Is it True the New Tax Bill is the End of Charitable Giving?

No! However, if you believe many in the media and non-profit world, there is plenty of gloom and doom over the new tax bill.

Since the standard deduction will double under the newly passed tax bill, predictions from the Congressional Joint Committee on Taxation, and others, suggest the number of Americans who itemize their taxes will drop by 30 million—accounting for $100 billion in itemized charitable gifts. (Separate Research from the Independent Sector and the Lilly Family School of Philanthropy, and the Tax Policy Center shows that this change will result in a decline of giving between $13 – $20 billion per year.) The assumption is more Americans will do better on their taxes by taking the increased standard deduction as opposed to itemizing their deductions; and therefore, the tax incentive for charitable gifts will disappear for those who do not itemize.

So what are non-profits to do?

First, fear not! Do not buy the gloom and doom! I believe these predictions grossly overstate the number of taxpayers who will no longer give, or give less, because there isn’t a tax benefit. Given the income level of the taxpayers this new law affects most, the tax benefit for charitable gifts is not very significant, so these donors are likely not giving for tax-related reasons anyway. Secondly, if these taxpayers are allowed to keep more of their income, it simply means they are more able to give.

Lastly, and most importantly, understand most donors give because they believe their gift is making a difference, not because they will receive a tax deduction. There will always be a small percentage of donors who give primarily for the tax benefit. However, those donors are not as likely to become faithful, long-term partners.

The bottom line is the new tax bill does not change much of anything at all. Non-profits should be concentrating on all the same things they have been (or should have been) focusing on all along, which is communicating to donors the significant difference their past giving has made and their future giving can make. From mass appeals to one-on-one interactions, all communications should be rooted in a sincere desire to grow a genuine relationship between the organization and the partner, without concern for gifts in the future. Sincerely focusing on the donor’s needs, rather than the organization’s needs, is the key to developing loyal, long-term partners.

When nonprofits marry a good strategic plan with all the related policies, procedures, goals, timelines, clearly defined tasks and metrics for success with a truly donor-focused philosophy and a board involved in fundraising, it is a recipe for long-term fundraising success that will empower the organization to expand all it does for those they serve, regardless of tax law.

Non-profits should be aware the new tax bill does offer something important to donors age 70½ or older. It’s called the charitable IRA rollover. Rather than taking the Required Minimum Distribution from their IRA, donors can now direct that distribution to a charity. Doing so would lower their taxable income and therefore the amount of income taxes they pay.