There’s been a great deal of talk in Washington, DC, about tax reform. Both Houses of Congress have passed their own proposals, which must now be reconciled in a process known as a “Conference Committee.” Your team at the Hydrocephalus Association has been following the bill closely, and we’ve identified some key provisions impacting the hydrocephalus community. Things are fluid in DC, but here’s the current state-of-play:
Medical Expense Deduction Repeal
Currently, taxpayers can itemize deductions for medical expenses exceeding 10% of their income. In other words, if you make $50,000 per year, you can deduct expenses over $5,000. The version of the tax bill passed by the House would eliminate that deduction, whereas the version passed by the Senate would reduce the threshold to 7.5%. Patient advocate groups are urging legislators to maintain the deduction. There is some indication that the members of the House involved in negotiations (also known as “conferees”) are considering maintaining the deduction. Since our medical expenses can be high living with hydrocephalus and a myriad of other conditions, we would also advocate for having the deduction remain at 10%.
WHERE WE STAND: Maintain the deduction for medical expenses to help people with chronic conditions afford their care.
Individual Mandate Repeal
The Affordable Care Act (a.k.a. Obama Care) requires that people pay for at least a minimal level of health insurance or face a tax penalty. The purpose is to ensure that healthier people are part of the pool of both healthy and sick individuals in the market, thus assisting in keeping costs down for those with chronic illnesses. The tax bill as passed by the Senate would eliminate this mandate. Although this doesn’t directly dismantle Obama Care, some argue it would destabilize insurance markets as healthy people leave the market, leaving individuals with high cost illnesses. The House bill does not repeal the mandate.
WHERE WE STAND: Maintain the Individual Mandate Repeal until another mechanism to replace it is identified. We cannot risk destabilizing the fragile health insurance market for those with chronic medical conditions who relay on it for health coverage.
Repeal of the Orphan Tax Credit
Pharmaceutical companies are currently able to claim a tax credit to develop drugs for rare diseases. The House bill would repeal this credit, whereas the Senate bill would scale it back. Patient groups are concerned this will reduce incentives to develop drugs that will be used by relatively few patients. Some etiologies of hydrocephalus are part of larger rare disorders, like X-Linked Hydrocephalus, part of L1CAM Syndrome.
WHERE WE STAND: Maintain the Orphan Drug Tax Credit to encourage ongoing research into rare diseases.
Tax Credits for Hiring Disabled Individuals and Veterans
Currently, small businesses can claim a tax credit for hiring veterans and individuals with disabilities. The House version of the bill eliminates this credit.
WHERE WE STAND: Support small businesses’ ability to hire veterans and individuals with disabilities by preserving the tax cuts.
Two different provisions would impact charitable giving, specifically, 1) changes that could result in politicization of charitable giving (also referred to as the “Johnson Amendment”) and 2) itemizing charitable deductions on tax returns.
The Johnson Amendment – Politicizing Nonprofits
Regarding politicization, the House bill would repeal a law that non-profits are not allowed to endorse political candidates. With the repeal of this law – the Johnson Amendment – powerful donors could pressure charitable organizations to endorse or oppose political candidates by withholding their donations. The Senate bill does not include this provision.
WHERE WE STAND: Protecting nonprofit organizations from politics is essential to maintaining the nonbiased, patient-oriented work of groups like Hydrocephalus Association.
Itemizing Charitable Donations Repeal
On itemizing deductions, both bills would increase the standard deduction for all Americans, which in the short term has shown individually beneficial, but detrimental to nonprofits. Many Americans were motivated to donate and list their donations to receive the tax benefit. Without this incentive, it has been shown that the number of individuals who will contribute to charitable organizations dramatically decreases. We could not survive without the generous support of individuals like you who believe in our mission. Many of you will continue your support, and for that we thank you. But we don’t want to eliminate a tax benefit that helps not only individual tax payers but also the nonprofits focused on supporting vulnerable and underserved communities.
WHERE WE STAND: Include the universal charitable giving deduction, which would be allowed in addition to the standard deduction. This would create a fairer tax code that enables everyone, including nonprofits, to benefit from this tax incentive.
Let Your Voice Be Heard
Clearly, patient and charitable groups are fighting on many fronts to make necessary changes to the bill before it moves any further. But there’s still time to make a difference! This process is moving forward quickly and all members of the House and Senate will be voting again on a final proposal that combines the House and Senate bills. Contact your legislators today to ask them to stand with our community on these important issues! Below we have also provided sample text you can use for social media. Don’t forget to tag your elected official!
Living with #hydrocephalus is EXPENSIVE! @TAGyourMEMBER, don’t take away my medical expense deduction. Every bit helps me afford my medical care. #TaxReform
Retweet if you need to deduct medical expenses because you live with a chronic medical condition. I do! I live with #hydrocephalus. Save Medical Deductions! #NOMOREBS #TaxReform
Over 160 patient organizations support the Orphan Drug Tax Credit, including @HydroAssoc. Don’t take away incentives to deliver medical breakthroughs. #SaveOrphanDrugs #TaxReform
Include a Universal Charitable Deduction to help protect the future of nonprofits like @HydroAssoc, working to support our #hydrocephalus community. #TaxReform