I’m celebrating Tax Day 2025 with an exploration of your favorite subject and mine: the charitable deduction. I’d understand if pouring through the IRS tax code isn’t exactly your favorite pastime, so I hope to provide a bit of a public service by demystifying obtuse IRS gobbledygook. No matter what side of the donation equation you’re on – and many of us are both donors and recipients, depending on the circumstance – if you’re working in the nonprofit cinema ecosystem, the charitable deduction is always there, even if lurking in the shadows. So let’s shine a little light on it, shall we?

Before I go any further, all the caveats apply. I am not a CPA or a tax attorney. I met my college math requirement by taking Math As a Liberal Art during my Freshman year at Occidental College twentyfivehrumphteen years ago. Perhaps this makes me particularly well-suited to explain this; if I, a proud holder of a BA in English and Comparative Literature1, understand it then maybe you will too. And if you already do: you get a gold star! 🌟

The Story So Far…

A person’s relationship with the charitable deduction is based on their tax situation. Up until 2026 – more on that in a minute – the 90% of taxpayers (according to 2022 data) who take the standard deduction could not deduct charitable donations of any kind. Put another way, for the vast majority of Americans, there was no financial benefit whatsoever for donating to a 501c3 nonprofit. People still do, of course (as of 2020, about 47% of households), but that percentage has been steadily declining for the past 20+ years.

The other 10%, those who do itemize their taxes because deductions exceed the standard for that year, calculate their federal2 tax savings by multiplying the total allowed charitable donation amount by their marginal tax rate. For example, if a hypothetical taxpayer with a marginal tax rate of 35% donated $10,000 in a year, their charitable donation would reduce their tax bill by $3,500, or $10,000 × 0.35. The advantage grows for people in higher tax brackets who also donate big bucks. In a simplified example, someone earning $5,000,000 of taxable income could owe 35% in taxes, or $1,750,000. If they made $1,000,000 in charitable donations that year and could deduct the full amount, that donation would reduce their taxes by 35% of $1,000,000, or $350,000, lowering their tax bill from $1,750,000 to $1,400,000. That’s not nothin’.

Timing is what makes things interesting. These taxpayers can claim up to 60% of adjusted gross income for cash, and 30% for non-cash, donations in a single year. So it’s a common practice to sync up a bunch of charitable giving the same year as an anticipated wealth event (AKA a bigger tax bill year), in order to max out the deduction limits and thereby reduce an overall tax bill by as much as possible. But just because a person can maximize their deductions, does not mean they will. Every taxpayer falls on their own point along what I’ll call the Spectrum of Tax Avoidance, or the tolerance level for the gymnastics required to keep money out of local, state, and federal coffers. There’s another Spectrum at play here: one of Motivation. On one end is the person who is chiefly motivated by the application of the charitable deduction to maximally benefit their finances, and the giving is the byproduct. On the other is the person who has more money they can spend in one lifetime, wants to move it into the world to do some good, and organizes their financial (and tax) plan accordingly. I suspect everyone falls somewhere in between, and maybe some are so divorced from their finances they haven’t given it a whole lot of thought.

What’s New in 2026

The OBBBA, signed into law on July 4, 2025, introduced three changes to the charitable deduction beginning in 2026 for individual3 taxpayers. For now, let’s stick with “The Itemizers” (roughly the top 10% of taxpayers). Starting in 2026, there is a new 0.5% of AGI floor for taxpayers who itemize, which creates a minimum threshold before charitable giving becomes tax‑deductible. In plain language, the first 0.5% of your AGI given to charity each year does not reduce your taxes.

For example, our friend with $5,000,000 of AGI and a 35% marginal tax rate who donated $1,000,000 in cash to charity in 2026:

• Calculates 0.5% of $5,000,000 = $25,000

• Subtracts that $25,000 floor from the $1,000,000 in gifts, leaving $975,000 that counts towards the deduction

• Multiplies $975,000 by their 35% marginal tax rate = $341,250 of tax savings.

In 2025, before the floor applied, our friend’s donation reduced their taxes by $350,000, so this new rule increases their tax bill by $8,750. Put differently, in 2025 they effectively “paid” $650,000 to give $1,000,000 to charity, but in 2026, because of the new 0.5% floor, the same $1,000,000 gift effectively costs $658,750.

Taxpayers in the highest nominal income bracket of 37% are facing an additional restriction in 2026: itemized deductions, including charitable donations, are capped at 35% of income. So where previously this taxpayer could use a multiplier of 37% to calculate their charitable deduction, if that was their marginal tax rate, they are now limited to 35%. While this impacts a relatively small percentage of overall Americans, these folks account for over half of annual charitable giving and tend to be more prone to adjust their giving in response to policy changes.

Returning now to the Non-Itemizers, or the remaining 90% of taxpayers. Starting this year they will be able to deduct charitable donations: Up to $1,000 if single, or $2,000 if married filing jointly. This is on top of the standard deduction amount ($16,100 and $32,200, respectively); the filmmakers in the audience will appreciate that this is referred to as “above the line.” Taxpayer savings of this new policy are estimated in the couple of hundred dollars per person, and could lead to a significant uptick in smaller-dollar donations from a wider spectrum of taxpayers.

Still with me?

I have a confession to make. I had a career for many years in the nonprofit sector and made charitable donations from a DAF I opened in 2006 with no clue how the charitable deduction worked. If you relate to that statement, I’m here for you (and your secret’s safe with me). While I sympathize with your situation, I also believe that knowledge is power; and where knowledge gaps exist, erroneous assumptions often step in to fill them. I hope you have learned something you once assumed was irrelevant or just too confusing to bother with. And that this knowledge makes you feel more confident and empowered to ask questions, facilitate more transparent conversations, and make informed decisions. If it leads to more support flowing into the nonprofit cinema ecosystem, that’s a win.

At the macro level, smaller-dollar donations are expected to increase, while larger-dollar donations could decrease. The two are roughly calculated to offset each other, so the net effect will be a broader base of givers making up the $550-$560 billion expected in total charitable giving in 20264. That strikes me as a good thing in a healthy democracy. Let’s also not forget the estimated $2 trillion currently parked in foundations and DAFs, and with the projected Great Wealth Transfer that number could grow to $18 trillion by 2045. I know it comes as cold comfort to a nonprofit leader or independent filmmaker who suddenly loses a key donor as a result of policy changes, but at the risk of sounding Pollyannish, I look at these numbers and see a ton of money sloshing around out there, just waiting to be put to good use.

What’s your relationship with the charitable deduction, if you have one? How are you thinking about responding to the policy changes this year? If reading this sparked thoughts or questions for you, share them in the comments or send to hello@thebacklight.org.

In my previous post I offered a perhaps oversimplified formula illustrating the basic conditions responsible for the existence of the US Nonprofit Cinema Ecosystem. To repeat:

Late stage capitalism + minimal federal arts funding + nonprofit tax code

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US nonprofit cinema ecosystem

It’s an attempt to provide a quick and dirty answer to the “Why?” of it all: Why does this sector exist in the first place?

Here I want to dig a bit more deeply into the WHAT. What does the US Nonprofit Cinema Ecosystem (AKA USNCE) do? What are the unique functions of these mission-driven orgs and funders? What role does it play in the context of a market-driven entertainment industry?

The answer we often give is “market failure.” It’s shorthand for a case we make for the nonprofit sector writ large, that it exists to step in and provide the things the market fails to when left to its own devices. In the case of the United States, it can also stand in for failure of government to cover the essential needs of its citizens.

Even though the word “failure” is a knock on the market, I also think that it implies a second-tier status for the nonprofit sector. “Failure” suggests that market-driven success is the gold standard, and anything that relies on tax-exempt donations to sustain its business has missed the mark. I don’t personally love the terminology. My experience on the board of The Roxie Theater turned me into a big believer in the benefits of a healthy mix of earned (box office & concessions) and contributed (donations) revenue. Providing myriad ways for stakeholders to support an organization is good business practice; for a community-driven independent art house cinema, for example, donations are how a community demonstrates its support and enthusiasm. So perhaps we do away with “market failure” and instead focus on “public good:” after all, that’s what the tax exemption is for in the first place.

With that frame in mind, I think it’s useful to parse out the functions of the USNCE in an attempt to build a shared understanding that can then help shape conversations about its current and future role in a rapidly shifting independent cinema industry. Each one of these is a subject worth much deeper exploration on its own, which I look forward to shepherding in the future. But, for now:

Risk capital

I’ve often said (and others share this view) that philanthropic capital is the most extreme form of risk capital there is. The IRS provides tax incentives ostensibly to motivate the transfer of capital from a person that has more than they need (or can at least spare a little bit) to an entity that is performing a social good. Nobody is relying on a financial return on investment from charitable donations to pay their kid’s college tuition, home mortgage, or medical bills. The financial benefit is built in, guaranteed, and divorced from the market performance of the recipient organization or project.

With this pressure off, philanthropy can fund experiments that have very little to no current market value but possible future market uptake. Pilot tests can help take ideas from the white board into the real world, test hypotheses, and gather data. Learnings are incorporated into the design and decisions are then made if there’s a market “there there.”

Distribution Advocates FilmADE fund is a prime example of this type of activity in the cinema landscape. Distribution used to be where an independent filmmaker could derive a healthy income from the marketplace, but massive disruption has rendered that pathway much less lucrative nowadays. Distribution Advocates uses grants to support experiments in the present to spur healthy market-based distribution revenue for filmmakers in the future. FilmADE grants to run distribution experiments with future market potential, requiring grantees to share learnings via comprehensive case studies that benefit the field at large. Their work has inspired other funders such as Ford Foundation and Perspective Fund to also support distribution experiments, so we can look forward to a lot of learnings coming from this space in the upcoming months.

Creative independence

Imagine a world in which movies only came out of the corporate entertainment industrial complex, with the half dozen studio heads that have held those jobs for decades greenlighting projects they determine “the market” wants. In the nonfiction space, we would be served up a steady diet of self-executive produced celebrity docs, true crime series, and maybe – if we’re lucky – a film about a musician. The vast majority of these would go straight to streaming and the space for “cinematic nonfiction” (my love language) would shrink to near nonexistent.

Maintaining a protective shield from market pressure around a film for as long as possible - from development, through production, and even beyond – via grants and nonprofit artist support (see below) can help nurture artist visions deemed “risky” or “out of the mainstream,” and, for some, nonprofit film festivals (also, see below) become the first opportunity for these works to meet an audience. I could name so many examples, but here’s a recent one I’m connected to: what major studio exec or streaming doc division head would’ve said “yes” to Brittany Shyne’s pitch over 10 years ago when she embarked on the project that would become Seeds: a two-plus hour, lyrical, black-and-white immersion into the lives of Black farmers in the southern United States? A film that screened around the globe in 2025, picking up award after award, and landed on the Oscar Documentary Shortlist. Lucky for us, a collection of nonprofit funders and individual donors said “yes,” because they wanted this first-time feature director and her team to realize a unique creative vision, trusted they could pull it off, and believed there would be an audience who would love it.

Artist support

As far as I can tell, the bulk of filmmaker support and development happens in the nonprofit sector. Seems the financial ROI for labs, fellowships, training, networking and community-building just isn’t there, so market-driven entities aren’t incentivized to devote resources to these activities. Nonprofit organizations often form as interventions, addressing lack of opportunity for artists from underrepresented populations by fostering community and career pathways. Initiatives that center artist affinity such as women and gender nonconforming, BIPOC, Indigenous – just to name a few – specifically work to provide resources and mentorship to bring these filmmakers’ stories into existence, and one day shift the balance of the industry at large.

I put “artist-led professional support networks” in this category, too. The past 10 years has seen the rise of organizations like Brown Girls Doc Mafia, Fwd-Doc, the Documentary Producers Alliance, and A-Doc, among others, that are either standalone 501c3 organizations or fiscally-sponsored projects that can take tax deductible donations to power the work they do for their members and the field at large.

Distribution

My first encounter with the doc film world took the form of an introduction to Diana Barrett in May 2014. Some readers may recall Diana as the founder of the Fledgling Fund, a private foundation that from 2010 to 2019 made grants to documentaries in support of their impact campaigns. I suspect other organizations and individuals engaged in similar work long before Fledgling’s launch, but in my mind that date signals a moment when the idea to use philanthropic dollars in service of film distribution that includes social, legislative, or cultural change goals really started to catch on. The Global Impact Producers Alliance history is also, in large part, the history of how impact producing came to be.

Because the goals are primarily mission-driven, impact campaigns are almost entirely funded by grants. Both film-focused organizations like Perspective Fund as well as “issue funders” (groups that work in the domain that the film addresses, like climate, reproductive rights, racial justice, etc.) support the work with the belief that engaging with the story will move the needle on the issue presented in the film.

While impact may not look 100% like traditional distribution, they both use a lot of the same tools to reach audiences, such as theatrical exhibition (including four-walling), direct-to-audience platforms such as Gathr and Kinema, and placement on other streaming services. In a time when traditional distribution pathways for independent film are becoming scarcer and less remunerative, I’m curious if philanthropic capital will play a larger role in distribution: both in supporting issue-based change and in the broader public good of indie cinema writ large.

Exhibition

My totally unscientific hunch is that the vast majority of film festivals – especially regional and special-interest fests – are nonprofits or programs run by umbrella 501c3 organizations. It seems the bigger and more “market-driving” they get, the higher likelihood they are corporate entities, with one major exception being Sundance. For some percentage of independent films, their festival run is their theatrical run, which means that portion of the film’s distribution is subsidized by US taxpayers.

Another absolutely unverified guess is that over three-quarters of US independent arthouse cinemas are nonprofits. In a time when megaplex theater chains are struggling and shuttering, more eyes are on these standalone cinemas as the keepers of the in-person movie-going experience in communities across the country.

Notable here is that professional organizations supporting festivals (Film Festival Alliance) and art houses (Art House Convergence) are also – you guessed it! – nonprofits.

Extremely Imperfect

This is as good a place as any to wrap up this little tour of the USNCE. Like the system itself, what I’m sharing here is imperfect, but I hope it is at least helpful in getting a conversation started. I’ve refrained from evaluating the work (there’s plenty of time for that) in service of describing it. I believe it’s important to have clarity about the WHAT before engaging in an analysis of the HOW.

The beauty of this exercise is that this picture can continue to develop over time with your input. So, tell me: does this resonate with you? Is there something missing? This is a funder-driven analysis; if that’s not your perspective, how do you see it? Please share your thoughts in the comments. Thank you!

Those of us making and watching movies in the United States do so in a unique economic context. I think there’s a strong case to be made that our version of capitalism inhabits the extreme edge of shareholder profit maximization, monopolization, rampant resource consolidation, and financialization of just about every aspect of life. In the film world, this is manifested by tech companies treating entertainment divisions as loss-leaders, the collapse of the theatrical business, the few remaining studios milking tired IP to pump out one derivative movie after another to please their private equity overlords, an oligarchic entanglement of deep-pocketed executives with the current presidential administration – and anyone not working in those spheres scrambling to find a business model that works. I’m not breaking new ground here; in fact, most of the media I consume about the movie business is understandably covering these market-driven topics minute-by-minute.

For such a blindingly wealthy country, the United States government underinvests in arts and culture. We consistently rank at the bottom of the list of OECD nations in both per capita and raw number federal arts and culture expenditure. This has always been the case, but is particularly true today thanks to the gutting of the NEA and NEH, as well as the rescission of funding for the Corporation for Public Broadcasting.

When it comes to philanthropic spending, however, the US always sits at the top of the list. Our tax code that exempts certain organizations and individuals from paying taxes in exchange for performing public good is particularly robust by comparison to other nations. Whether this way is “better” or “worse” than another way is complex and far beyond the scope of my interest. Instead, I accept that it exists and remain forever fascinated by the who, what, where, when, how, why – and how much – of it all.

Late stage capitalism + no federal arts funding + nonprofit tax code

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US nonprofit cinema ecosystem

This is a simplistic overview of the conditions that create a distinctly American sector – and the focus of TheBacklight – nonprofit cinema: The 501c3 organizations that provide artist support, fiscal sponsorship and grants; nonprofit film festivals and arthouse cinemas; public media entities that commission and distribute documentaries; and the foundations and individuals that fund them. These entities operate within this beneficial structure because they ostensibly put something else ahead of profit; for now we’ll call that “mission.”

The line between the non- and for- profit cinema industries is far from firm: a filmmaker supported by Sundance (nonprofit) labs goes on to direct big budget Hollywood movies (hi, Ryan Coogler!); a majority grant-supported documentary scores a festival acquisition by a streamer; a major streamer exec founds a nonprofit that “supports and empowers mid-career POC creators and artists to make commercial film and television across genres that reflects our multicultural society — to propel narrative change, advance racial equity, and create cultural impact;” a nonprofit production company’s doc series has 3.3 million YouTube followers. I find this permeable membrane, this mix of mission and market, infinitely fascinating.

In the zeitgeist, the focus is on the market. TheBacklight is a space where the focus is on mission. There is so much passion, work, care, and creativity going on over here that is undervalued, under-appreciated, or simply invisible. Is it perfect? Hardly. Do we have it all figured out? Not at all. But its very existence bears more attention, examination, and celebration than it’s getting. I can see why it’s not a great beat for a commercial media reporter to cover; by comparison to Big Hollywood, we barely register on any standard measure: box office receipts, share price, subscriber growth, production budgets.

But just because something is small by comparison doesn’t mean it has no value. In fact, within the nonprofit cinema ecosystem is where some of the boldest work is made by a more diverse array of makers, where community thrives at festivals and in cinemas, and where distribution follows paths forged by partnerships and meaning-making. There is a lot of territory to explore here, starting with questions like:

• What is the special role of the nonprofit cinema ecosystem in the context of an economy driven by profit?

• Where are the most interesting projects, experiments, and collaborations happening? And what can we learn from them?

• What in the sector is working and why? Also: what’s getting in the way, and how can we clear those obstacles?

I have been active in this corner of the film industry since 2014 primarily as an independent funder: of documentaries, artist support and exhibition organizations, and artists directly. Along the way I sat on the board of a nonprofit arthouse cinema, The Roxie, from 2019-2026. My orientation towards the work has always been first and foremost as a grant maker who believes in supporting independent filmmaking for its intrinsic value. I’m definitely not alone in this belief. I’m someone who learns by writing, so this is a space where I will share some of what I’m noodling on and, someday soon I hope, what you’re noodling on, too.