The Lilly School of Philanthropy predicts a 4.6% drop in giving this year. In 2016, 37 million households itemized deductions, a number that will be reduced to 16 million in 2018. The new deductibility rules and the impact on nonprofit contributions has been a source of mild panic for the nonprofit sector. It led to record-breaking gifts in 2017 as pledges were paid off early. (Thank you?). A panel of philanthropy experts at a recent Association of Fundraising Professionals chapter meeting convened to present information about the new tax law and guide nonprofits on their 2018 planning.
Here's what we learned:
Catalyst for Giving has not changed: The reason people give to a charity has little to do with the tax deduction and everything to do with friends and the cause. The panel noted our job as fundraisers is to create joy in giving. People will continue to give.
High Net Worth prospects are better off: Our major gift officers need to be prepared to utilize different giving vehicles and assist donors with planning however, the financial position of high net worth donors is improved by the TCJA bill and they, in fact, have more income as a result.
Impact on Timing: The consensus of the panel was that the tax law changes will impact the timing of gifts more than the gift itself. For example, the catalyst that year-end brings for nonprofits to encourage gifts will be largely removed for most donors. Nonprofits who rely on that year-end deadline to create a catalyst for giving may be disappointed.
How can nonprofits prepare?
- Anticipate reductions in your year end appeal. Nonprofits need to create another mechanism to generate a sense of urgency such as a matching gift with a deadline or an event to drive donor gifts. No longer will Dec 31st be enough to cause your donors to respond. Events can assist you in establishing opportunities for giving.
- Create a sense of urgency. Donors, at the levels impacted by the tax policy, will continue to give when asked but may not feel a sense of urgency.
- Focus on why individuals give to your nonprofit and how they give. Individual giving, especially first-time donors, are often due to the request of a friend. For many organizations, these requests are included in year-end appeals. For 2018, it may be important to engage your board in asks related to an event or online campaign that has a deadline. The psychology of giving at year-end in response to a letter from a friend is EXACTLY the same as donating to his/her table at a fundraising event. (Find out how YWCA attracted 200 online donors during its luncheon event.)
- Event giving is largely immune to the tax deduction psychology. Events create a moment in time where nonprofits call for support (if done well), friends are compelled to encourage friends to attend, and the tax deductibility of a gift is seldom the reason for a gift during an event. Events can still serve as an ideal time to attract smaller gifts from new donors and your annual donors.
Make the ask
- Too often, we witness nonprofit events that are parties rather than fundraisers. Approach an event like a year-end campaign and Make The ASK!
- Use your event strategically to create a sense of urgency, fear of missing out, peer pressure and it could become an important backstop for your annual yearend appeal.
Plus, don't forget that your next major gift may be at your event. Consider these ideas for cultivating major gifts through your event.