A recent analysis by Grants Plus “What does tax reform mean for grant funding?” outlines the implications of the new tax law on philanthropic giving. Grants Plus warns of a “perfect storm” that will impact philanthropic giving if individual donations fall at the same time that federal grants and contracts, and state and local budgets, are reduced or even cut.
The Grants Plus highlights the shift in overall giving patterns based on a projected increase of 30 million tax payers who will now take the standardized deduction on their individual taxes (from the Indiana University Lilly Family School of Philanthropy), as well as a drop in charitable donations of between $16 billion and $24 billion per year (from the Council on Foundations).
Non-profits feeling the pinch – The new tax law will not affect all non-profit organizations in the same ways. Although budget uncertainty is likely for all organizations, there may be significant differences in giving patterns based on donor preferences. Large nonprofits, like universities, museums, and hospitals, are favored by the wealthiest donors, while ordinary Americans donate more to local charities, social service agencies, and religious organizations. Grants Plus suggests that the organizations most likely to be hurt by a disproportionate decline in giving by middle-income donors are those that meet local needs and serve vulnerable communities.
Foundations must make difficult choices – In the short-term, it seems individual donor giving patterns will not affect foundations. With fewer state and federal dollars to work with, however, some non-profits will rely more heavily on philanthropic giving. This means increased competition for fewer dollars, especially for those organizations that provide crisis or safety net services. This means foundations will have to make some tough choices.
What can organizations do?
- Talk with individual donors
- Shore up your funder stewardship and deepen the relationships and trust
- Be alert to changing priorities
- Seek out new sources of support – See Grants Plus tips for finding funders most likely to fund your nonprofit or contact Grants Plus about our comprehensive Funding Scan.
- Engage your staff and board
Advocacy & Communication Solutions (ACS) has previously partnered with Grants Plus to assist organizations in meeting their objectives. In addition, ACS continues to help foundations and non-profit organizations who rely on philanthropic giving to strategically communicate about their work to target audiences and position themselves to achieve their goals.