Opportunities to Respond to the New Tax Law to Benefit Your Organization

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 ward@gsbfr.com

For information about the tax law itself, click here.

Click here to read an interesting article about the impact to giving.

River Crossings

Imagine driving by a restaurant with this sign outside: We lose money being open on Mondays. Come eat and help us break even. Doesn’t that just make you want to go out to eat on a Monday night??

In order to increase business during their slow times restaurants appeal, not their bottom line, but to the self-interest of their potential patrons. They think, “What would appeal my customers? What would encourage them to come out to eat on the first work day of the week after a busy weekend?” This thinking leads to marquees that read things like $5 Burger Night and Free Pie Mondays. Cheap burgers? Free pie? I could be convinced!

Considering the customer’s standpoint changes the messaging from one of scarcity to one of possibility.

The same is true for congregations. In the middle of summer, most experience a dip in giving. As people head out of town for weekend activities, worship attendance goes down. Fewer people in worship translates to fewer dollars in the offering plate. Church budgets feel the pinch.

To address this challenge, many congregations offer their members some form of automated giving (many Lutheran churches use Simply Giving through Vanco). Congregations with larger percentages of automated givers have better cash flow during the summer months, easing the strain on treasurers as bills come due.

This leads to announcements like this (that I have heard many times in many places), “During the summer months we experience a shortfall of giving. Automated giving is a way for you to help your church! Even when you are out of town your donations will continue to come and help us meet our expenses. Please, won’t you sign up now?” It’s 100% true, but it doesn’t prove very inspiring. It focuses on scarcity and shortfall and not on God’s abundance. At the heart, this message sounds much like the first restaurant marquee. We lose money in the summer. Sign up for automated giving and help us break even. Not very inspiring!

A couple weeks ago I attended a congregation that came at this from a different direction. A video showed a couple who said, “We love this church and are excited to be a part of financially supporting a place where we can see God at work in powerful ways. We had a hard time keeping track of the checks that we put in the offering plate. Every time we’d come to worship we’d have to pull out the checkbook and look back to see when the last check had been written. Automated giving took those worries away. Now we can support our church on a regular basis without the worry and hassle of trying to keep track of it all. We love it.”

Considering the donor’s standpoint changed the messaging from one of scarcity to one of possibility. The focus remained on the ease of supporting God’s activity through the church and not on the lack of funds in the plate.

What message does your congregation convey as you seek to expand the rolls of automated givers? Do you appeal to scarcity and need or to possibility and abundance? Do you focus on what is good for the congregation or what is good for the donor?

What Is in Charge?

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.

Questions Welcome

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!

Giving: It’s Systemic

When some charities and churches are embroiled in conflict, they think a Vision or Strategic Plan will fix their operational issues. During a crisis or when there’s high anxiety over the instability of the organization, it’s not the time to initiate a Vision Plan. What is needed is an Operational Plan.

When the Annual Giving Program is non-productive for several years, some leaders propose a Capital Campaign to raise a significant amount of money to fix the annual deficit. A more effective plan is to strengthen the Annual Giving Program to solve operational funding needs and thus build toward a capital campaign.

All too often as an organization seeks to initiate a Vision Plan or Capital Campaign, it is discovered that the leadership (staff and/or volunteer) is dysfunctional. When this is the case, there’s no way a Vision Plan or Capital Campaign can be successful. First things first, a Board Development Consultation is needed to focus the leadership and insure success of any Plan or Campaign.

Not all conflict is bad; healthy organizations have conflict, but they have learned how to manage, resolve, and improve from it.

The GSB consultant can help identify where to enter the system and begin to work on effective leadership and clear visioning. . If there is conflict or no Vision, giving will be flat or decrease. However, when the leadership can articulate the Vision, when conflict has been resolved, people will respond and will support with increased volunteerism and giving. It is systemic and organic; all are connected and when open and flowing, generosity grows.