New Study Finds Minimal Tax Reform Impact And Offers Fundraising Guidance

Leremy/shutterstock

Leremy/shutterstock

Despite dire predictions that charitable giving would drop when tax reforms took effect last year, giving was actually quite healthy in 2018, according to a new study that confirms earlier findings by Inside Philanthropy.

The new research, which surveyed 537 charitable organizations, as well as more than 800 individuals who head their households’ financial decisions, also offered some fundraising ideas for organizations seeking to increase contributions. 

Business as Usual

Fundraising campaigns in 2018 fared similarly to those in 2017, according to the study conducted by the Nonprofit Research Collaborative, a group including the Association of Fundraising Professionals and other fundraising organizations. The findings surprised the researchers, who expected that charitable giving would fall due to the doubling of the standard deduction under the 2017 Tax Cuts and Jobs Act and stock market volatility at the end of last year.  

But 73 percent of the organizations surveyed reported meeting their fundraising goals, with a majority (63 percent) reporting increases in charitable receipts, about the same as in 2017. That’s much better than other years, such as 2010, when only 52 percent of organizations met their fundraising goals. And what’s more, organizations feel confident about fundraising this year, with 60 percent predicting increased donations in 2019.

Meanwhile, nearly 90 percent of individual donors, regardless of income, said they gave the same or more in 2018, compared with 2017. And among half of the donors who made comments about their giving on the survey, only 11 percent wrote that taxes did or will affect their charitable contributions.

Altogether, the findings suggest that the tax reforms that took effect last year did not impact giving, as multiple experts had predicted. “Tax law had little impact on charitable receipts for the majority of charities,” the researchers wrote.

How Nonprofits Can Do Better

The study contained some other fundraising implications:

“Face-to-face” methods of fundraising saw the most growth in 2018, with 97 percent of  organizations reporting major gifts, 92 percent receiving gifts from board members, and 90 percent realizing bequests and other planned gifts. And another 77 percent said they secured new commitments for planned gifts last year.

Growth in direct mail giving was down significantly—just 42 percent, compared to more than 50 percent in 2017, the lowest share of organizations reporting growth in direct mail contributions since 2010.  

“It can be very hard for organizations to track whether someone gave because of a direct mail appeal or an online appeal,” said Melissa Brown, the lead researcher of the study. “But organizations now have the opportunity to reach five generations of donors, and each person has a different preference for how they receive information. Organizations find this very challenging, but they need to adapt to the multitude of communication channels out there. They have to be very nimble about monitoring, and ready to change a method on a dime.”

Good stewardship is critical. The study found that organizations that met their fundraising goals offered more—in the form of communications with previous donors and invitations to events—than others that did not meet their goals.

The activity most strongly associated with meeting fundraising goals was sending communications that explain the impact of an individual’s gift without asking that person for more financial support. Fundraising experts like Penelope Burk of Cygnus Applied Research have advocated exactly that approach for many years, but even sophisticated charities have been slow to take her advice, choosing instead to remain in constant solicitation mode and turning donors off.

The DAF Factor

The study asked organizations about 2018 gifts from donor-advised funds for the first time since the annual research began to assess the giving climate in 2010. A large number of survey respondents, 80 percent, reported receiving money from one or more donor-advised funds last year, with 92 percent of those indicating an increase in such gifts for 2018.

Survey respondents and other organizations that offer donor-advised funds “reported that they had a lot more donations from people who wanted to take deductions before the tax law took effect, and it no longer made financial sense to itemize,” Brown explained.

Historically, noted Brown, tax law changes have resulted in a spike in giving as donors “lock in” advantages of donating that may lessen or disappear in a new tax environment. She said that she expects gifts from donor-advised funds to decrease or level off this year and beyond.

Asked if they intended to alter their giving in 2019 based on what they know about recent tax reform, 16 percent of donors said they planned to change, with some remarking that they might reduce giving if it does not benefit them from a tax standpoint, while others said they’d give more due to increased income. 

“Goshdarnit, charities should keep asking,” Brown said. “Don’t assume that people won’t give without having the tax advantages, that’s crazy talk! People give because they care about the mission and what the charity does.”