July 18, 2019
Nonprofits, Foundations Wary of Reductions in Charitable Giving

May 25, 2018 — A majority of nonprofit and foundation leaders are concerned about a potential decrease in charitable giving in the wake of federal tax reform that went into effect this year, according to a recently completed national survey, although the full impact won't be known until after the 2018 tax year concludes.

The survey, conducted by the Center for Effective Philanthropy (CEP), a Cambridge-based nonprofit organization that develops data to help funders improve their effectiveness, found that 53% of nonprofits and 53% of funders were concerned that the new tax law about lead to reduced charitable giving.

Only 19% of nonprofit CEOs indicated they were not concerned about reduced giving to their organizations, and only 14% of foundation leaders were not concerned about reduced giving to the sector generally.

About 30% of both nonprofits and funders said they didn’t fully understand the legislation yet or weren’t sure what its effect would be on giving.

The new tax law, which took effect Jan. 1, doubled the amount of the standard deduction that individuals can claim on their tax returns, which, according to analysis by the Tax Policy Center, could slash the number of individuals utilizing the charitable giving tax deduction by more than half, leading to reduced charitable giving.

Massachusetts nonprofit leaders said the new law would lead to lower charitable giving, potentially costing Bay State nonprofits millions of dollars. However, The Wall Street Journal editorial board opined that tax deductions don’t drive charitable giving, and with more money in their pockets, taxpayers may give more.

While numerous Massachusetts nonprofits have recently posted fundraising records at their annual galas, the lack of a comprehensive nonprofit fundraising source makes it difficult to fully discern current charitable giving levels.

According to the CEP survey, based on responses from 170 nonprofit leaders and 187 private and community foundation leaders:
  • 33% of nonprofits and 39% of foundations suggested that foundations could help build the capacity of nonprofits to respond to the legislation.

  • 25% of nonprofits and 20% of foundations suggested that foundations could help educate nonprofits and the public about the consequences of the legislation.

  • 36% of nonprofits, but no foundations, also suggested that foundations could help nonprofits raise support by broadly promoting the importance of the nonprofit sector and its work.

  • 26% of foundation respondents said they were not sure how foundations could help.
"While the actual implications of this new legislation won’t be tallied until end-of-year fundraising drives, the roles that nonprofits and foundations play need not wait," noted Kevin Bolduc and Ellie Buteau, the study's authors, in a blog post.

"Foundations can certainly talk to nonprofits now about opportunities to strengthen the fundraising and economic-planning capacity of nonprofits. They can consider whether they are in a good position to educate nonprofits and the public at large about what the new legislation means and why charitable giving matters regardless of the laws for deductions. And they can reflect on their opportunities to raise their voices—alone and together—to reinforce for all of us that nonprofits, their work, and their beneficiaries are important and worthy of support."

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