Navigating "Tax Deductible" Under the New Tax Law
Note: A new federal tax law went into effect on January 1, 2018. The law affects tax-deductibility of charitable donations due to the increase in the standard deduction to $12,000 for individuals and $24,000 for those filing jointly.
Throughout the year, as CDP gathers information and best practices from non-profit professionals, member stations, and consultants, we will provide tips and guidance that we hope will help stations make well-informed decisions about how to/whether to respond to the changes.
It’s April 15, and non-profit fundraising professionals have yet to agree on strategies and tactics associated with donor communication regarding the new tax law. That’s good, because we need to have a wide-ranging conversation about this topic. As we plan for direct mail campaigns, which require a significant investment and advance planning, decisions will need to be made about how we approach tax deductibility language in our letters and on collateral materials.
Reasonable points have already been made:
Donors give to support the missions of their favorite charities and non-profits
Focus on the story of how your organization changes lives in the community
Tax deductibility is usually 8th or 9th on the list of reasons why donors give
That last point was from legendary fundraiser Roger Craver, whose Agitator web site and blog regularly addresses such topics. In my e-mail exchange with Roger, he made concrete points that I found helpful.
As part of my research I looked at donation forms on the Forbes top 20 charities sites to determine how they handle tax-deductibility language and made a spreadsheet that I provided to Roger. I asked whether we need to review the wording on our appeals, acknowledgements and collateral materials to clarify that information for donors. Here is his reply:
“Applying the new tax regulations will not apply to all donors equally. Not just because of the change of the cut-off point for the standard deduction, but also because of the way the claiming of deductions will be applied in various ways in various states. For donors in those states that have high property and income taxes they may be able to move their charitable contributions along with other deductions (medical, home business expense) into an allowable deduction.
The complexity of anything new is always daunting and I don’t believe any nonprofit should attempt to offer tax advice or anything close to it on their donation forms or websites.”
Therefore, Roger and Nick Ellinger (who recently wrote a three-part series for The Agitator on the issue of tax-deductibility language in this new tax law environment) suggest stating, “Your gift is tax-deductible as provided by law” or something to that effect.
We did not get to the subject of whether or not to keep or remove “tax deductible” in the body of solicitations. However, for acknowledgments and tax receipts, Roger advised:
“…when you issue the tax receipts I’d treat them as a statement of total giving for the year and avoid going into any explanation of what the donor can or can’t deduct.
Something like, “Thank you for your total contributions in 2017 of $__________
Your kindness and generosity have enabled us to (insert mission here) and all of us here are at XXXX are grateful.”
The conversation continues. What actions to you plan to take?