2017 TAX LAW EFFECT ON NONPROFITS STILL BEING MEASURED

By February 26, 2019 Blog

The Tax Cuts and Jobs Act of 2017 brought changes that were worrisome to the nonprofit sector. It nearly doubled the standard deduction—which nonprofits worried would reduce incentives for making donations. The first year under the new tax law is complete and final 2018 data about fundraising is starting to trickle in.

This week the Fundraising Effectiveness Project (FEP) released its 2018 Fourth Quarter Report. Among many of the reports findings is that charitable giving was up 1.6 percent in 2018, but only because of an increase in money from large donations. The total number of donation was down by 4.5 percent, as were retention rates (the percentage of donors who continue to give to the same organization).

When breaking down gifts based on total giving amounts the report found that gifts of $1,000 or more increased by 2.6%, Revenue from smaller gifts decreased. The $250 to $999 range dropped by 4.0 percent, and gifts of under $250 dropped by 4.4 percent.

Since the tax cut was passed into law, the nonprofit sector has been watching fundraising totals like a hawk – trying to find any indication of positive or negative trends.

“I think one of the reasons that we’re seeing more larger gifts is that donors had to give more — and have other itemized deductions — in order to exceed the standard deduction threshold,” said Jay Love in a press releases. Love is the chief relationship officer and co-founder at Bloomerang, one of the data providers for the database at the center of the report.

On the other hand, “smaller gifts also fell, as those donors couldn’t take advantage of the charitable deduction anymore,” Love said.

Love’s insights are backed up by the report and its finding that donors dropped by 4.5 percent from 2018 to 2017. Inside that figure are the following groups:

  • New donors to an organization dropped by 7.3 percent from 2017
  • Newly retained donors, those who have given a second time to an organization, dropped by 14.9 percent
  • Recaptured donors, those who stopped giving to an organization but returned and gave again to the same organization in 2018, dropped 1.6% percent
  • Repeat retained donors, who have been giving to the same organization for at least three years, which increased by only 0.2 percent

“The headline may show an increase in giving, but that increase masks some serious long-term trends that are presenting huge challenges to the sustainability of fundraising and philanthropy,” said Elizabeth Boris, chair of the Growth in Giving Initiative. “Giving is increasing because of larger gifts from richer donors. Smaller and mid-level donors are slowly but surely disappearing—across the board, among all organizations. Philanthropy should not and cannot be just the domain of the wealthy, and the entire sector needs to look at how we reach out to and engage these donors.”

Chart credit: Fundraising Effectiveness Project

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