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With the highly anticipated GOP Tax Bill in full gear, there is a need to take a critical look at how the new laws will affect giving to nonprofits. Here are some of the new tax laws,  how they will affect both corporate and individual giving, and how nonprofit organizations can maximize the new opportunities the new tax laws present. First, let's see some provisions made in the new tax laws.

  • Doubling standard deductions from $12,700-$24,000 for all married couples and $6,350-$12,000 for individuals.
  • The allowed rate (?) of charitable donation doubled from 50-60% of the adjusted gross income.
  • The doubling of filers from $5.5-$11 for single single filers and $22.4 million for married filers. (Single filers are taxpayers who are unmarried or legally separated as at the last day of the year under review and must only file their taxes under the "single' filing status).
  • The reduction of the corporate tax rate from 35-21% on profits. This is aimed at keeping more corporate profits in the United States.

What This Means for Nonprofit Fundraising

The United States Congressional Joint Committee on Taxation is of the opinion that the new tax bill will see to the reduction of the number of U.S. citizens who itemize taxes from 33%-5%. Due to this, there has been an estimated reduction in annual giving of up to $20 billion. This huge drop is expected to obliterate the exciting philanthropic growth witnessed since 2015.

However, the changes to  corporate tax regulations are likely to offset the drop in individual giving. Most of these corporations will be left with excess profits as a result of the cut in corporate taxes. A large number of big corporations have announced huge increases in their donations, thus, we may expect a significant increase in corporate donations. However, these corporations may not be incentivized enough to reduce their tax bills with donations to nonprofits.

Nevertheless, these new tax laws may affect some charity organizations more than others, especially community-based charities. These types of charities have been shown to benefit more from the charitable donations of middle-income U.S citizens.

Ways to navigate these tax changes

  1. Aim High and Low

Nonprofits will likely lose most donors who gave beyond the standard deduction limits last year but fall below the increased deductions under the new tax laws. In spite of this, nonprofits should consider ramping up their efforts around the low-level donors and donors that can make up to $12,000 charitable gifts annually.

  1. Leverage on Direct Mails and other Annual Appeals

It is a known fact that low-level and direct mail annual appeal donors give more because of the mission of the receiving nonprofits and not for the tax benefits of such charitable giving. Thanking such donors for their support thus far and making them understand why you need their support now more than ever with cogent reasons will motivate them to give more.

  1. Take your case to large foundations

Re-examine your relationship with large donor organizations and foundations who might be in a position to make larger donations. Do all you can to reestablish contact with your old donor foundations and let them know why your nonprofit needs their lifetime support.

  1. Market your mission

You need to find people who feel connected to your mission. Invest in fundraisers who are interested in building relationships. Invest in constant outreaches and make people who support your mission feel valued and appreciated.

As the effects of these new tax laws begin to sink in, there is a need for every nonprofit to go back to fundraising basics, take another look at your donor groups, find opportunities that will work for you, and find your ways around the new tax laws and the restrictions they bring.

Last modified on Sunday, 24 March 2019
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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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