Giving USA 2019 The Annual Report on Philanthropy for the Year 2018 has been released. The report is a public service initiative of The Giving Institute, researched and written by the Indiana University Lilly Family School of Philanthropy. The report is the most comprehensive authority on US giving, using data from 16 million businesses of all sizes, over a million estates, 52 million households, over 1.3 million nonprofits (inclusive of religious organisations), and 82,000 foundations.
The figures provide some interesting topics of conversation, but what do they indicate for the future of philanthropy for your organisation? For instance, what impact do religious affiliations have on giving today and on future bequest dollars? Or, what is the impact of crowdfunding? Highlighted below are some indicators of the numbers and possible trends, the impacts, the standouts, and the actions to be taken by a non-profit organisation for this year and for the future.
Giving USA 2019 indicates that giving in the United States (adjusted for inflation) declined 1.7 percent to US$427.71 billion. Although this is a slight decline from the year before, charitable giving reached its second highest total in history. The report (adjusted for inflation) highlights:
– Individuals declined 3.4 percent to US$292.09 billion;
– Foundations increased 4.7 percent to US$75.86 billion;
– Bequest declined 2.3 percent to US$39.71 billion; and
– Corporations increased 2.9 percent to US$20.05 billion.
– Religion declined 3.9 percent to US$124.52 billion;
– Education declined 3.7 percent to US$58.72 billion;
– Human services declined 2.7 percent to US$51.54 billion;
– Foundations declined 9.1 percent to US$50.29 billion;
– Health experienced a decrease of 2.3 percent to US$40.78 billion;
– Public-society benefit organisations declined 6.0 percent to US$31.21 billion;
– International affairs increased 7.0 percent to US$22.88 billion;
– Arts, culture, and humanities experienced declined 2.1 percent to US$19.49 billion;
– Environmental and animal organisations increased 1.2 percent to US$12.70 billion;
– Individuals declined 4.9 percent to US$9.06 billion (the majority of these donations are gift-in-kind medications to patients); and
– Unallocated giving (difference between giving by source and use in a particular year) was US$6.53 billion.
(Source: Giving USA Foundation, Giving USA 2019)
There was an overall decrease in giving, and giving by individuals dipped to 70%, for the first time and has been trending downward. We will have to wait to see if foundation giving will continue to be a larger share of overall giving, or if there is anything more to the increase in corporate giving than a positive economy and record profits (the likely factors in the increase of corporate giving).
(Source: Giving USA Foundation, Giving USA 2019)
Impact of Tax Policy and Doubling of the Standard Deduction
The biggest driver in giving lies in the strength of the U.S. economy. The 2018 stock market experienced a tremendous amount of volatility, especially in the fourth quarter, and this impacted giving. Further, although donors give for a plethora of reasons, there is no denying the impact that tax policy has had on giving. On 22 December 2017, the Tax Cuts and Jobs Act — the most sweeping tax legislation since the Tax Reform Act of 1986 — was signed and went into effect in 2018. The impact was reductions to income tax rates for most individual tax brackets and a significantly reduced income tax rate for corporations. The timing and amount of giving is influenced by tax policy, as incentives matter in economic behaviour.
A major change in this historical tax law was the doubling of the standard deduction. This reduces the incentive to give, because, when giving for tax reasons, an individual must itemise his/her deductions (thereby reducing their taxes). With the doubling of the standard deduction, an individual receives the reduced tax without needing to take a tax deduction that would be itemised. For many, the doubling of the standard deduction is easier when compared to making the required donation amount and itemising to reach the same tax benefit.
The increase in international affairs could be explained by less domestic natural disasters and more overseas natural disasters — for example, the floods in Japan, India, and Nigeria; the tsunami and earthquakes in Indonesia; and Guatemala’s Fuego volcano eruption.
Religious giving is down, and this could be the start of a trend, notwithstanding the problems in the Catholic Church, for — according to the US News Gallup Poll — attendance to weekly religious services is trending downward, and, a recent Pew Research report found that, adults under 40 are less likely to be affiliated with a religion. This will certainly impact potential future realised bequests to religious organisation if the young fail to have a lifetime association. Finally, religious organisations, traditionally, have had a weekly audience from whom they can seek a donation (passing of the plate) but are now finding it more difficult with less people attending service.
Education giving saw a slight decrease, but there is neither a standout reason to indicate this decrease, nor a sweeping change through the education sector to explain a long-term trend — with the exception of the “80/20” rule. Donors are not allowed a deduction when they receive a benefit in return, or, if the benefit is insubstantial (cost of a meal), they must use the net amount for the deduction. However, previously, the tax code allowed donors who made contributions in exchange for the right to purchase tickets or seating at a college or university athletic event to treat 80 percent of the contribution as a charitable contribution.
This “80/20” rule encouraged charitable gifts to support athletic programs, scholarships, facilities upgrades/construction, and other priorities. The actual purchase of tickets for a college or university athletic event is a separate, non-deductible transaction. The 80/20 rule only applied to contributions made for the right to purchase priority seating. Athletics at higher education institutions in the US is very big business, and this is likely to impact some giving at institutions, especially if a team is not performing well, because, previously, at least if one watched their team get smashed he/she were getting some tax benefit with the experience.
(Source: Giving USA Foundation, Giving USA 2019)
There was no mega bequest this year larger than US$250 million. According to the Chronicle of Philanthropy, America’s 50 biggest donors gifted US$7.8 billion in 2018, which is a 50 percent drop from the previous year. The Giving USA 2019 report identified a total $4.8 billion in very large mega gifts or gifts by individuals produced as a rounded econometric estimate. This year, the top three High Net Worth Individual givers — and the amount they gifted — included Jeff Bezos and MacKenzie Bezos (Amazon)with US$2 billion; Michael Bloomberg (Bloomberg L.P.) with US$767 million; and Pierre Omidyar and Pam Omidyar (EBay) with US$392 million.
Not Captured, but Impactful
Crowdfunding that is not given to a charity or that does not provide tax deductibility is not captured in the Giving USA 2019 report. The report does not capture when a family or friend sets up a crowdfunding site — through one of the many platforms — to raise money to give to an individual undergoing cancer treatment, a family who lost their house and belongings in a fire, etc. Research is needed to determine if people are supporting these campaigns in lieu of making a donation to charity. And, again, if an individual is able to take advantage of the doubling of the standard deduction, thereby making a donation for tax purposes moot, there may be less hesitation in supporting a crowdfunding campaign.
What about crowdfunding scams? For example, the high-profile case of Johnny Bobbitt, Katelyn McClure, and Mark D’Amico. Posting to GoFundMe, a crowdfunding site, Ms. McClure and Mr. D’Amico said that they had run out of gas while driving home in the Philadelphia area, and that Mr. Bobbitt, a homeless veteran, had spent his last US$20 to buy gasoline for them. The couple said they wanted to raise US$10,000 to thank him and get him off the streets. It was a scam, and the three of them made it all up while raising US$400,000.
The aforementioned case may keep people from supporting similar crowding funding campaigns, but non-profit organisations are not always the pinnacle of transparency and ethical dealings — for example, Oxfam’s sex scandal hurt public trust and confidence, not only in Oxfam, but in similar organisations in the sector. Donors do forgive when mistakes are made, but only if action is taken to change behaviour and if people are held accountable. Organisations should be diligent in ensuring such situations do not unfold, because everyday people have more and more choices in how their money can make a difference in the lives of others.
Trends can be the canary in the coal mine. The mind set “we have always done it that way” is an express lane downhill. Early exposure to philanthropy is a key indicator to long-term support and involvement. Organisations need to adjust and test giving channels, as donors get involved and supporting causes that resonate with their personal beliefs in different ways. Boomers are heading to retirement and Millennials are moving into higher earning power positions; organisations need to capture the Millennials early, both through traditional and non-traditional channels of giving.
To inquire about trends that could affect your organisation in the future, and to ensure your organisation has a proactive mindset, contact AskRIGHT Senior Consultant, Dr Jason Ketter.
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