Nonprofit Fundraising After the Tax Bill
How will the new tax bill impact giving to your nonprofit organization?
The media has run a lot of doom and gloom scenarios including that nonprofits could lose up to $13 billion annually. At issue: the increase in the standard deduction from $12,000 to $24,000 for married persons filing jointly. That change means that the number of people who itemize could decrease from 33% to 5%, according to some estimates. If people can’t itemize their deductions – including gifts to charity – the logic continues, they will not make charitable gifts.
I feel a little more optimistic. Why? Partly because I believe in the goodness of humanity and partly because research suggests that taxes do not impact giving as much as other factors. This research provides a scientific foundation for fundraising. Specifically,
Giving to nonprofits totaled $390 billion in 2016. Even if projected decreases ring true, that would only amount to a 3.3% decrease overall. While some organizations might see more or less of a decrease than the average and some live closer to the margins than others, most can survive and plan for this decrease without significant service disruptions.
Research shows that over the last four decades, giving has held steady at 2% of the Gross Domestic Product regardless of all other factors. Assuming that the economy stays steady or continues to grow, giving should keep pace.
Longitudinal research[1] shows that even in times of higher taxes, giving stays steady. Nothing about the current change in tax laws suggests any different result.
Donor motivation research finds that few donors make gifts FOR the tax deduction. Instead, once they make a decision to give to a particular charity, they structure their gifts to maximize any tax benefit.[2] In fact, research in 2006 found that wealthy donors did not intend to decrease their charitable giving in light of proposed tax legislation at that time. Nothing suggests that wealthy donors will act any differently in light of the currently enacted tax laws. In fact, they may see their money grow and choose to invest some of that new-found wealth in nonprofits.
How can you maintain an effective fundraising program under the new tax laws and especially during the uncertainty of the transition to our new economic reality?
Focus your message on your mission. Donors give to support your mission and help your clients. Staying on message gives prospects a reason to support your organization other than receiving a tax benefit.
Look at how the tax changes - and any of the ripple effects it may generate - impacts your clients and your mission. Are you seeing more need? Have traditional funding sources cut funding? These might become part of your case for support. But remember that donors fund opportunities, not needs, so phrase these gaps as opportunities for your organization to help more people realize their dreams and potential.
Diversify your funding. If current predictions hold, corporate profits should increase as should foundation portfolios. Both situations suggest that your take a closer look at prospective corporate and foundation donors to fill any gaps from loss of individual donors.
Focus on major gift fundraising. If current predictions hold, the wealthiest in the community may have more money to invest in local nonprofits. Personally, invite them to get them involved (or more involved) in your mission and your clients. Decreases in discretionary income will more likely come from lower and middle-income donors or those who contribute through your annual fund.
Talk to your donors to find out what worries them (economically) and what motivated them to give to your organization. Work with them to maximize any tax benefit of their gift to you if that ranks as a primary concern. That might mean that they give you 2 years’ worth of donations in a single calendar year and you count them as donors (and the appropriate giving club) for both years. Adjusting to your individual donors shows that you care about them as people, not just checkbooks. This is the art of fundraising.
Before you fall into the “sky is falling” trap, do some research on donor behavior and on your donors. Continue to monitor giving to your organization (who, how and when), adjusting as necessary, and you too should weather this storm as much as any economic change that has come or will come in the future.
For more on the art and science of fundraising, listen to my latest #FundraisingFriday vlog – available every Friday.
