How Will The New Tax Law Affect Giving?

(For years a wise voice in fundraising has been Eddie Thompson of Thompson and Associates. You will find his comments below timely and on target.)

Charities shouldn’t panic over the changes in our tax laws!  I have been asked many times in the last few days how the tax law changes will impact nonprofit organizations. There has been a great deal written on the subject. Too much has been written or said causing a great deal of fear, much of it with little factual basis and excessive hyperbole.  

Here are my thoughts on the subject.  

Giving reflects the direction of the economy and how people are feeling about their economic future more than it reflects the perceived tax benefits from making a gift. Recent studies tell us that folks are more optimistic about their financial future than they have been in almost a decade. We know that giving has been stagnant in general over the last few years, except fundraising for hurricanes, floods, and other man-made and natural disasters. For some time now, folks have simply not felt good about the question, “Do I have enough to live on for the rest of my life?”     

People rarely give simply to receive a charitable deduction. When their main objective is to receive a charitable deduction, donors are typically selling a large unrealized capital gain asset such as a business, a farm, or a long-term stock investment. It would have been better for most of these folks if they had addressed the question of giving prior to the sale of the asset. Since the new tax law did not change capital gains taxes, our challenge remains: discuss the benefits of a gift before the sale of the asset.  

It is possible that taxpayers (and perhaps their favorite charities) in high income-tax states will feel the impact of the inability to deduct all of their state income and property taxes on their federal tax returns. Time will tell how big of an impact it might have. We really don’t know and feel it is premature to draw sweeping conclusions that quantify an impact on charitable giving.  

We have no control over how much donors can give, regardless of the tax environment. So, it seems logical to focus on what we can control and stick to the basic principles of successful philanthropy rather than worry about what is out of our control.  Here are my suggestions going forward:

1.     Build stronger relationships with your donors by having more frequent and deeper conversations.

2.     Remind your donors of the value of your organizational mission.

3.     Remember that generous people are still generous by their very nature.

4.     Know that most folks want to help people in need and be part of something noble and larger than themselves.

5.     Focus on gifts that still work well (and may even be enhanced) under the new tax law, such as the IRA Charitable Rollover.

6.     Use this as a chance to evaluate your own efforts, asking yourself things like:

o    Do I have a systematic approach to working with my donors?

o    Do I have a fundraising strategic plan? You must have a strategic plan if you want strategic results!

o    How will I measure my activities?  Measure what you can change! 

The sun comes up each morning—even if it’s cloudy. Many of us remember similar fear mongering and dire predictions in the 1980s when tax laws were changed significantly. General fears that giving would plunge simply did not occur. Let’s not let fear dampen our efforts now. Our missions and causes still impact lives and communities, and good people still want to accomplish good with their resources.

Eddie Thompson

Thompson and Associates