Nation & World

Did tax law change how Americans give to charities?

Early data suggests donations grew slightly

Daytona Beach News-Journal/TNS

A volunteer loads groceries into one of the cars lined up in May to provide a Florida community with free groceries.
Daytona Beach News-Journal/TNS A volunteer loads groceries into one of the cars lined up in May to provide a Florida community with free groceries.

When the Tax Cuts and Jobs Act of 2017 reduced the incentive to claim tax deductions on charitable giving, there was widespread fear that philanthropic organizations would see a steep fall in donations.

Instead, donations nationwide increased 1.5 percent last year, according to an early assessment released Wednesday by the Blackbaud Institute for Philanthropic Impact.

“There was certainly a lot of talk and speculation about whether charitable giving would significantly decrease because of tax law changes in 2017,” said Steve MacLaughlin, vice president of data and analytics at Blackbaud Inc. and senior adviser to the affiliated Blackbaud Institute.

“I think what this first real look at the data shows is, no, that didn’t happen.”

Blackbaud is a publicly traded company based in Charleston, S.C., that makes software used for fundraising and other functions by not-for-profits.

It based its analysis on data from 9,029 not-for-profit organizations representing $31.9 billion in total fundraising in 2018.

Since 2016, donations are up 9 percent, which means that 2018’s rate of increase, 1.5 percent, was smaller than the two previous years.

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Still, not-for-profit leaders said they viewed the 1.5 percent increase reported by the Blackbaud Institute as evidence that households donate because they care about not-for-profits’ missions more than they do about tax deductions.

For example, Interfaith Hospitality Network of Burlington County, Pa., which provides temporary housing for homeless families in churches until permanent residences are found, saw its unsolicited donations increase to $26,000 last year from $23,000 in 2017, director Patricia Lasusky said.

The Network’s larger donors, people who give $100 or $500, “seem to have come forth with more money,” Lasusky said.

“Not everybody gives in order to get a tax deduction. Many people give because they feel that they should give. They feel blessed, they want to bless someone else, or they believe in what the organization is doing,” she said.

Too soon to tell

However, others cautioned that one year is not enough time to draw conclusions about how taxpayers will adjust to the increase in the standard deduction to $24,000 from $13,000 for married joint filers and to $12,000 from $6,500 for single filers.

That increase, along with capping state and local tax deductions at $10,000, means fewer people will get a tax benefit for charitable donations.

“The new habits of the American taxpayers could take time to form. You can’t know what a trend is based on one year,” said Eileen R. Heisman, president and chief executive of the National Philanthropic Trust in Jenkintown, Pa., which manages $6.28 billion in charitable assets.

It’s possible many taxpayers are only realizing now, as they do their taxes, that they won’t get a deduction for last year’s donations, said Abbie R. Newman, executive director of Mission Kids Child Advocacy Center in Norristown, Pa., which works with victims of sexual and physical abuse.

“We’ve been thinking of ourselves as fortunate because we didn’t see a reduction in 2018,” said Newman, who did not have specifics readily available.

“Hopefully we won’t see a change in 2019.”

On its tax return for 2017, Mission Kids reported raising $625,395, not including government grants.

Last year’s gain in donations was uneven across organizations of different sizes.

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While not-for-profits that collect $1 million or more in donations had an increase of more than 2 percent, charities with less than $1 million in annual fundraising logged a 2.3 percent decrease, the Blackbaud Institute reported.

Surrey Services for Seniors, in Devon, Pa., which has a fiscal year ending in June, is a bit behind where it was last year. But CEO Robert Madonna said he hasn’t heard anyone say they were giving less because of tax-law changes.

Surrey’s tax return for the year ended June 30 says the organization raised $1.79 million, including $141,017 from fundraising campaigns and $266,399 from events, but excluding government grants.

Jon Biedermann, a vice president at DonorPerfect, a Blackbaud competitor based in Fort Washington, Pa., pointed to a possible tax-change wrinkle in the data for a not-for-profit fundraising report due out next week from the Association of Fundraising Professionals’ Fundraising Effectiveness Project.

That analysis split donors into three categories based on their largest gifts:

l Up to $250

l Between $250 and $999

l $1,000 or more.

All three categories of donors increased giving in 2017, but last year only donations from the $1,000-plus group climbed, said Biedermann, who is on the board of Giving USA, which publishes a benchmark annual report on philanthropy in June.

That change could indicate that people who no longer itemize because of tax-law changes donated less, he said.

“Obviously, you have to be careful with causation versus correlation,” Biedermann said.

“You can’t say its caused it, but there sure is a strong correlation.”

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