I got an email from a client earlier today. He wrote:
I saw an article in the Washington Post yesterday. It discusses that, with the new tax law, many people will lose the deductibility of charitable contributions because they will become subject to the standard deduction. For individuals 70.5 and older who are subject to “required minimum distributions” from their retirement accounts, the article describes that charitable deductions can still be taken by directing the brokerage firm to contribute directly to a charitable entity.
I wonder whether we could send a letter to our donors who are 70+ telling them about this strategy, perhaps linking to an article, or providing specific language they can direct to their accountants or investment advisors.
Let me know what you think.
Well, I think that it is an interesting strategy. And, you might want to consider sending such a letter, or if you are of an age to take required minimum distributions from ERISA-qualified funds—i.e., retirement accounts like 401 (k), profit-sharing, defined contribution pension plans, IRA Rollovers, and the like—then you might want to think about this for yourself.
But what about all the rest of the population who do not have such a benefit. How do they “claw back” the value of a charitable gift deduction if they no longer can itemize their deductions?
The media—and most especially the press which reports about the nonprofit world—has been filled with hand-wringing articles about how contributions will go way down because of the unintended consequence of the increase in the standard deduction.
This contrarian is not going to pile on and issue another doom and gloom set of warnings in light of the Tax Cut and Jobs Act of 2017. Instead let me share the data with you that describes the key factors driving donations. We know that some people give to support the fundraising efforts of a family member, friend, or neighbor. Others like to create a philanthropic image for themselves or their company. Still others feel guilty saying no to someone expressing a need. These reasons for giving often are understated and certainly under-reported in the research.
The 2016 US Trust Study of High Net Worth Philanthropy conducted in partnership with the Indiana University Lilly Family School of Philanthropy looked at factors driving charitable giving among wealthy households. This biennial study found that donors primary stated motivations for giving were much as they had always been. They were as follows:
- Believing in the mission of organizations (54%)
- Believing that their gift can make a difference (44%)
- Experiencing personal satisfaction, enjoyment, or fulfillment (39%)
- Supporting the same causes annually (36%)
- Giving back to the community (27%)
- Adhering to religious beliefs (23%)
By the way, 18% of wealthy donors in the same study say they gave because of tax benefits which is a drop form 34% in the 2014 study.
Our firm’s prescription for our clients, particularly those who fear the impact of the new tax law, is to communicate effectively and genuinely with donors, express appreciation and let donors know what heroes they are.
In the weeks and months ahead, we are going to focus our efforts on helping clients consider what motivates donors to give and how to:
- Acquire new, first time donors who believe in the cause
- Tell their new donors that they really make a difference
- Convey joy in the gift to the giver
If you want to be part of our new initiative, send me an email to set up a call. In a 30 minute no obligation call, we can begin you down a path of growth in your donor community, upgraded gifts from your existing donors, enhanced retention of donors, and increased lifetime value of each one of your contributors. Write directly to me by clicking here and we will help you focus your efforts on what motivates donors to give.