Graduation Year

2025

Date of Submission

4-2025

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics-Accounting

Second Department

Economics

Reader 1

Benjamin Gillen

Abstract

This thesis examines the impact of the Tax Cuts and Jobs Act of 2017 and the Coronavirus Aid, Relief, and Economic Security Act of 2020 on charitable contributions and nonprofit financial health. The standard deduction increase introduced by the TCJA disincentivized middle to low-income earners from making contributions. In March 2020, Congress temporarily increased the AGI limit on charitable deductions while simultaneously offering an above-the-line deduction for all U.S. taxpayers. While earlier studies have analyzed the effect of the TCJA in disincentivizing charitable contributions, no study has examined the moderating effect of the TCJA and CARES Act in affecting contributions to smaller nonprofits. As middle-to-low-income earners tend to donate to and benefit from smaller organizations, this thesis examines the effect of both the TCJA and CARES Acts in incentivizing charitable contributions and their preceding effects. The analysis focuses on the effects of smaller nonprofits eligible to file a 990EZ form, and the outcomes of this legislation by examining contributions, employee counts, volunteer activities, net assets, and cash balances. Utilizing a panel dataset from IRS Form 990 Filings between 2014 and 2021, I conduct a difference-in-differences framework to analyze the effects of these policies. The results show a significant reduction in individual contributions to smaller nonprofits both post-TCJA and CARES compared to their larger counterparts. These findings highlight the increase in standard deduction, while reducing tax liability, reduced charitable contributions, and the financial well-being of the nonprofit sector, as well as show the sensitivity of nonprofit funding to federal policy.

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