The nonprofit sector is bracing for what could be one of the greatest decreases in philanthropic giving in the modern era. The GOP’s Tax Cuts and Jobs Act of 2017 has greatly reduced tax-related incentives for people to make charitable donations. Experts project that the number of U.S. taxpayers who itemize deductions could fall by as many as 21 million.

Combined with other dramatic changes—including the significant increase in estate exemptions for the nation’s wealthiest—the drop off in deductions could sap up to $20 billion from the philanthropic sector and eliminate hundreds of thousands of jobs over the coming years.

There may be legislative opportunities to reverse some of the damage down the road, but the immediate forecast is bleak.

Nonprofits have missions to pursue and need to uncover resources in order to find sustainable footing to make it through this rough patch. Frustratingly, the resources are there; the only catch is that donors don’t need to distribute them in order to receive tax benefits.

Donor-advised funds (DAFs) enable wealthy individuals to receive upfront tax benefits without actually donating any resources. Donors are permitted to recommend resources from DAFs to various recipients over time while the value of their fund continues to grow. While DAFs may increase the number of philanthropic dollars in the long-run, these vehicles ultimately provide wealthy individuals the tax benefits associated with charity without simultaneously requiring them to help organizations working for the social good.

Without immediate incentives for donors to allocate resources to nonprofits from these funds, the philanthropic sector only has one choice: to appeal to the hearts and minds of DAF holders.

We are entering an era where fundraising professionals must create affinity between donors and holders of wealth and the mission of their organizations. Year-end “tax deductible gift” messaging may not work this year. Create new reasons to give by bringing people back to the basics—your mission. Demonstrate the impact your organization makes in the community and prioritize donor engagement. Give your donors the opportunity to make an immediate difference using tools that serve their philanthropic interests and your mission.


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