Congressional and White House leaders announced their plans for tax reform at the federal level. A preliminary analysis of their road map includes:

• Doubling the standard deduction. This would lead to tax cuts for many low- and middle-income individuals and families. It also could have the unintended consequence of eliminating tax incentives for charitable giving for most Americans.
• Simplifying individual income taxes by consolidating seven tax brackets into three brackets. This would likely simplify tax filings for many Americans and could lead to tax cuts for individuals and families with relatively high incomes (although the blueprint allows for the possibility of “an additional top rate [for] the highest-income taxpayers to ensure that the reformed tax code is at least as progressive as the existing tax code and does not shift tax burden from high-income and lower-and middle-income taxpayers”).
• Eliminating various tax breaks. The framework would maintain deductions for charitable contributions and mortgage interest but eliminate many other deductions, exemptions, and credits, including the deduction for medical expenses.
• Eliminating the estate tax. Historically, many wealthy Americans have made large bequests to nonprofits or established grant-making foundations as part of their estate planning. The repeal of the estate tax could reduce incentives for these large investments in the work of charitable nonprofits.
• Lowering corporate income tax rates. The framework would reduce the corporate income tax rate to 20 percent and reduce maximum tax rates for small businesses to 25 percent. This would not affect most charitable nonprofits, since 501(c)(3) organizations are generally exempt from paying federal income tax. However, it could reduce tax rates for nonprofits with significant unrelated business taxable income.
• For nonprofits, the most notable effect of this tax blueprint would be its impact on charitable giving. Researchers have estimated that doubling the standard deduction would mean that only about 5 percent of taxpayers would use itemized deductions and therefore have tax incentives to give to nonprofits.

The tax reform blueprint is merely a starting point for the tax reform process and doesn’t provide details of many other tax provisions that could have a significant impact on nonprofits. It is possible that other tax legislation affecting nonprofits, such as the CHARITY Act of 2017, could be included in tax reform legislation as it moves through Congressional committees in the coming months.