The end of 2017 brought with it tax reform. From a nonprofit organization perspective, this reform has created a degree of industry concern around its potential effect on charitable giving.
For many organizations, fundraising is the lifeblood of their operations and can directly affect their ability to fulfill their missions.
We believe that, at this time, the tax reform implemented should not have a material effect on the overall level of charitable giving, mainly due to the composition of donor types. According to the Giving USA Foundation, 72% of charitable donations came from individuals. On an individual basis, the after-tax cost of charitable giving did not rise significantly (with the top tax bracket moving from 39.6% to 37%), and tax deductibility is not cited as a material motivation by donors in industry surveys.
Our inference from this is that tax reform likely will not materially affect individual donors’ propensity to make charitable contributions.
From an outlook perspective, we anticipate there may be some major tailwinds supportive of future charitable giving levels and some minor headwinds antagonistic of future charitable giving levels to consider in 2018 and beyond.
Our research has found that, at least over the past 40 years, tax reform has had less of an impact on charitable giving than other factors such as market/investment performance and household wealth.
While there will always be exceptions to the rule and nuances between how local and regional nonprofits experience the effects of tax reform relative to national-level nonprofits, we nevertheless believe that the outlook for future charitable giving remains positive.