Running a small nonprofit organization is never what anyone would even remotely consider “stable.” But last year, just in time for Christmas, we got a monkey wrench of gargantuan proportions: the new Tax Code.
We consider it a “monkey wrench” because we know what the law says, but we don’t know what the impact will be. However, most prognosticators are predicting a substantial decline in charitable donations. Some say that the reduction may be as much as $14 billion fewer contributions this year.
Why? That hinges almost entirely on the behavior of middle-income donors.
According to the Philanthropy News Digest:
“While the legislation does not eliminate or reduce the deductibility of charitable donations, it does nearly double the standard deduction used by two-thirds of American taxpayers to $12,000 for individuals and $24,000 for married couples.
As a result, many moderate-income taxpayers who currently itemize deductions may find that it’s no longer beneficial for them to do so, leading to a sharp reduction in small donations to mainstream charities.”
Ouch.
As someone that has deposited a LOT of $25 checks, I can tell you two things: 1) they add up quickly, and 2) those donors are INCREDIBLY important to the fiscal wellbeing of our organization. For many small and mid-sized organizations like us, those donors represent the bulk of our donor base.
Many organizations (like us) are in the process of planning our budgets for next fiscal year (starting July 1), and we now have a wild card that just reduced even the most calculated forecast to a “best guess.”
AND, since the majority of charitable donations are traditionally made at the end of the calendar year, we’re going to have to wait 12 months from now to see how good that guess was.
The unknown variable is how much a tax deduction serves as a motivation for those middle-income donors that will be less likely to itemize.
Which gets directly to the heart of WHY WE GIVE. (In this instance, “we” refers to Americans in general.)
The first time I made a charitable contribution (to a Jerry Lewis MDA telethon in the ‘70s), my motivation to do so was not a tax deduction. I was moved by a story I heard and I wanted to help.
To this day, that doesn’t come into the equation. At least, not for me. (But then, I suppose, you probably have to make –unfortunately– more than I ever have for that to be a motivating factor.)
I always include the standard language in all of our fundraising appeals: “contributions are deductible to the extent of IRS code.” But that’s never the REASON for the appeal. That’s not why I ask friends, family and complete strangers to give me money. “Hey pal, you look like you could use a tax deduction.”
We once had a board member that was terribly uncomfortable with the funding model of the nonprofit sector as a whole. Something of an admitted socialist, he believed that the true benefits of our work were realized by society-at-large and (since our constituents did not have the capacity to pay for our services) that the funding should come from taxation.
While I sympathized with his dilemma, the reality is that THIS is the world in which we live. And the work that we are doing can’t wait for an economic and societal shift of such a degree. And with the new tax code, we (as a society) are getting further and further away from that kind of social service funding model.
So, now what? How do we work within this brave new world of tax law? How do we generate the support needed to continue the delivery of our services?
As the great management guru Peter Drucker wrote, nonprofit organizations fill the gap that the private sector either can’t or won’t. And he recognized that it was often difficult for those with a free enterprise perspective to calculate the value of the work of the nonprofit. As he put it in his 1990 book Managing the Nonprofit Organization, “What is the bottom line when there is no bottom line?”
He went on to answer his own question saying that “[Nonprofits’] ‘product’ is a cured patient, a child that learns, a young man or woman grown into a self-respecting adult; a changed human life altogether.”
That is, I think, the answer to my “now what” question.
We have to focus on the WHY of our work to get at the WHY people give.
That need is not going to change. It’s not going away. Meeting that need must remain the focus of our work and it must remain the reason for our support. That means we have to go beyond just telling good stories about that work.
We have to connect our donors to that work so that the reason to give is clear and it’s a personal connection.
It’s still a story, but the donors are now part of that story, not just the audience.
What’s that look like? I don’t know. Your guess is as good as mine. But I can tell you for sure that it’ll be on the agenda of our first board meeting this year. And I’d be willing to bet that we won’t be alone.
If it causes us to re-examine our mission and our work and messaging… good. That’s what we’re supposed to do: evaluate our work and get better at doing it.
It’s still the same work. But the landscape just got a whole lot different. We just have to adapt and evolve. It’s only natural.