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Editor's note: This story is part of an occasional series examining the impact of the "fiscal cliff"
on Watauga County.

Originally published: 2012-12-12 11:31:41
Last modified: 2012-12-12 11:31:41

Nonprofits wary of federal cuts, changes to tax deductions

by Anna Oakes

Charities and nonprofits are among the organizations that are uneasy about the impending "fiscal cliff."

 The nation is just weeks away from the expiration of a number of federal tax cuts, including payroll tax reductions and the George W. Bush tax cuts. And if Congress doesn't act before the end of the year, government programs will automatically receive significant funding cuts, as outlined in the Budget Control Act of 2011.

Nonprofits in North Carolina fear these cuts will result in reduced funding for charitable programs, according to the N.C. Center for Nonprofits.

For example, according to a report by Sen. Tom Harkin, Head Start programs in North Carolina would be reduced by $13.4 million, resulting in cuts to grants for child care, maternal care and child development that support the work of nonprofits, the center said.

And nonprofits are also wary of a negotiation proposal to cap itemized tax deductions -- a chief incentive for charitable giving.

"A cap on itemized deductions would be exhausted by fixed-cost deductions, such as for mortgage interest and state/local taxes," the center said in a statement. "A cap would also effectively eliminate the tax incentive for most Americans to give to nonprofits.

"Dismantling the charitable giving incentive would devastate North Carolina's nonprofit sector and those who are served by it in countless communities," the center said.

Capping itemized deductions at $17,000 or $25,000 per individual would harm a sector of the economy that employs more than 10 percent of the North Carolina workforce, the center said.

Susan Pettyjohn is vice chancellor for university advancement at Appalachian State University, which is in the midst of a multiyear, $200 million capital campaign. Pettyjohn said the charitable tax deduction is an important factor for many who give large contributions.

"There's a lot of uncertainty. It's a little bit more challenging this year with everything that's going on in Washington," Pettyjohn said. "While people still love this university and plan to support it, people are just waiting to see."

Linda Slade, executive director of High Country United Way, believes people who want to give will give regardless of what happens to tax deductions, but it may not be as much.

"Will it have implications on some giving for some people? Absolutely. We don't know which way that's going to go," she said. "I honestly believe -- the optimist in me -- that people who give will give at whatever level they can afford."

Since 2008, contributions to the United Way declined, but fundraising has been stronger this year,  Slade said.

"This year, I can honestly say we have been very fortunate to see a little bit of an uptick in our giving, and I really hope that continues," she said.