Revenue / 01.29.19

Has the New Tax Law Affected Charitable Giving? A Look at 2018 Giving

Teddy Durgin

The Tax Cuts and Jobs Act, which took effect in early 2018, doubled the standard deduction for charitable gifts. The prediction from many who rely on charitable gifts was that this would deter organizations and individuals from donating.

Now that it’s been roughly one year since the new law was put into place, Access checked in with professionals who can speak to its effect – or lack thereof – on giving. First, we spoke with Steve Jacobson, President-Elect of the NYC Chapter of the Association for Fundraising Professionals and CEO of Manhattan-based Jacobson Consulting Applications (JCA), which provides consulting for a myriad of events non-for-profits.

"The new tax law is certainly putting more and more stress on nonprofit organizations," said Jacobson. "Near the middle of the year, I saw that organizations were running a bit behind in fundraising. Of course, there are many factors that can go into that. I personally think that we're going to be down a couple percent in giving for the year due to the tax law. But, we'll see."

Nonprofit consultant Terry Stone — a.k.a. “The Nonprofit Geek” — specializes in fundraising and culture change, having worked with numerous boards, including that of INTIX, to develop cultures of giving. He was a bit more optimistic than Jacobson regarding the influence of the new tax law.

"I'm going to go out on a limb and say that if organizations have done a good job of creating a connection to their cause and their mission, then people — even though they won't get the same tax consequences of their donations as they have in the past — will have continued to give,” said Stone. “But it's about building good partnerships with your donors. If you haven't done that work, then perhaps your donations will decrease because you haven't helped folks understand the need to continue to give and support your nonprofit."

Jacobson echoed the need for such good relationships. He said it's all about strategizing for some.

"Wealthy donors are going to give, especially if they believe in your cause. So yes, it's all about relationships and maintaining those relationships. But, INTIX members should be aware of the changes in the tax law and provide some strategies to address some of the concerns donors might have. For instance, with the charitable deduction going up, folks may be wondering whether they will itemize or not itemize. 'Do we have enough deductions to itemize?'

"Folks may not make that floor to itemize their deductions. What some are doing is 'bunching gifts.' Instead of giving, say, $5,000 in the next three years, maybe they'll give $15,000 this year. They may do that directly with the charities or they may put that money into a donor-advised fund where they can then distribute it out evenly over the next three years. I would advise nonprofit INTIX members to talk to donors about their concerns with the tax law and then offer solutions so that it's a win-win all around."

Elizabeth McClain, Vice President of SD&A Teleservices, Inc., also expects donor-advised funds to increase in prominence this year and under the new tax law. But she also believes there is more at play when it comes to decreased donations than just the influence of the new tax law.

"If you are looking for reasons why giving was down in 2018, I'm not sure it can all be credited to the tax law," she said. "That's because 2018 was a strange year with news cycles, markets and the most-hyped mid-term election ever. I think it is just important to note that there were several macro-effects last year to consider when interpreting donor behaviors."

Looking ahead, Jacobson says he would like to see a universal charitable tax deduction. "It doesn't really matter if it falls within the itemization schedules.”

McClain believes 2019 has the potential to be a great year. But, first, everyone may have to shrug off 2018.

"From what we were hearing on the phones," she commented, "there was a perception that patrons could not afford to give [this past year], since there was going to be less of a break. We are thinking that, in 2019, they will be feeling some guilt. A tax break is not the real reason to give. People give because they believe in the mission of an organization."

She added, "For patrons who do need a tax break to give, we are thinking that donors may now be loading gifts on a bi-annual basis so they can qualify for the break. Patrons who used to give annually, may now give in Q1 and Q4 bi-annually so that more gifted dollars are going into one tax year in a more affordable way. This puts more pressure on asking. Patrons need to be asked more frequently and with more urgency at such new times of year. As a result, 'second ask' or 'special appeal' campaigns have a new level of importance when it comes to tax law."

Stone, meanwhile, continued to stress the need for organizations to look at relationship building and "not just expect people to give because you do good."

"You have to keep people informed about the needs of the organization and the roles they play in terms of making good things happen,” he said. “Some people have given just because it's helped them financially. I'm not saying that's a bad thing; that's just the reality of some people's giving efforts. One of things I've talked a lot about with the folks at INTIX is the importance of building a culture of philanthropy. It's about how you get people to both come and give, and then, over the years, how you get them to give more and more to support the work you do."

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