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Tax Reform Insights

As the Tax Cuts and Jobs Act became law in December 2017, many of our colleagues have provided excellent analysis of the potential impact on the nonprofit sector. We’ve provided links to some of our top picks below.

Today, we’re thinking about the steps that nonprofit organizations can take to prepare for the impact of the new law. These are, admittedly, uncharted waters, but we think that the following suggestions can help weather this potential storm.

Focus on value. And values. The changes to federal tax code means that the standard deduction will nearly double from $6,250 to $12,000 per individual. This may create a perception that donors will be less philanthropic because the deduction is higher. To counter this mis-perception, focus on the role that charitable giving continues to play in serving your mission. Highlight profiles of donors who have sustained (or increased) their giving levels. And since the middle class may feel the greatest impact, this may be just the time to strengthen your “mighty middle”© donor program. (You can learn more here.)

Define the terms on your terms. Weave financial terms into your donor communications. Talk about the “dividend” that a gift will pay in terms of your mission. When appropriate, point out that the increased standardized deduction is the equivalent of the benefit they’d receive from a significant gift. Show your donors that you understand—and care about—their financial well-being, and that charitable giving is still a part of a healthy financial plan.

Be bold. During times of uncertainty, some organizations see a decline in giving because they stop asking. Instead, we encourage organizations to continue inviting donors to invest in their cause. Acknowledge the unusual circumstances, and then state the ongoing need for your services, whether it’s meeting a basic need, elevating the arts, or teaching. For some audiences, it may even be helpful to inform donors about the potential negative impacts of tax reform—including risks to charitable giving.

Don’t forget the impact on estate gifts. Tax reform now allows wealthy donors to pass a larger portion of their estate to heirs without triggering the estate tax. So don’t treat your donors as if the tax savings are the only—or even primary—motivation to include your organization in their will. And for younger donors, focus on the benefits of a beneficiary designation from their retirement accounts or life insurance policies.

Talk to your local community foundation about DAFs. We may learn that the year-end produced a flood of new and increased donor advised funds. Talk with your local community foundation about opportunities to share your organization’s mission and impact with these newly empowered philanthropists.

We’ll continue to monitor the actual impact of tax reform on the nonprofit sector, assess the impact on our clients and colleagues, and share any insights that may be helpful. If you have immediate questions or concerns, don’t hesitate to contact any member of our team to discuss your unique circumstances.

Additional Resources on Potential Impact of Tax Reform.

Laura MacDonald has earned a national reputation for her dedication to the nonprofit sector. She is a Certified Fund-Raising Executive (CFRE) with decades of experience in nonprofit leadership, fundraising, and philanthropy. In 1999, she established Benefactor Group to serve the needs of those who serve the common good.

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