The Change in Tax Law and NFP Funding

Many pundits claim the recent tax law will have a crushing impact on not-for-profit (NFP) organizations.  These organizations have traditionally relied on the generosity of their donors and grant funding to operate.  Now the standard deduction for the federal income tax has been raised to $12,000 for a single taxpayer and double that for a married couple. This reduces the incentive to donate to NFPs since the donation will probably not generate a tax deduction for the average American taxpayer.  Even when someone has enough enough itemized deductions so the charitable contribution will produce a tax deduction,  the new lower marginal tax rates will also reduce in lower deductions.

Management of NFP organizations should not take this potential challenge lightly. They must realize charitable contributions are not simply a matter of economics. People donate because of their charitable impulses and their desire to  do something good for the community.  In the current environment NFP’s need to significantly step up their communication program, explaining how important they are to the community.  NFPs  provide many of the needed services to our communities.  For instance, Centers for Independent Living provide a wide-range of services for people with all types of disabilities.  Religious organizations provide food and shelter to the those in need. Management and their boards need to speak up and be heard.

Charitable donations are scarce resources  being devoted to an almost infinite need.  The change in the tax law is only one complicating factor in raising funds.  The sheer number of NFP organizations means stiff competition for any organization looking for funding, particularly the smaller organizations. NFPs need to  examine their methods of raising money.  Do they make it easy for their patrons?  Is their a “donate button” on the website?  If so, is it easy to find?  Does an NFP advertise on  hackneyed social media such as Facebook and Twitter, or has it moved to Instagram and Snapchat?  Does the NFP run an effective marketing  campaign?  An NFP must cast its net far and wide to raise funds in today’s operating  environment, and it must consistently stay in front of their donors.

NFPs also need to remind their donors it is not only money that is important.  While there is no doubt charities need funding, they make use of the time, treasure, and talent of their patrons.  Increased utilization of volunteer time and volunteer talent could go a long way in supplementing the operations of an NFP.  To some extent, volunteer time and talent can substitute for treasure. Volunteers already do much of the work at NFP’s but there certainly is room for improvement. Many professionals have found volunteering at a NFP is both professionally and personally rewarding. NFPs can take advantage of this new environment to push for additional volunteers.