Dusty Rhodes “Tax Reform Implications for Christian Radio Donations”
After months of legislative talk and all kinds of speculation around the impending Tax Cuts and Jobs Act, it was finally passed late last month. This was the most comprehensive tax reform in 31 years. It has generated questions and even anxiety about its potential effect on the charitable community including nonprofit-owned radio stations. Projections are coming out of the woodwork about future support for nonprofits in 2018 and beyond. Most experts are predicting less giving overall – the debate is primarily ‘how much less.’
Though I’m not a CPA, I’ve spent years in revenue leadership roles responsible for keeping a watchful eye on “outside influences” affecting donor-supported organizations, to report back what I learn, recommend actions to take, and help others navigate potential whitewater ahead. I care deeply for the financial health of our industry. As we begin this year with new tax laws going into effect and radio station leadership considering what, if anything, to do differently, here are some thoughts I hope will help.
First, some bad news
• One provision many hoped for did not make it to the final stage, the Universal Charitable Deduction, an above-the-line deduction available to all individual taxpayers whether they itemized or not. It would have improved the incentive for more people to give.
• While less than 30% of taxpayers nationwide typically itemize charitable deductions, that same group accounts for a whopping 77% of all charitable giving in the U.S. Due to the new standard deduction doubling and other changes, many experts are estimating the number of taxpayers itemizing charitable deductions will drop to between 5% and 11% which may equate to a decrease in annual giving anywhere from $11 billion to $21 billion, and primarily among middle-income households.
• The Evangelical Council for Financial Accountability (ECFA) estimates 60% of that reduction will impact faith-based ministries and churches, and cautions its members to plan for some of their donors to give 3-4% less than they did in 2016.
• The estate tax exemption doubled, removing some incentive for some wealthier donors.
Now the good news
• For context, we live and work in the most generous nation on earth. In calendar 2016 Americans donated a record $390 billion. Historically, Individual donors are the largest source of donations (72%) and the Religion sector receives the largest percentage of all giving (32%). This trend is expected to continue.
• The lowering of individual and corporate tax rates provides many more dollars for potential charitable contributions from both individuals and corporations. We are already seeing evidence of 100+ corporations increasing their generosity to their employees.
• The investment market set new records multiple times in 2017 and (as of this writing) continues to do well. This kind of growth activity typically positions high-capacity donors and foundations for their continued giving of major gifts and grants.
• When the tax code was last changed in 1986 it also eliminated some incentives to give. Though some donors gave less, overall giving continued growing to record levels we enjoy today.
[1] Philanthropy Roundtable
[1] Giving USA
[1] USA Today, List Of Companies That Paid Bonuses Or Boosted Pay Since Tax Bill Passed, January 14, 2018
Motive behind the money
Knowing almost 30% of taxpayers itemized their charitable deductions does not automatically mean receiving a tax benefit was their chief motivator behind their giving especially, in my opinion, for people of faith. To be sure, the other 70% of taxpayers who donated have already been giving without receiving the tax benefit because they did not itemize.
In a 2017 study, though a majority of donors predicted there will be an overall drop in charitable giving if donations are no longer tax deductible,18% of donors surveyed felt overall giving will actually increase. The survey revealed this belief is held almost exclusively by donors under age 50, and particularly by donors under age 35! When asked if “their own giving” will rise if donations are no longer tax deductible, 22% believed it will, quadruple the number who answered similarly in a 2012 study. And these perceptions did not change based on whether or not donors itemize deductions on their tax returns. We will see what holds true this year.
There have always been “outside influences” we never have control over such as market crashes, natural disasters and tax reform. In times like this I believe it’s incumbent upon us as leaders of donor-supported Christian radio stations and networks to maintain a biblical perspective about provision, while taking an honest look at what we can control and options we can take. And because it’s vital the missional aspect of our stations has the funding it needs, never hesitate to ask for outside help.
Options for leaders to consider which often help grow donation revenues
• Trust God as the ultimate Source to provide where He will guide. Tell your teams you trust them to step up as needed as you possibly face new challenges together.
• When it comes to trusting for the resources to fund your budget, be wise but avoid a scarcity mindset which breeds fear, and adopt an abundance mindset which fosters faith.
• Rekindle the unique and compelling vision you have for your station to impact more lives for Jesus. Identify effective ways to consistently invite more stakeholders to participate in that vision with you.
• Diversify your fundraising strategy beyond on-air pledge drives. Employ new ways to go deeper with current donors, to engage more new donors, to re-engage more lapsed donors, and to identify and cultivate more people with high-capacity and inclination to give.
• Revisit your efforts around improving pledge fulfillment. If necessary, ramp up those efforts appropriately to help more pledgers remain faithful in fulfilling their pledge.
• Ask yourself if you are doing all you can, as the leader, to personally build deeper relationships with more donors who have capacity to give beyond what they are currently doing. Challenge your board members to step up in their areas of giftedness.
• Take another look at how you fundraise. Is it in compliance with the highest standards (ECFA for example), biblically-based, and do you educate your donors about biblical concepts like generosity and stewardship year round, not just during pledge drives.
• Update your ministry profiles on 3rd party websites such as GuideStar and Charity Navigator, and maximize the opportunities in your IRS 990 form (your most public-facing document to potential donors and foundations) to clearly explain who you are and what you are accomplishing, using accurate statistics and compelling stories.
• Ensure there are obvious demonstrations on your own station website of accountability and transparency of your ministry finances, governance and mission impact.
[1] Donor Mindset Study, Opinions 4 Good and Grey Matter Research, April 2017
• Review your station website donation pages for relevant content for donors. Minimize distractions and exit ramps on the actual donate page which might cause donors to hesitate or leave before actually giving.
Dusty Rhodes has served in fundraising leadership roles in Christian radio for over 25 years, as Senior Vice President / Chief Development Officer at WAY Media/WAY-FM, and currently as Senior Vice President and Partner with the fundraising and leadership consulting firm Elevation Growth Partners. Dusty@ElevationGrowth.com 720-460-8877
