By Lisa Cirincione, Senior Resource Development Associate at Joining Vision and Action
In my last blog, I noted that the number of people in the United States who donated to charity fell in 2018 compared with 2017. And I pointed out that the Tax Cuts and Jobs Act of 2017 (TCJA) might be a contributing factor. But, you may have been thinking, didn’t corporations benefit the most from the tax reform?
Yes, they did! And their giving to nonprofits did go up last year. Giving by corporations increased by 5.4 percent in 2018, totaling $20.05 billion. However, they can (and should, in my opinion) give more. This giving represented only 0.9 percent of their pretax profits. [1]
Mixed news on foundations’ giving
We can all be grateful that foundations continue to kick butt working to make our communities great places to live. In 2018, they went above and beyond their legal requirement to distribute 5 percent of their assets and gave more—7.3 percent, on average, for total of $75.86 billion.
Among a sample of foundations with less than $50 million in assets, the average distribution ratio was highest among small foundations (those with less than $1 million in assets)—they granted a whopping 14.2 percent of their assets. Midsize foundations (those with assets between $1 million and $10 million) followed, granting 8.8 percent; and large foundations (those with assets between $10 million and $50 million) granted 5.9 percent of their assets.
In looking back at foundation giving, we see that foundations have almost always given more than the minimum they were required to give. Still, there is room for concern. In 2018, although total grants and the size of grants by midsize foundations increased, [2] both small and large foundations awarded fewer total grant dollars, and their average grant size fell. And when we look at foundations’ giving in 2018 cumulatively, there was some softening, as foundations of all sizes gave slightly less in 2018 than they did in 2017.
How is it going in 2019?
Concerningly, the data from the first quarter of 2019 shows that giving by individuals is down. The Fundraising Effectiveness Project reported that for nearly every key metric, giving between January and March 2019 declined on a year-over-year basis. [3]
The report also found that the number of new donors fell 10.5 percent compared with the first quarter of 2018; the number of newly retained donors who gave to an organization for the first time in 2018 and gave again in the first quarter fell 7.5 percent on a year-over-year basis; the number of repeat retained donors fell 3.6 percent; and the number of recaptured donors who had previously lapsed but gave in the first quarter fell 1.8 percent.
Depressing, right?
What’s coming?
After the TCJA, only about 18 million taxpayers itemized their deductions [4]—down from 46.5 million in 2017, according to estimates from the nonpartisan Joint Committee on Taxation. As income inequity continues to grow, the number of people who claim the standard deduction will grow with it.
Republicans and Democrats have both contemplated making the charitable contribution deduction an “above the line” tax break, meaning that taxpayers could claim it regardless of whether they itemize their taxes. Such a change, however, is unlikely to pass in the near future because it could cost as much as $515 billion over a decade, according to estimates from the Tax Foundation. I guess our Congress is more comfortable losing tax revenue by collecting less from corporations than by giving people a reward for donating to nonprofits.
Nonetheless, there are very smart people developing policy options that would extend the charitable deduction to taxpayers who claim the standard deduction, so maybe they will change legislators’ minds. If you are interested in learning more about some of those policies, I highly recommend this report commissioned by the Independent Sector.
Conclusion
So if you are skipping to the end of this blog, here is the key takeaway. In 2018, fewer individuals gave to nonprofits, but gifts from foundations and corporations made up for that decline in giving. Is that what your organization experienced too? We’d love for you to leave a comment telling us about what you are seeing.
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