The implications of tax reform on donor attitudes and donor behaviors keep making headlines. Add into the mix a roller-coaster stock market and political uncertainties, and many local nonprofits may see a slide in donations. But there’s hope – and imperative – to keep the momentum going in the communities we serve. Indeed, experts advise nonprofits to focus on year-round fundraising and to strengthen relationships with donors.
The implications of tax reform on donor attitudes and donor behaviors keep making headlines. Add into the mix a roller-coaster stock market and political uncertainties, and many local nonprofits may see a slide in donations. Indeed, “the percentage of Americans donating to charities is declining and there are fears the new tax law is expected to exacerbate the trend,” reports telegram.com; and the Blackbaud Institute reports that giving overall giving flatlined in 2018, increasing just 1.5%.
But there’s hope – and imperative – to keep the momentum going in the communities we serve. Indeed, experts advise nonprofits to focus on year-round fundraising and to strengthen relationships with donors.
In February, on our regular monthly radio show, we updated our listeners on the status of fundraising at local nonprofits. Referencing both Blackbaud’s findings and a recent Community Foundation survey of some 50 Boulder County nonprofits, Board Chair Leslie Allen – co-founder of Front Range Source – says local giving mirrored national giving in 2018, showing a slight increase over 2017. The increase was “not huge, but bigger than people expected,” Leslie says. “A very welcome surprise that mirrors surveys across the country.” That said, CPA and former foundation trustee Patricia Nielsen said on our radio show that “we haven’t really seen the effect” of tax reform, yet.
Both Leslie and Pat offer several useful and timely perspectives based on decades’ experience in fundraising and tax rules. For last-minute tax tips in managing your philanthropy, including the advantages of “bunching,” listen to the full radio show. Leslie also speaks to specific changes implemented by local nonprofits to proactively increase their fundraising capacities – “you need to invest to see a return,” she says.
According to Inside Philanthropy, this year is the first in which the full effects of the 2017 tax reform will become apparent due to increased standard deductions and other changes taking effect in 2018. While that may make fundraising more difficult, charities are advised to “segment their donors into a matrix encompassing as many as nine groups based on age and wealth, and to communicate with them according to their interests and economic circumstances.”
Instead of focusing on winning larger gifts from affluent donors, “you need solicitations based on different files for both age and economics,” says Barlow Mann, COO of Sharpe Newkirk, a Memphis fundraising consulting firm. “Don’t turn off your mid-range donors by only featuring stories about big gifts.” At the same time, Blackbaud researchers found that, in 2018, “while fewer households are giving, those that give are donating at higher levels than ever before. Buoyed by these generous donors, organizations that prioritize stewardship and retention of their donors continue to find the greatest success.”
Advises Leslie Schaus, a tax partner at Strategem CPA who was interviewed on this timely subject by Community First Foundation in Arvada: “Individuals 70-½ or older must take required minimum distributions from their IRA. They can donate these distributions directly to charity and avoid paying income tax on it.” Related, Dan Morris, a Financial Advisor with High Point Financial Group, suggests a renewed emphasis on Donor-Advised Funds: “Individuals or families can fund a DAF with either cash or appreciated assets, then bunch donations to the DAF in alternating years,” he says. “That way, they may exceed the standard deduction in the alternate years and receive a charitable deduction. The beauty of a DAF is that donors can time when to donate to the fund and receive a tax deduction. It also allows them the flexibility to recommend grants to charities over time whenever they wish.”
Learn more in this article, A Big Tax Break for Charitable Giving Disappeared. Here’s What You Can Still Do.
To appeal to people who don’t itemize, Leslie further recommends that nonprofits “focus on charitable giving for the good of the community rather than tax benefits.” While the Association of Fundraisers reports that the total number of donors nationwide has dropped, Jon Bates – President of the Community Foundation of Northern Illinois – also maintains a strength-based position: “We like to believe that people give because they care. That’s the first reason and tax benefit is icing on the cake,” he says.
To help advance your 2019 fundraising efforts, check out Blackbaud’s Gift Range Calculator: this tool calculates the number and size of gifts you will need to achieve your fundraising goal so that you can adjust resources or goals appropriately.
