Fiscal cliff: Southwest Florida charities believe donations won't fall off

In this Nov. 16, 2012, photo, President Barack Obama acknowledges House Speaker John Boehner of Ohio while speaking to reporters in the Roosevelt Room of the White House in Washington, as he hosted a meeting of the bipartisan, bicameral leadership of Congress to discuss the deficit and economy. Administration officials say President Barack Obama and House Speaker John Boehner met Sunday, Dec. 9, 2012, at the White House to discuss the ongoing negotiations over the impeding 'fiscal cliff.' Spokesmen for both Obama and Boehner said the two men agreed to not release details of the conversation, but emphasized that the lines of communication remain open. (AP Photo/Carolyn Kaster, File)

In this Nov. 16, 2012, photo, President Barack Obama acknowledges House Speaker John Boehner of Ohio while speaking to reporters in the Roosevelt Room of the White House in Washington, as he hosted a meeting of the bipartisan, bicameral leadership of Congress to discuss the deficit and economy. Administration officials say President Barack Obama and House Speaker John Boehner met Sunday, Dec. 9, 2012, at the White House to discuss the ongoing negotiations over the impeding "fiscal cliff." Spokesmen for both Obama and Boehner said the two men agreed to not release details of the conversation, but emphasized that the lines of communication remain open. (AP Photo/Carolyn Kaster, File)

Senate Majority Leader Harry Reid of Nev., second from left, accompanied by fellow Senate Democratic leaders, pauses during a news conference on Capitol Hill in Washington, Thursday, Dec. 13, 2012, to discuss the stalled fiscal cliff negotiations and other unfinished business in the Senate. From left are, Senate Majority Whip Richard Durbin of Ill., Reid, Sen. Patty Murray, D-Wash., and Sen. Charles Schumer, D-N.Y. (AP Photo/J. Scott Applewhite)

Senate Majority Leader Harry Reid of Nev., second from left, accompanied by fellow Senate Democratic leaders, pauses during a news conference on Capitol Hill in Washington, Thursday, Dec. 13, 2012, to discuss the stalled fiscal cliff negotiations and other unfinished business in the Senate. From left are, Senate Majority Whip Richard Durbin of Ill., Reid, Sen. Patty Murray, D-Wash., and Sen. Charles Schumer, D-N.Y. (AP Photo/J. Scott Applewhite)

This is one of a series of stories looking at potential local effects of the fiscal cliff. Return to naplesnews.com through Wednesday or pick up copies of the Daily News on Sunday, Monday and Tuesday.

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— Uncertainty about the U.S. government going over the so-called fiscal cliff could end up being just a bump in the road for Southwest Florida charities that rely heavily on philanthropy.

The prospects of higher income tax rates, a lower tax deduction for charitable contributions and changes in the estate tax and capital gains tax all could change the way the wealthy make decisions about their philanthropy.

Today's uncertainty about future changes is sending anxious ripples through the nonprofit community around the nation about the ability to raise money for their causes, but local charities say they aren't expecting disaster.

"We're not losing sleep over it," said Jim Martin, chief development officer for the NCH Healthcare Foundation, the fundraising arm of the NCH Healthcare System. "Are we conscious of it? Sure."

Among the possible outcomes of budget negotiations is an increase in the highest tax rate from 35 percent to 39.6 percent, which could mean high-income households would pay more taxes and have less money left for charitable giving.

The charitable deduction for households earning $250,000 or more could go from 35 percent to 28 percent, giving donors less of a tax break and more of an incentive to make up for the difference by giving less in the first place, according to the Center for Philanthropy at Indiana University.

For example, under current tax law, a $10,000 gift would save the donor $3,500 in taxes. If the deduction were to go down, the same contribution would save the donor $2,800 in taxes. One possible outcome could be that the donor would reduce their gift by the difference in tax savings.

Another proposal, which President Obama has so far rejected, would cap all deductions for high-income earners. If the cap were set at $25,000, for example, it could cost charities $10 billion a year in lost donations, the White House has estimated.

A 2011 study by the The Center for Philanthropy found that the effect of these tax changes would have reduced charitable giving by 1.3 percent over two years had the changes been enacted in 2009.

That mirrors the modest reductions in giving that Southwest Florida nonprofit leaders say they would expect from donors they have talked to about the tax changes.

"I think there's a lot of reasons people give besides a tax break," said Sharon MacDonald, chief foundation officer for the Lee Memorial Health System Foundation.

MacDonald said tax changes won't reduce a donor's commitment to their favorite causes, but smaller donations would mean it will take longer to reach fundraising goals.

"It may have to come in smaller denominations, but I don't think we'll see that dramatic of an impact," she said.

Martin, at the NCH Healthcare Foundation, said he also is bracing for possibly smaller gifts but not a drop in the community's famously generous streak.

"I don't envision that leveling off," he said. "The people who believe in NCH and what we're doing are going to make charitable investments anyway."

In this Dec. 5, 2012, photo, President Barack Obama pauses as he speaks about the 'fiscal cliff' at the Business Roundtable, an association of chief executive officers, in Washington.

In this Dec. 5, 2012, photo, President Barack Obama pauses as he speaks about the "fiscal cliff" at the Business Roundtable, an association of chief executive officers, in Washington.

Wealthy donors' main objective in giving isn't necessarily to maximize their tax advantage but to find the best way to get more of their money into a charity's coffers, said Rob Moher, vice president of development at the Conservancy of Southwest Florida.

"These people are always going to give no matter what the tax situation, but they're always interested in getting the most bang for their buck," he said.

Some charities report that uncertainty over tax law changes already is having an effect — from donors accelerating their giving to donors deciding not to sign long-term pledges.

Moher said the Conservancy is expecting as much as $400,000 to come in by the end of the year from donors looking to make good on pledges earlier than they would have otherwise.

Some donors are choosing to put their gifts in so-called donor-advised funds, where they can take advantage of this year's tax laws but can decide later how to spend the money, Moher said.

"It's a way of sort of hedging your bets," he said.

Income tax changes aren't the only taxes wealthy donors might be keeping an eye on as the deadline for coming up with a budget deal nears.

Without a deal, the estate tax would automatically jump from 35 percent to 55 percent and the estate tax exemption would fall from $5 million to $1 million, said MacDonald, at the Lee Memorial foundation.

Moher added that if a capital gains tax increase is worked into the deal, it could prompt donors to give more stock or other assets rather than pay taxes on their appreciation.

Smaller donors who don't worry about estate taxes or capital gains still would feel a hit from limits on the charitable tax deduction, maybe more so than wealthy givers, said Stephen Wheeler, chief development officer at the David Lawrence Center, a mental health center in Collier County.

"I would think that would be unfortunate," he said. "The audience most affected by that are middle income, not the wealthy making life-changing donations."

For now, with the fiscal cliff looming Jan. 1, charity leaders are holding their breaths while donors wait to see what any deal — or lack of one — will mean for them.

"Everybody's talking about it, but few are doing anything about it," Wheeler said.

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