The tough job of nonprofit fundraising just got tougher. The 2017 Tax Cuts and Jobs Act doubles the standard deduction for individual taxpayers. That change is anticipated to slash the number of taxpayers who itemize their deductions because the standard deduction will be higher for them. One itemized deduction those folks won’t be taking is the one for charitable contributions.
Not getting a tax incentive in the form of a deduction means that many taxpayers will donate less to charity. That will be quite a blow to nonprofits that depend on smaller individual gifts that add up to a significant portion of total income. Fundraisers will have to change their strategies.
With competition for contributions getter fiercer all the time, it’s more important than ever to make a convincing case that funds donated to your nonprofit will achieve results. Donating to a nonprofit is just like making an investment – return on investment (ROI) attracts investors. Nonprofits need to “market” their ROI, or program results, so donors are attracted to “invest”.
In a recent episode of With Good Reason on NPR, best-selling business writer Jim Collins discussed the special factors that make for the most successful organizations in the non-profit world. Those organizations are poised to get results. Listen to his reasoning here.
Collins posits that a commitment to excellence in nonprofits results in outcomes beyond measure. That starts with hiring qualified people who are working for more than their paycheck. No matter their role in the organization, they are passionate about the mission and the effective use of donations. It makes sense – professionals collaborating to serve the community within a clear mission and established practices are positioned to achieve a higher ROI.
If a high ROI on donations isn’t compelling enough, Collins presents his case in another very impactful way. He points out that when for-profit organizations have bad financial results or a product failure, they lose money. Sure, that’s bad; but the overall cost to society when nonprofits fall on hard times is immense – homeless citizens whose children do not have a childhood; formerly incarcerated men and women who cannot get re-entry services for support when they come home; working families who have no money for groceries the last week of each month.
We don’t know exactly what taxpayers will do after losing the income tax deduction for charitable contributions. But no matter what, it’s fair to say that nonprofits with a higher ROI on their program results will attract more contributions from taxpayers who keep donating to charity after the tax law change.