The Down Side of Giving

Posted by Laura Otten, Ph.D., Director on August 22nd, 2019 in Thoughts & Commentary

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When did giving become all about the donor and not about the nonprofit?   With all of the years behind me, no one could consider me naïve, so what could make me ask this question?  Is it just wishful thinking?  Or that ever pressing need to believe that people still really are decent, caring, compassionate? 

Gifts to Charity tax form

We saw changes in people’s giving last year that seem directly attributable to the 2017 Tax Cuts and Jobs Act that nearly doubled the standard deduction, erasing the need in some people’s minds to actually make a charitable gift.  Get the deduction without actually giving? 

Perhaps that was the thinking behind the drop in giving last year, as reported by GivingUSA:   total giving was down in 2018 by 1.7% in inflation adjusted dollars.   The gifts that are so vital to so many nonprofits were all down:  gifts of less than $250 were down 4.5% from the previous year, and gifts between $250 and $999 were down 4%.  That’s millions and millions of dollars that are no longer available to thousands of the 1.6 million nonprofits.  Those dollars could mean the difference between those organizations’ life and death. 

None of the donors who gave, however, were faced with the question of life or death in deciding to give to charities.  In fact, their financial health may have greatly benefited by their donations.  This may sound odd, but one of the bits l’ve always liked in talking to folks about philanthropy is helping them to understand that the concept of philanthropy isn’t simply about giving away that which you can; it is about giving with sacrifice. 

As a result of giving money, time, goodwill, etc, the donor is making a sacrifice.  There will be less to expend on what the self (and I include family in this) wants and needs.  It would seem that we are developing more and more schemes—and I use that word intentionally, as that’s exactly what it seems like:  the sly fox scheming to protect the wealthy on the backs of the less-wealthy and those who want to help those in need.  Think first of the donor over the nonprofit, assisting the donor in gaining financial benefit from her/his “charity” while making it more difficult for the nonprofit.

 One of the largest money management companies and purveyor of donor advised funds recently counseled donors to “bunch” their giving.  Bunching involves saving up charitable dollars for several years and then giving one gift large enough to push the donor over the limit and allow her/him to itemize that one year.  For example, a donor normally who would have given $5000 in charitable donations each year stops giving every year and once every three years gives $15,000.  Great for the donor because s/he played the tax benefits system, but not so great  for the nonprofits that still need to make budget every year, faring better when money comes in consistently year after year.  Peaks and valleys aren’t great for stability.

Another suggestion that, again, benefits the donor and not the nonprofit, is to give gifts of stock.  This is a long standing practice that some nonprofits are happy to oblige, others not.  (If you don’t know if your organization accepts stock, check your gift acceptance policy.)  Giving shares of stock absolutely benefit the donor, while costing the nonprofit.  (Hence, why some nonprofits don’t accept anything but cash.)  By giving shares of stock, a donor can take a tax deduction based on the fair market value of the stock donated.  If that donor sold the stock to give cash to a nonprofit, s/he would have to pay capital gains taxes on the money made in the sale (not to mention broker fees).  Much better for the donor to let the nonprofit deal with the cost of selling the stock, something that too few nonprofits are equipped to do.  In addition, cash doesn’t suffer the fluctuation in value that stocks do. 

I get that money is money is money, and a nonprofit can spend it just as easily if the donor gives it with sacrifice as with self-benefit.  But what happens if we create a society of people who are only willing to help others if there is a direct financial benefit to themselves?  What kind of a society will we be?  And where will that leave nonprofits and the people and communities they serve?

The opinions expressed in Nonprofit University Blog are those of writer and do not necessarily reflect the opinion of La Salle University or any other institution or individual.

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