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Jan. 16, 2018, 10:30 a.m.
Business Models

For news nonprofits, the tax overhaul is bringing new uncertainty about future donations

“For us, it’s rare that someone cites the tax deductibility as a reason for giving. People are supporting us because they’re passionate about what we’re doing. People want to be a part of the community thats supporting us.”

There are still a lot of open questions about the effects of the tax bill passed in December, but for nonprofit news organizations, the biggest concern is what kind of impact the new law will have on readers’ willingness to donate.

The new tax law will double the standard deduction to $24,000 for those filing jointly and to $12,000 for single filers. That will lower taxes for many Americans, but it also reduces the attractiveness of the charitable tax deduction — which could cause some collateral damage for nonprofits whose donors benefit from it. (You can only claim the charitable deduction if you itemize on your tax return, and a higher standard deduction makes that less appealing. The deduction, in effect, reduces the cost of your donation by your marginal tax rate) Thanks to the new rules, some have estimated as many as 30 million more filers could choose not to itemize.

Development managers at nonprofit news organizations say it’s too early to tell how the new tax provisions will affect their donations from readers, but it’s a situation they’re following closely. “Like a lot of people, I’m still in a wait-and-see mode,” said Terry Quinn, chief development officer at The Texas Tribune. “But we don’t expect to see any dramatic changes in 2018.”

The expectation is the same at MinnPost, where the organization expects that the tax bill’s impact will be “pretty minimal,” said development manager Tanner Curl. “It seems like something that will affect really large universities more so than our kind of organization. But it’s something we’re following and keeping an eye on.”

In particular, Curl says he expects the new tax provisions will encourage some supporters to concentrate their donations in certain years, in order to maximize the benefits of itemization their donations, as opposed to taking the standard deduction each year. Many of MinnPost’s current donors contribute monthly or annually, and changing that could complicate our accounting, said Curl.

It’s clear, however, that all donors won’t be affected equally by the changes. Julianne Markow, chief operating officer at Voice of San Diego, said that her organization is paying close attention to the contributions from the mid-tier donors who give between $700 and $1,000 a year, which represent a “big chunk of donations for us,” she said. “We don’t know what’s going to happen there.”

Smaller donors (people who contribute, say, $25 a month) are less likely to be concerned with the tax benefits of their contributions — while those donating at the highest level likely do so through charitable trusts or donor-advised funds, the latter of which gives an immediate tax benefit and dispense funds to charities of choice over time.

MinnPost’s Curl said that the organization has already heard from donors who are looking to redistribute their donations. “It’s just a handful at this point, but as an early indicator of how behavior will change, that’s been the most prominent one,” he said.

Overall, development managers at nonprofits estimate that they will be comparatively immune to the most significant shifts in behavior because, for most of their donors, the financial benefits of charitable contributions are rarely the top reasons to donate. “For us, it’s rare that someone cites the tax deductibility as a reason for giving,” said Quinn at The Texas Tribune. “People are supporting us because they’re passionate about what we’re doing. People want to be a part of the community that’s supporting us.”

That attitude is a prevailing one among nonprofits, according to Mary Walter-Brown, CEO of the News Revenue Hub, which works with news organizations to develop sustainable funding modes. “Through our surveys, we’ve found that most nonprofit news donors give because they have a passion for journalism, rather than for the tax deduction,” she said

Nonprofit news organizations may also be in a stronger position than other kinds of nonprofits because they have one asset that most charities don’t: news products that remind donors every day about the organization they support. “They’re giving because they value the news and they’re getting something,” Markow said.

However, that doesn’t mean that nonprofit news organizations can rest on their laurels, Curl said. His argument: Nonprofits can’t let their reporting do their donor work for them, particularly now. “It would be naive to think that these changes won’t have any impact on our work, but I think we can do administrative and messaging work to mitigate its effects,” Curl said. “We have keep that essential connection between the donations that are made and the work those donations make possible.”

Photo of donate sign by Howard Lake used under a Creative Commons license.

POSTED     Jan. 16, 2018, 10:30 a.m.
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