What Will the New Tax Laws Mean for Donor Relations and Stewardship?

Gina Galluppi
Senior Executive Director of Stewardship and Donor Relations
University of Southern California

By now, you have heard or read about the potential effects the recently passed Tax Cuts and Jobs Act will have on charitable giving. The Chronicle of Higher Education provides a brief, but helpful, summary of the changes to the tax laws that will impact philanthropy and nonprofits. 

Currently, we can only speculate what these new laws may mean for fundraising. The Council on Foundations estimates $16 billion to $24 billion will be lost annually in charitable donations. By raising the standard deduction, the incentive to itemize diminishes. Some states will have limits on the deductibility of state and local income and property taxes, leaving less money available to give to a favorite charity. Smaller nonprofits may be hit harder by losses in philanthropic dollars, than a university or college. Donations from wealthier donors will continue, but it’s the smaller donations from alumni and from those that support causes close to their heart that will be more challenging to acquire and retain. Additionally, taxes on investment earnings at some private institutions with large endowments, and the elimination of the deduction athletics donors may take for the right to purchase tickets will have a negative impact on the people and programs those dollars ultimately support. 

While these new tax laws present challenges and will mean working harder for philanthropic dollars, we also should consider this as an opportunity for our profession and for the donors we serve. As donor relations and stewardship professionals, now may be a time to review our strategies, strengthen best practices, revitalize or add programming, and use the potential consequences of these laws to further advocate for the importance of our work to our leadership. Transparency will be more imperative than ever. A clear accounting of dollars received and invested, along with the stories that demonstrate how philanthropic dollars are making a difference will be more essential. From a frontline perspective, appeals for the causes, people, and institutions that matter to donors may also need to be looked at in fresh and creative ways.

We know donors give for altruistic reasons and not simply to receive a tax deduction. We also know donors expect timely acknowledgments, recognition, and an understanding of their giving—past, and present—as well as updates on how their gifts are being used. The significance of our profession’s work may become more important than ever, as the effects of the new tax laws become clearer.