-exempt nonprofits that operate businesses unrelated to their charitable mission must pay an unrelated business income tax (UBIT) on their net unrelated business income. Under prior law, a nonprofit that operated multiple unrelated businesses could deduct the losses from one business from the profits from another to determine the amount of net unrelated business income subject to UBIT. The TCJA does not allow this. Starting in 2018, each unrelated business must determine its net income without regard to losses from other unrelated businesses. As a result, it’s likely that more nonprofits will have to pay UBIT. (See this article from Nonprofit Quarterly that explains UBIT).As more analysis of the bill become available, we will provide updates on potential impacts of the bill on artists and arts organizations.
Thank you to the many artists and arts advocates who took action with us on this bill.
Celebrating 10 Years of Legacy
The Legacy amendment, created and passed by MCA and environmental advocates, placed the arts into Minnesota’s constitution and guaranteed funding for 25 years. You can help us celebrate the 10th anniversary of that historic day by becoming a member of MCA today so that we can continue to advocate for the arts both locally and nationally and make sure the arts will have a seat at the Legacy table for years to come.
With your membership and support MCA will continue that Legacy. Your membership helps MCA to spread the good news on how Legacy funds are being used effectively in all 87 Minnesota counties. We make sure the arts aren’t a partisan issue and that legislators from both sides of the aisle continue to support the arts.
Because of your support we’ve had a huge impact with the passage of the Legacy Amendment:
- State arts funding at the Legislature has tripled since 2008
- MCA has produced over 50 arts economic impact studies through Creative Minnesota
- The documented economic impact from the arts in Minnesota has grown from $838.5 million to over $2 billion since the passage of the Legacy Amendment
- Annual Attendees at arts and culture events has jumped by 4.5 million a year since passage of Legacy
Joining MCA means you value arts funding and want to ensure our continued success on behalf of the arts at the Legislature. Other states look to Minnesota as the national leader in arts advocacy and have asked us to share how they too can pass a Legacy Amendment. They see a state with the nation’s longest serving arts advocacy organization in MCA. But most importantly they see you and all the arts advocates who fight every year for our many victories. Thank you for joining me in becoming a member today.
Forward together in the arts,
MCA Membership Chair
MCA is a 501c(4) nonprofit organization, which lobbies for & influences legislation. Dues/Membership payments are not tax deductible.