We’re 7 months through the year. Those whose fiscal year ended June 30^thare now preparing their year-end board reports. Those whose fiscal year finishes on December 31^stare figuring out how to close whatever income gap is likely.

About this time each summer I stick a Post-it note on the edge of my screen with what I think will be the two most frequent excuses given by fundraisers for failure to meet their 2019 projections.

This year I’ve picked the “Tax Laws” and “Political Fundraising” as the top two reasons fundraisers will use as excuses when explaining shortfalls to their CEOs and Boards.

“Tax Laws” because nearly two years after the passage of the Tax Reform Act of 2017 (also euphemistically titled “The Tax Cuts and Jobs Act”) there’s still an abundance of confusion, misunderstanding and misinformation over the law’s effect which many pundits and the trade press predicted would result in tens of billions less in charitable contributions.

“Political Fundraising” because of the run-up to the presidential and congressional campaigns for the 2020 Election which “surely” will result in a billion-plus $ being siphoned from the nonprofit till.

So, why do I call these marketplace factors “excuses”?  Here’s why:

• If these factors represented the true threat and depressant to the overall nonprofit sector –a general threat like a major recession — that many claim, then we would be seeing a drop-off among virtually all organizations. But that’s not the case. Some organizations are posting a banner year. Others are making excuses.

I’ll come back to an explanation of why I believe these are convenient excuses, but first let’s take a look at the facts and how you should factor these facts into your strategy.

Tax Reform and the Itemized Charitable Deduction.

Anxiety ran high in the months before passage of the 2017 Tax Reform Act. What would be the negative effect of limiting the itemization of charitable deductions? Most predictions were dire; some estimated loses as ranging from $25-$30 billion.

The Agitator took a contrarian view. In a post titled The Tax Man Cometh Nick summed up our concerns succinctly:

“So, what do you do differently if tax deductibility went away entirely tomorrow?

“Nothing.

“Tax deductibility is not a reason to give. It is something that makes giving cheaper. If it’s cheaper, you get more giving; if it’s more expensive, you get less. But those are mere points on a line.

“As much as you can get out of removing friction and costs out of the giving process, you can always always make a bigger impact by addressing the core reason a person gives.”

After tax reform became law Nick returned with a new The Tax Man Cometh series:  Part 1, Part 2, Part 3 with many Agitator readers weighing in with thoughtful comments.

Now… nearly two years after passage of the new tax law, despite predictions of disaster,  charitable giving is up.

If you’re interested in the details and if you value experience and research in viewing the effect of the 2017 reform act I urge you to read the always-thoughtful insights of Michael Rosen in his All You Need to Know about Decrease in Itemized Charitable Deductions and I Told You So: Charitable Giving is Up! appearing in in his blog Michael Rosen Says…

Here are two key points from Michael’s analysis on the effects of the Tax Reform Act.

• Most fundraising pundits and trade press got it wrong. Instead of the feared $20 billion-plus decrease they projected for 2018, Michael and his group of pros indicated that the decrease would be slight and in fact there might actually be an increase.

• In fact, the release of Giving USA 2019proved Michael to be correct. Philanthropic giving increased by $2.97 billion between 2017 and 2018. (If you have a CEO or board or are personally interested in the detail I urge you to read Michael’s analysis.)

So much for Tax Reform Act of 2017 “excuse”.

FAR MORE IMPORTANT than his terrific analysis on the effect of tax reform is this key takeaway from Michael: “The charitable tax-deduction is not a substitute for a solid case for support.”

“…for the majority of donors, tax issues were never a viable consideration when it came to charitable giving.  Today, tax considerations are an issue for even fewer people.

“This all means that the classic, but foolish, year-end appeals touting the tax benefit of giving before December 31 are even more irrelevant than ever.  Furthermore, it means that the relevance of the idea of year-end giving itself has been diminished. If someone doesn’t need to do year-end tax planning, why would they need to wait until year-end to donate?” [Emphasis added.]

In a nutshell Michael recommends you take these three actions:

1. Stop Talking about Taxes. 90% of the public will not be able to take advantage of a charitable gift tax-deduction. The exception is those donors you know can take advantage of the deduction. But even there, the case for support should be emphasized over taxes.
2. Develop a Solid Case for Support. In the past too many nonprofits have relied on the crutch of tax deductibility. This was always a faulty approach because historically most taxpayers could take a deduction by giving to any  Even more faulty –less effective—now that 90% of taxpayers no longer itemize.
3. Do Not Focus on Year-End “Do not rely so much on the idea of year-end giving. In the past, many donors might have evaluated their tax position before making their year-end gifts. Given that so few people have a tax-review reason to delay giving until year-end, there’s less of a reason for fundraisers to put the bulk of their efforts into year-end appeals.  Instead, you might find it more advantageous to appeal to prospective donors at other times of the year when other charities are not bombarding them with competing solicitations and when their disposable income is not being diverted to spending on holiday gifts for family and friends.”

Competition from Political Fundraising

The second entry on my “top excuses” Post-It goes to the flood of political fundraising appeals, already at a flood, and likely to overflow the levees of tolerance and good taste in the months ahead.

We’ve covered this before in Will Political Fundraising Harm Your Bottom Line and if you’ll read that post you’ll get a good idea of what some Agitator readers think about the effect of political fundraising on other nonprofits’ bottom lines in an election year.

I have placed election year competition on my “excuses” list partly based on personal experience with scores of nonprofits and partly on the Blackbaud Report Giving in An Election Year: How Political Giving Impacts Nonprofit Support. Both my experience and the Report indicate that generally political giving does not negatively affect other nonprofits.

A few caveats.  My experience with large, national advocacy organizations shows these types of groups actually do better in an election year. This is likely attributable to the fact that donors to these groups tend to be politically-oriented and understand how giving to both types (political and advocacy) tends to reinforce each other.

The Blackbaud Report is based on the 2012 election.  Data from Giving USA collected over many decades also indicate no negative impact.  But given the changing/changed nature of our politics the subject clearly deserves further study.

The point I’d make in defense of placing competition from political fundraising in the “excuse” column is that, just as in the case of tax-deductibility, organizations that are not politically partisan can actually benefit by timing their appeals and tailoring the content of their appeals and overall case for support to take advantage of the political season.

“Excuses” are in your control.

All of which brings me to the essential point behind why I’m unwilling to accept factors like ‘tax-deductibility’ and ‘political fundraising competition’ is this:  Every organization faces these factors, but some thrive, and some don’t. Those who thrive understand that it is the actions the organization takes toward its donors that determine the attitude of the donor toward the organization; the donor’s attitude determines the donor’s action.

So, as you think about year-end giving think about actions you might take, or avoid:  Buck the crowd and avoid the year-end appeal for a more appropriate, less crowded time?  Spend more time and space on your case for support and less on highlighting tax-deductibility?

Faced with a heightened and intense political climate take advantage of the issues your organization works on that are affected by politics and play to that. You might consider seeing if any of your donors also appear on the contribution reports of the Federal Election Commission (FEC) as a way of determining their partisan political interests. However, be alert to the  FEC regulations that forbid the use of FEC donor information for direct solicitation

In an earlier post Making the Most of a Charged Political Climate I recounted some of the decades-long fundraising experience of advocacy organizations in a Presidential election year:

“Bottom line: Take advantage of the climate. Seize the opportunity to drive up the volumes to bring in a maximum number of donors. AND … plan to make a substantial investment in retaining those donors.”

How has the Tax Reform Act of 2017 and/or the 2020 Election cycle affected your fundraising plans for this year and next?

Roger