As the final details of Republicans’ tax overhaul are hammered out, some nonprofits are pushing a simple message to donors: Consider giving this year before the tax changes — including to valuable deductions and stock gifts — go into effect.
Congressional measures will probably alter giving incentives in various ways, experts say. For instance, both the House and Senate tax bills, which will need to be reconciled in a conference committee and passed by both chambers, would double the standard deduction that any American is eligible to take. Experts say that move would result in far fewer people itemizing and thus getting a tax break for charitable donations. Many people may find themselves in lower tax brackets, too, which would reduce the size of their charitable deductions.
Potential changes to the estate tax and how stocks can be donated also have some charities worried — as do cuts to federal programs that aid nonprofits’ work that could be triggered by the deficits the tax bills are expected to cause.
Talking to Donors
Some nonprofit institutions have refrained from talking to donors much about the tax bills — the final version of which Republicans hope to get to President Trump’s desk by Christmas.
“There is so much unsettled that it would be difficult to make assumptions about what impacts might look like so we have not initiated discussions with donors on the topic,” says Kim Tobin, vice president for advancement at Colorado State University, in an email to The Chronicle. “Interestingly, we haven’t received inquiries from donors about the topic.”
Others note that the tax measure probably isn’t as important a factor in giving as are donors’ personal financial situations or concerns about the economy.
A potential correction in the stock market that economists say is long overdue seems to be even more important to affluent donors as the tax bill, notes Gregory Sharkey, senior philanthropy adviser at the Nature Conservancy.
“Some donors are making large year-end gifts in large part because of those two factors — and I would say that the stock-market factor is a lot bigger than the tax-reform factor,” he says.
But the lack of finality on the tax overhaul hasn’t stopped other charities from talking to supporters about it.
“If you are a taxpayer who itemizes, it probably makes sense to accelerate some charitable contributions into 2017 to get a larger income-tax deduction this year,” wrote Mary Kay Mark, director of planned giving at the Greater Milwaukee Foundation, in an email to donors Wednesday. She noted that an increase to the standard deduction could result in many people seeing no tax benefit for their contributions in 2018. She encouraged supporters to talk to their tax advisers to assess their options.
Nonprofits should be sure to make such pushes, argues Thomas Bognanno, president of Community Health Charities, which helps raise awareness and money for more than 2,000 health and wellness organizations. “You’ve got to play on what’s in the headlines,” he says.
He added: “The message should be: ‘Give to us now because if this tax reform goes through, we could be in trouble in years to come.’ "
Below are examples of how some nonprofits are talking to donors about the tax overhaul:
Pointing Out Stock Gift Changes
The Community Foundation for Greater Atlanta is calling attention to lesser-known proposals pushed by Republicans, such as a measure in the Senate bill that would force investors to use what is known as the FIFO method, which would change the way people sell and donate stocks. The highly technical provision could make it more difficult for donors to give stocks that have grown the most in value and therefore would reap the biggest tax benefits, says Christy Eckoff, director of gift planning.
“We’re encouraging people with highly appreciated assets to front-load their charitable giving this year,” she says.
She added that the grant maker is also encouraging donors to give to or start donor-advised funds charitable accounts that allow donors to take advantage of tax benefits for gifts now but wait on deciding which charities to support.
Last Thursday, the organization sent an email to donors encouraging them to speak with their advisers about donating assets that have gained value and potentially starting a donor-advised fund.
In an email to donors and financial advisers last month, the community foundation addressed the tax overhaul head on: “Currently there is great uncertainty around tax reform and what that means for the value of charitable deductions. Many of the current proposals, while keeping the charitable deduction, dramatically reduce the value of a charitable gift. With the current tax rates and capital-gains rates, charitable giving provides a great bang for your buck.”
Offering Advice and Guidance
Some colleges are acting as trusted sources of information for their donors about the potential implications of the tax changes, says Sheryl Bourgeois, executive vice president for advancement at Chapman University in Orange, Calif.
The university is weighing whether to send a message to donors next week notifying them about some of the most significant looming tax changes — though some trustees say the college may want to wait to see if there are significant updates from Republicans before doing so.
In conversations with donors, Ms. Bourgeois says fundraisers are telling supporters they may want to accelerate gift pledges to avoid any changes that would eliminate or reduce their deductions. She says the message is: “If you’re worried, you might want to take action now before the close of the year.”
The university also shared a memo this week with trustees that touched on potential tax changes to education tax credits and other items. The purpose of the note was to educate trustees about the tax overhaul so they could speak about it with alumni and supporters, Ms. Bourgeois says.
The letter noted the standard deduction: “Most believe this will significantly reduce the $1,000 to $10,000 level of gifts to universities.”
Answering Donors’ Questions
Some nonprofits are only responding to questions donors have about the tax overhaul, not taking active steps to talk about the measures.
Mr. Sharkey, of the Nature Conservancy, says that when asked, he has highlighted to donors some of the bills’ major provisions affecting charitable gifts — like the doubling of the standard deduction and the potential changes to tax brackets. He notes to supporters that it’s still uncertain what the final bill will contain.
“What I’m telling donors is, ‘Look, if you are concerned about the uncertainly, you want to talk with your advisers and see if it makes good sense to make some of your gifts this year when you do have tax certainty.”
It’s important to talk to donors individually about the tax implications of charitable gifts, because everyone’s personal financial situation is different, says Robert Wahlers, vice president for development at Meridian Health Affiliated Foundations.
Meridian Health probably won’t send any notices to donors about the tax legislation, he says, but it will send them a message with simple tips for end-of-year tax savings — like ensuring they give to qualified charities and making their gifts before year’s end.
He added: “Our message consistently is about planning and encouraging [donors] to have regular conversations with their advisers,” he says. “And where we can educate them on concepts, we try to do so, but we aren’t really trying to react to changes in the market or react to changes in Congress that are based on pending bills.”
If and when a bill is passed, Mr. Sharkey will start to bring up the topic with donors, he says, rather than waiting for them to ask about it: “You better believe next year I’m going to be out there asking donors, ‘How is tax reform likely to affect your philanthropy?’ Once we have a bill and we know what we’re dealing with, then absolutely we should be in conversation with donors, and we should be proactive in bringing it up.”
See an email the Greater Milwaukee Foundation sent to supporters about Republicans’ tax overhaul.
