Monday Mixtape 018: How Will the Tax Cuts and Jobs Act (TCJA) Impact Charitable Giving?

Monday Mixtape 018: How Will the Tax Cuts and Jobs Act (TCJA) Impact Charitable Giving?

‘Charitable Giving Expected to Plunge …’

^ this headline hit my inbox last week. Scary stuff.

But before we freak out … let’s dive through this, together.

First, we must talk about changes to US tax law, and how it may affect your nonprofit revenue in the coming years.

Vastly simplified, the Tax Cuts and Jobs Act is projected to significantly reduce the number of households who itemize deductions for their charitable contributions.

This post from TechSoup spells it out: “In 2016, Americans donated $390 billion to charities, with 72 percent of the total coming from individual donors.

The rest of charitable giving came from foundations, bequests, and corporate grants. Of the $280 billion coming from individual donors, 82 percent came from people who itemized taxes.

An estimated 21 million of those people won’t be taking their charitable tax deduction this year.

What will be the result? The Tax Policy Center forecasts a reduction in charitable giving somewhere between $12 billion and $20 billion.

The new law will reduce the federal income tax subsidy for charitable giving by one-third. Most nonprofits should expect fewer donations to come in this year.”

WELL, OKAY.

First, a caveat: We don’t actually know exactly what’s going to happen. We’re talking about projections and likely outcomes, not sure things.

That said, this isn’t great news. You’re working on getting more donations, and finding out you may get fewer for reasons beyond your control, frankly, stinks.

But take courage! You’re not powerless.

TechSoup has good strategies for riding the waves of policy changes. Key takeaways include focusing on online fundraising, diversifying giving opportunities (particularly for mid-level donors), continuing strong donor engagement (particularly for small donors), and educating your major donors about alternative giving possibilities.

Even in the event that all projections are wrong, and everyone gives just like they always have, these are still good things to do. This week, I pulled together some resources to get your preparation started.

Here’s this week’s mix:

“Prepare the umbrella before it rains.” —Malay Proverb

Track #1: 14 Innovative Online Fundraising Ideas For Nonprofits & Charities by Tina Jepson at CauseVox

The first tip the TechSoup post suggests is “doubling-down” on online fundraising, which has steadily grown year-to-year. Both revenue and donor numbers keep going up, so it makes sense to put a serious effort into online fundraising.

Online fundraising can be a broad category, and Tina has 14 ideas to maximize its potential.

The ideas range from classics like personal fundraising websites and crowdfunding campaigns to online garage sales, donate-to-vote for silly dares, contests, and interactive video challenges.

Several of these ideas, including peer-to-peer fundraising and crowdfunding, operate on community-driven principles. This kind of fundraising uses social connections to reach donors, which makes it more about relationships, and less about tax deductions.

Community-driven fundraising is automatically more personal and harder to ignore. Standing out of the nonprofit crowd is only going to be more important in the years to come.

Track #2: Who Are Mid-Level Donors And Why Should I Care? by Nick Small at Nonprofit Hub

Does your fundraising plan include a strategy for engaging mid-level donors? If the answer is “Not really…” you’re not alone. This donor range is often overlooked, but it’s full of potential. Nick’s post explores that potential, arguing that many mid-level donors could and would give more if they were cultivated and asked properly.

There are no exact numbers to define a “mid-level” donor. It depends on the average gift size of your organization. Your $500 mid-level donor may be another organization’s major gift. Mine your data to see where your unique mid-level occurs. Then, start strategizing.

As Nick points out, mid-level donors consider themselves investors in your cause. Consequently, it’s important to let them take the lead on giving to the programs they care most about,and consistently report on the return (impact) of their gifts.

Ready for a deep dive into all things mid-level donor? The post includes video from Maeve Strathy’s breakout session at Cause Camp 2016 for even more strategy.

Weekly Wow

Major high-fives to Postpartum Support International, and their Climb Out of the Darkness campaign. So far, they’ve activated 1,388 of their supporters as peer fundraisers to spread awareness and inspire 1,996 donors to give!

Track #3: Donor Engagement Cycle: Inspire. Learn. Engage. Ask. Thank. Show Impact by Tina Jepson at CauseVox

Donor Engagement = Happy Donors = Retained Donors.

Keeping the donors you’ve got while engaging new ones is already important. When there’s a downturn in giving, engagement becomes even more crucial.

Donor engagement is cyclical. To keep the relationship growing, continually inspire them with storytelling, educate them about your cause (while you learn about them, too), engage them opportunities for involvement, ask for donations, thank them, and then demonstrate their impact.

Strengthening the connection between donors and your organization makes it harder for things like changes in tax laws to break it.

Track #4: 7 Top Planned Giving Marketing Strategies by Chris at DonorSearch

As the TechSoup post points out, it may be useful to educate your major donors about different giving options, like charitable remainder trusts, charitable gift annuities, and IRA direct rollovers. This kind of planned giving may be more interesting to them, and to you, under the new laws.

Before anyone can make these kinds of gifts, they have to know they exist and that you accept them. That’s where marketing comes in. This post from DonorSearch is a thorough resource for marketing planned giving, including how to include planned giving in your existing marketing materials, creating new materials (like a page on your website, and a brochure), marketing in person, and branding your planned giving program.

I think one of the best points Chris makes is that when you’re marketing planned giving you must lean more towards sentiment than technicalities. It’s easy to get caught up in the minutiae of different kinds of gifts, but the real reasons people make planned gifts are just as emotional as they are financially savvy.

Bonus Tracks

Kittens don’t work for you?

By The Way…

Since we’re talking about predictions, allow me to make one: Community-driven fundraising is going to be increasingly important as the giving landscape changes.

And let’s be real: Even without any tax law changes, it’s a challenging fundraising world out there. Everyone is bombarded with messages and attention is at a premium. Getting your message out, even to people who would like to hear it, can be difficult.

Community-driven fundraising is an approach that supercharges human connections to cut through the noisy world and turn supporters into advocates for your cause.

To learn how to incorporate it into your fundraising year-round, strengthen your donor relationships, and connect with new donors, check out our free webinar training here.

Thanks for reading!

– Megan

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P.S. Questions about this week’s mix? Suggestions for next week? Don’t leave me in the dark. Let me know by emailing me at blog@causevox.com.