November 13, 2019
Federal Tax Law Change Did Not Seem to Hurt Nonprofits in 2018

February 7, 2019 — Early analysis of charitable giving in 2018—anxiously watched by nonprofits in Massachusetts and elsewhere for the impacts of the new federal tax law, which reduced the number of taxpayers who would itemize deductions—indicates mildly positive fundraising results for 2018, compared to 2017.

Fifty-four percent of fundraisers at nonprofits surveyed last month by the Association of Fundraising Professionals (AFP) said they raised more funds in 2018 compared to the year before, while 28% raised about the same and 18% reported raising less money.

Mike Geige, president and CEO of AFP, said that the 54% increase is "cause for concern," because in a strong economic climate, as was the case in 2018, other surveys show that 60% to 65% of respondents typically report higher fundraising results over the previous year.

George McCully, founder and CEO of the Catalogue for Philanthropy, a Watertown-based nonprofit that works to promote charitable giving through donor education, said, "Research has shown that while tax considerations in some cases may affect the level of a donor’s gift, the decision of whether or not to give in any specific case is made on value, not tax, considerations."

Approximately a third (36%) of the 384 AFP members participating in the 2018 Year-End Fundraising Survey reported the economy had a positive impact on their fundraising, while 35% indicated it had no or very little impact. A smaller portion (29%) felt the economy had a negative impact on their development efforts.

Approximately 54% of respondents said the changes in federal tax law had little or no impact on their fundraising, though 37% said the changes had a negative impact. Nine percent reported the tax changes having a positive impact on giving to their organization.

According to AFP, in general, respondents did not see the tax changes having much impact on donors. An overwhelming majority (73%) reported that very few or no donors expressed confusion or uncertainty about the tax changes.

An even higher proportion (81%) indicated that very few or no donors expressed plans to delay giving until 2019 or use techniques like “bundling” to take advantage of the itemized charitable deduction. “Bundling” refers to donors giving every other year or every three years to accumulate sufficient gift levels to give to a charity and take advantage of the itemized charitable deduction.

The new tax law, which took effect Jan. 1, doubled the amount of the standard deduction that individuals can claim on their tax returns, effectively raising the cost of making charitable contributions. Many people feared that this could slash the number of individuals utilizing the charitable giving tax deduction by more than half, leading to reduced charitable giving.

A preliminary picture of charitable giving to Massachusetts organizations is not yet available and an accurate assessment may be not be forthcoming, as calculations of charitable giving typically rely on analyses of deductions taken on federal tax returns. With many people continuing to make charitable donations, but not itemizing those contributions on their tax returns, capturing those giving levels is difficult.

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