The new federal tax law implemented this year – with a doubling of the standard deduction amount allowed for individuals and married couples – has left some nonprofits wary of fourth-quarter giving, despite some encouraging signs.
The National Council of Nonprofits in January called the tax law, which removed a financial incentive for giving, “devastating to the millions of people around the country who rely on charitable nonprofits for everything from food and shelter … to a safe place to escape domestic abuse, and enrichment through the arts.”
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Before, when making a charitable contribution, you could itemize instead of taking a standard deduction. But the 2017 federal tax overhaul championed by President Donald Trump and congressional Republicans changed that: The deduction for donations stays the same – but it needs to be itemized to be claimed.
“Overall, what we were looking at was the world of the unknown,” said Cortney Nicolato, president and CEO of United Way of Rhode Island. “CEOs in the nonprofit sector have been working with the Association of Fundraising Professionals, looking to The Chronicle of Philanthropy, talking and figuring it out.”
So far this year, the United Way is seeing an increase in giving, she said. It operates 2-1-1 – a help resource line – works to alleviate homelessness, connect folks with free tax preparation and quality child care, among other efforts.
But Nancy Wolanski, director of the Grantmakers Council of Rhode Island, calls the tax situation alarming. She cites national forecasts that overall giving will drop. She also notes that reductions in government resources spur demand for nonprofits.
‘[Corporate donors] are giving more in a different way.’
CORTNEY NICOLATO, United Way of Rhode Island president and CEO
“Republican leaders have already cited the size of the deficit as justification for further cuts in social services, which would compound both the need in our local communities, as well as further reduce the funding available to provide essential services,” she said.
Chris Barnett, senior communications and marketing officer of the Rhode Island Foundation in Providence, said it’s too soon to tell what effects the new rules will have on giving.
“We actually don’t have any conclusive evidence, either from our own experience this year or from grantees or nonprofit fund holders,” he said. “We won’t have a good sense of the impact until after the fourth quarter ends.”
Laura Calenda, chief marketing and philanthropy officer at homelessness organization Crossroads Rhode Island, agrees that it’s too soon to tell; she’s hopeful, though, about holiday contributions.
“We believe that the majority of our donors give to Crossroads because they want to help people who are experiencing homelessness, not because of a tax write-off,” she said.
And the news isn’t all bad from other organizations, though all agree that the fourth quarter is key. Children’s Friend, also based in Providence, reports holding steady, with giving slightly increased over last year so far.
“We have not seen an impact,” said President David Caprio. “We’re eagerly waiting and watching.”
His organization served more than 36,000 individuals with low incomes with services such as education, advocacy and connections with other community programs last year. Its major fundraising walk this past spring brought in a bit more money than the year before, Caprio said.
Nicolato said United Way’s advantage is its strong relationships with corporate donors.
Corporate giving is projected to increase, said Nicolato, with companies working to ensure their giving reflects what they are saving in corporate taxes.
“They are giving more in a different way,” she said of corporations. Since the tax-law change, many have still committed to keep donations at the same level, with a strong local commitment.
Though nonprofits have had longstanding efforts underway to educate donors and the community about what they do, how they do it and the impact on the community, those things are even more of a focus now, said Caprio and Nicolato. And different approaches likely come into play.
For example, money certainly isn’t the only way to give to a nonprofit. United Way makes it clear that donors can give noncash gifts such as stock options and land.
Raising a nonprofit’s profile through community actions or outreach is another approach that may bring in new contributors or keep existing donors.
This past spring, Children’s Friend did a lot of communications work focused on the state budget, giving its mission momentum.
“We believe that child welfare is underfunded,” Caprio said. “What this [advocacy work] allows us to do is to tie our message together, show there is a need out there. We show the need and show how they can help.”
Nonprofits have to continue to show their value, said Nicolato.
“We have to show ‘your dollar did this,’ ” she said. “My guess is that this [new law] will elevate that need.”
