Please Don't Donate Cash
The new tax law has prompted many articles on a variety of topics. One topic, gifts of non-cash assets, is getting a lot of attention due to the most recent research from Professor Russell James. Professor James’ report, Cash is not King in Fundraising: Results from 1 Million Tax Returns, provides proof of what many fundraisers already know, but often have difficulty communicating or acting on.
The recent increase in the standard deduction will limit the value of the charitable deduction for many donors. As a result, gifts of appreciated securities and other non-cash assets will take on more importance. We have noticed that despite our recommendations, some of our consulting clients do not market these gifts as often as they should because they are too complicated or due to competing priorities.
Dr. James’ recent research confirms that gifts of non-cash assets correlate strongly with long-term fundraising growth. Using an analysis of one million Forms 990, he determined that charities reporting only cash gifts increased their fundraising by just 11% over a 5-year period. In contrast, charities reporting non-cash gifts of securities grew their total fundraising 66% over the same 5-year period. Charities receiving gifts of stocks or bonds grew their contributions six times faster than did those receiving only cash!
One significant piece of advice stemming from Professor James’ research points out that all fundraisers should know how to discuss non-cash gifts with prospects, because this is critical to raising more money. And yes, there are resources available to reduce the complexity when promoting these gifts to potential donors. Read the executive summary of Dr. James’ research.
To start, here’s a simple paragraph that can be added to your existing communications, website, or planned giving mailer:
If you are like so many others, your financial resources are tied up largely in non-cash assets. From a tax standpoint, it may be better for you to give something other than cash. When you make charitable gifts to our charity of stock, bonds, mutual funds, or other long term appreciated assets (assets you have held for over one year and that have grown in value) you receive a double tax benefit. You receive a charitable deduction for the current fair market value of the asset and you are not taxed on your capital gain in the asset. This means you receive a tax break for the appreciation on which you never paid taxes. By using appreciated assets, your gift costs you less! Another tax-wise option is to use your appreciated property to fund a life income gift, such as a gift annuity or charitable remainder trust. This kind of gift allows you to avoid tax on some or all your capital gain and receive income for life.
View Russell James' full report here.