There is much unknown about the effects the new tax law will have on philanthropic giving in 2018. Since most of my work is with congregations and church-related organizations, I will limit my perspective to how the church and related organizations should respond in 2018 to the new tax plan. Many philanthropic leaders are nervous and some are even afraid. This is natural in a time of change. I don’t think we need to worry, but organizations which rely on donations should make certain they are telling their story well and positioning themselves to remain in the front of the mind of donors.
One reason churches and other charities see such large revenues in December is that people are wanting to give before the end of the year so that they can claim this charitable deduction. The tax code has for decades held provision to allow for charitable deductions by those who “itemize deductions”. While the charitable deduction will still be allowed, the new standard deduction has basically doubled which will result in fewer people claiming this deduction. This means that people are getting as much or more deduction without having to itemize.
Approximately 70% of Americans in 2016 took the standard deduction and did not itemize. People with larger incomes tend to be more likely to itemize. Reasonably, the effect of losing the charitable deduction could be felt more by those with larger incomes who are currently your donors (https://taxfoundation.org/who-itemizes-deductions/). At the same time, most Americans with larger incomes will be receiving significant tax breaks. And a few of these large donors will still choose to itemize deductions.
I encourage you to not focus on deductibility of gifts. In my eighteen years of development experience with the church and church related organizations, I have found very few donors who are “deduction motivated”. Many appreciate that they can claim the deduction for tax purposes, but that isn’t why they give. Churches and other non-profit organizations should focus on what motivates donors to give and how to do a better job of raising up that motivation.
The giving landscape is changing. Donors are giving to fewer and fewer charities. For years, the church has been receiving a smaller percentage of overall giving in America. This has had nothing to do with tax deductibility, but with the failure to tell our missional story—a story of what God is doing in our world and through our churches and ministries today. I must acknowledge that even as the church receives a smaller percentage of gifts overall that giving over the last two years has been at record levels.
Yes, mid-level and larger donors may lose out on their ability to deduct their gift to your organization. Many of these givers will actually realize a greater deduction with the new standard deduction and most will have more money because their taxes will go down.
Historically, churches and charities have benefited when people have had more money at their disposal, but the benefit is not as much as might be expected. Instead, both churches and charities improve giving to the greatest extent when telling their stories well—stories of lives changed, impacts made as a result of the generosity of donors.
What I have seen from many churches is simply telling a financial snapshot. They share how much expenses exceed revenue and tell people the need is for more money. This is simply sharing information and it makes it about money and not mission. A college once shared with me the cost of the electric bill. This is not motivating to most donors, especially me. Sometimes, we share good information, such as we had 100 children participate in Vacation Bible School and this is good, but it can be better. The church should stop sharing statistics and numbers and start telling stories of impact. Tell the story of the youth who helped lead Vacation Bible School and came to understand their God given gifts. Tell stories of how pastoral care helped someone see God active in their life. Tell the story of how Sabbath rest in worship renews people who feel beaten up by the world.
There will be some churches and church related organizations that struggle next year and they will blame the new tax law. If so, I hope they will have talked to their mid-range and upper-range donors to find out for certain that is what happened. At the same time, I hope they will evaluate how they tell their story and take inventory of what God is doing through their ministry and how they communicate that. I think storytelling is far more important than tax law.
To best position your organization and your most faithful and generous supporters to navigate this new tax code, consider implementing these steps as the new year begins:
- In January and February have intentional conversations with 12-20 mid to upper range donors ($3,600 and up in most churches/$1,000 and up in most organizations). Ask them what the new tax law means to them. Together, determine strategies to help them. For instance, some donors may start giving every other year to lump their giving to take a deduction every other year. Being aware of their giving intentions will enable better financial planning for your organization’s leadership.
- After the first quarter, evaluate each donor (or donors of a certain level or above), and check on how their giving compares to previous years (or their pledge). Contact any who are behind to encourage their continued support.
- Evaluate the stories of impact that you share and determine that they are reaching your target audience.
- Invite a few donors to share their intention to maintain or even increase their giving in the coming year because they love the ministry of the organization and feel it makes a difference. They can even state that the tax law is not a factor in their giving decision.
- Provide prospective supporters a vision for more ministry that your organization can provide. People give to vision. Shrinking organizations normally get less money as donors become underwhelmed by the limited impact.
- Encourage donors to give appreciated stock. They still avoid capital gains taxes
Ministry needs will continue to grow in the future. Most of the churches (over 60) and organizations (over 10) that I worked with in 2017 are expecting more ministry to happen in 2018 than in 2017 and I believe that they will experience that. Several churches are expecting 20% or more growth for ministry in the next year and givers have indicated their commitment to support this growth. While the new tax code has left non-profit organizations concerned about its impact on givers, I remind you that the tax bill was working through Congress as organizations made these plans and as donors made their commitments to support them. The needs addressed by these ministries and the donor desire to partner with them supersedes tax reform.
The world is changing around us but as we vision a world that God is active in, we can dream boldly and live into those dreams.
Contact Mike at firstname.lastname@example.org
We raised more than $2 million but we were still 15% short of the goal. Should we accept long-term financing and just “suck it up” as missing the total need?
As we reached the final months of the appeal, rather than accepting less than what we needed, campaign leadership re-engaged our efforts. We asked two members who chose not to give to the appeal for a challenge gift. One of them stepped forward with a $100,000 challenge gift for more contributions over and above what was already committed. A zero dollar donor to the original appeal became a six figure challenge donor!
Those who were generous to the original appeal were invited to extend their gift. Those who didn’t engage the first appeal were invited to new or increased gifts. The entire congregation was engaged to reach what I consider “excellence” rather than accept a shortfall.
Rather than accepting anything but complete success has led this congregation to needing to inform donors what will happen with gifts in excess of the total need. What a great way to enforce an abundance mentality.
I think the most important thing is securing gifts for ministry is to inspire people to want to give. Answering the question “how will my gift advance the Kingdom of God” is critical in helping people feel that their gifts make a difference.
I think we often fail to inspire our donors and therefor they think we just want their money. Sometimes we add an exclamation point to the end of a sentence that isn’t actually inspiring and we think people should be excited.
People want the money that they earn to make a difference. If your cause doesn’t make a difference, they will either keep it for themselves or they will give it so someone else who will make a difference. So, cast a vision for how gifts to your organization are critical in advancing your mission and your donors will be inspired to give more than you think you even need.
Was I really, in a gathering of congregational leaders? On Tuesday, February 7, 2017 I had to ask myself that question.
We had gathered to evaluate the results of the fall, 2016 stewardship campaigns of the twelve congregations that had covenanted to walk together through the program we call Stewardship for All Seasons. I knew the program would lead to growth. I was overwhelmed at what I was hearing.
My previous experience as congregation leaders gathered to talk about financial giving was a focus on scarcity. There was lamenting about layoffs, cutbacks, and mission going unfunded. Without exception on February 7, 2017 that was not the story!
Two congregations had members pledge more to the ministry for the next year than the total giving for the previous year without consideration of the non-pledging households. Several congregations experienced numerous givers who had provided gifts of less than $5 per week in 2016 who pledged $30, $40, or more per week in 2017. Three congregations saw pledged revenue increase more than 22%. Four congregations experienced the number of families pledging increase by more than 20%.
Mission support, that is gifts from these congregations to their judicatory increased by at least $30,000 for the coming year. Mission support from these same congregations had been on a downward trajectory in the years prior to our work together.
These congregations exceeded their goals. They far exceeded my expectations. What had been a scarcity mentality for the church was now being described in terms of abundance and significant ministry into the future.
I was in awe. This was a vision I had hoped for. This year, I was blessed to see it become a reality, at least for these 12 congregations.
We do have a God of abundance. With vision and quality work, we can live into that abundance. What a blessing this was to hear about what God would be able to do through these congregations in the year ahead.
CFRE, M. Div., Partner
Click here to view my GSB website
As the stewardship workshop came to a close, she raised her hand as God had laid something on her heart. She shared that she was one of those people who did not take her giving seriously. She suffered through the annual stewardship appeal waiting for it to end. She didn’t want to serve on council because of the guilt she felt over not tithing. She shared that she felt shame for not being generous.
As she spoke, I could tell that she felt a tremendous sense of relief. She shared that her parents never taught her how to give because money just wasn’t talked about. In an email to me the next day she shared the following: “I need to refocus my treasure to where my heart already is. Living in two different worlds isn’t working. I know I am not the only person in the church in this situation so maybe my stepping out and being transparent will encourage others. Its very scary but I feel God’s hand in this.”
Often, without noticing or trying, our stewardship efforts cause shame. Not because we ask people for too much, but because we don’t treat them as a person. We need to focus on growth. We need to ask people to move from where they are to where they can be more generous. We need to challenge people but not offend them based on where they are.
Stewardship should be life-giving as we attach the treasures that God provides us to the ministry that touches people’s lives. By doing sloppy stewardship, we cause shame. By taking the time to treat people like individuals, we can help them grow and help them move into that abundant life that Jesus talks about. I often tell congregational leaders it is okay to treat people different as long as they don’t treat anyone better.
CFRE, M. Div., Partner
Click here to view my GSB website
I don’t necessarily enjoy being on Facebook, but it does keep me connected. I am part of several denominational Facebook communities where pastors can share questions and get support. I normally just skim my way through, but the stewardship posts normally catch my attention, and they often get my blood pressure going.
The other night, someone posted that they were so excited that the congregation decided not to pledge this year! I was furious and perplexed.
Studies show that those who pledge give many times more than those who don’t. The same people who complain about pledging are willing to get married and take out mortgages—both forms of pledging. By not pledging, we proclaim that something is not important.
If we believe what Jesus said in Matthew 6:21, “Where your treasure is, your heart will follow,” then for our organizations to get the hearts of our members, they have to be investing their treasure in them. The average donor gives less than 3 percent of their income to the church. The median member gives 0.9 percent. Therefore, the majority of our members are not investing their treasures in our organizations or churches.
We need to expect more of our constituency, not less. It is about their hearts. I’m not interested in not having the heart of my people in my organization, therefore I am not willing to let people not pledge. Our organizations deserve our best. If they don’t, then we need new leadership in our organizations.
I was speaking with a group of pastors the other day. The topic of stewardship came up, as it often does when I am in the room. We talked about how larger portions of congregation budgets are being provided by fewer donors. There used to be the 80/20 rule that 80 percent was given by 20 percent of the people. Recent studies have shown a shift to 90/10, and worse.
The critical problem occurs when these large donors leave, either because they move, they get mad, or they die. Making up the difference from a few large donors can be nearly impossible for many churches.
When you have a large donor or several, you should celebrate. However, you should work exceedingly hard to raise up other donors. Just because the Smiths will write a check at the end of the year to balance your budget, doesn’t make that a good thing.
In fact, when you have that situation, growing your donor base should become even more critical. I suggested to these pastors that they encourage these large donors to use their gifts to help raise up other generous donors. This can happen by matching or challenge gifts. Even better, it can happen by personal witness and faith sharing by the donors who understand generosity. If we are going to replace these donors someday, we have to be teaching the next generation how to become like them.
I recently led a workshop in a large banquet hall. I was invited in as the speaker. I was excited to be with this group. I knew of a few in the group who had been eagerly awaiting my presentation.
When I arrived, the hall was set with large round tables very far away from the podium and screen. I shared with the event organizer that the set-up wouldn’t work. Half the group would be seated with their backs to me. This seating arrangement wouldn’t allow for good dialogue as I made the presentation. I majored in hospitality, and this really bothered me.
She winced. Then proceeded to share why she couldn’t ask the event staff to change the set-up without a huge fight. So, I started to change the set-up myself, only to be told that I couldn’t do that. We had to leave the set-up as it was.
So, who is in charge? Not the speaker, not the event organizer. Unfortunately, not even the guests are in charge in this situation. In this situation, it is the support staff who run the show.
Who is in charge where you are? Or maybe better, what is in charge?
Are you the church leaders who only talk about mundane issues like whether the coffee is good or whether to pay the organist an additional $10 per month? Maybe you just talk about how far behind the budget you are.
Or, are you an organization that launches new programs because your program director thinks would be fun, not because the market you serve needs the program offered? Or, do you just offer what the marketing department says it can make work, even if it isn’t fully aligned with your mission?
The strategic plan needs to be in charge.
Whether you are a church, a hospital, a camp, or a Fortune 500 company, the strategic plan should guide you. For faith-based organizations, in the planning you should welcome God’s guidance and then follow it as the plan is implemented. Your plan comes from your mission, which is to serve your market as best you can. Your plan makes sure that your support staff are focused on what is most important − your mission.
I’m amazed at how offended people can get when their fundraising plans are questioned. I’m not talking about the person who questions everything you have ever done and never gives more than $30 per year to the church. Questions don’t mean someone isn’t supportive. In fact, questions can be a sign that they are interested and are just making sure your project is worthy of a gift.
I just worked with a congregation that raised more than $3 million. This was more than the base goal we established. One of the $500,000 gifts came from someone who asked a lot of questions. Some of the leadership wasn’t sure about these questions and got frustrated by them. One person in leadership wanted to dismiss the questions and not answer them.
We did answer them. Each question. I bet there were 12-15 of them. Some were hard questions about missteps that happened a few years ago. Others were about when the project would take place. There was a question about how sustainable the project would be. I remember many questions about quantifying the impact the project would have on the community.
Each question helped assure this member that the project was worthy of a major gift. Each question assured him that leadership had a good plan. Each question helped him know that God was guiding the project and it would be a blessing. His questions helped him know where to invest.
Would you buy a car from a salesman who didn’t answer your questions? Would you invest in a mutual fund without having your questions answered? Why would donors invest in your project if all their questions don’t get answered?
I have found that people who aren’t asking questions aren’t considering a major investment. We need to encourage questions. If people aren’t asking questions, we likely have a bigger problem: we likely haven’t engaged our audience!
Universal Studios will never do a marketing campaign that says, “We don’t have a Mouse.” Coke will never say, “We don’t make sports drinks.” An attorney won’t run a commercial that says, “We do it all but the accounting.”
Why do so many 501(c)3 organizations define themselves as non-profits? Or, worse, why do churches define themselves as who they are not like?
Mission isn’t about what you are NOT. It is about what you ARE. If you define yourself by what you aren’t, someone else will come in and do what you do better, and you will lose your mission to others. Define yourself by what you are, by what problem in the world you want to fix. How do you make a difference in the world?
I’m doing a strategic plan with the ELCA Youth Ministry Network as I am volunteering on a leadership team. We are having lots of fun and envisioning a transformed church because of the work we do. We are spending little time on defining what we aren’t. Our ministry vision is about what we are and how we make the world a better place because of our vision.
To have an effective congregational strategic vision or an effective strategic plan for your organization, work from what you are good at. What you do. Not what or who you aren’t. That doesn’t matter. It doesn’t matter that you don’t make a profit. It matters that you make a difference.