More Competition for Donations under New Tax Law

The nonprofit community has been holding its collective breath since many taxpayers lost their deduction for charitable contributions under the 2017 Tax Cuts and Jobs Act. In the months after the tax act passed, experts in tax and philanthropy speculated about its impact on overall charitable giving. The first clue came after filing season for 2018 tax returns, the first returns filed under the new law.

Based on 2018 returns filed so far, overall charitable donations were down 2% in 2018 compared to 2017, according to the Giving USA Foundation. Sure, 2% doesn’t sound like much, but it means that the pool of donated dollars got smaller, creating more competition for available donations.

More competition for donations means that nonprofits have to make the most of all the ways that they tell their story – their annual report, website and financial statements (yes, the financial statements). Here’s how:

Annual Report

The hallmark of nonprofit story telling is the annual report. Headline with the impact of the organization’s programs and services on its community and clients. Place a dollar value on specific services and equate them to specified donation levels, helping donors understand the power of their gifts. Include high-level financial information with graphs. Don’t have a big printing budget? Many nonprofits only issue an electronic annual report.

Website

A website could contain materials found in an annual report, but why do that when you can include a link to each year’s annual report, audited financial statements, and other details for donors who want more. Since websites can be refreshed frequently, it’s fairly easy to post upcoming events, features on volunteers and clients, and recent accomplishments. Toot your horn loudly! 

Financial Statements/IRS Form 990

Don’t underestimate the power of numbers. Financial statements tell donors about the sources and uses of funds and the organization’s financial health. Notes that accompany the financial statements help donors understand the numbers. The IRS Form 990 has a narrative section to describe programs and their community impact. Don’t scrimp on the narrative section, especially since it’s a public document that could be read by anyone. 

A 2% reduction in overall charitable donations because of the 2017 Tax Cuts and Jobs Act is bad news for nonprofits. More competition for a smaller pool of available donations means that telling nonprofit stories in annual reports, websites and financial statements is more important than ever.