David A. Paterson, N.Y. Governor signed a bill that may significantly reduce the amount on charitable contributions made by high income earners, people with an AGI (adjusted gross income) of $10-million annually. The new law reduces charitable write off on their state income taxes from 50 percent to only 25 percent. While the act will provide up to $100-million in revenue during the current fiscal year for the state, it could lead to devastating consequences for the nonprofit sector. Funding could decrease significantly as the wealthy have less incentive to make contributions.
In the recent economic downturn, issue of funding has lead to many nonprofits reducing operations and sometimes even as far as dissipating. Other charities have looked towards alternative means to survival, which M&A activity has been a very viable option. M&A has become increasingly more popular as a solution for financial difficulties that some charities are facing. Edward Charles Institute (ECI) anticipates that the bill will only amplify the effects of the recession and potentially leading to greater M&A activity in the nonprofit sector.
