By Jane Hodges Dec. 4, 2023 The Wall Street Journal
Year-end charitable initiatives like Giving Tuesday have become so common that it can be overwhelming. If you’re newer to making charitable contributions, especially, it can be difficult to choose where to put your funds to work and to understand how the nonprofit sector uses them.
“Choosing where to give is a heart argument, not a head argument,” says Joan Garry, a New York-based former nonprofit chief executive who runs the Nonprofit Leadership Lab. “Making a gift is the beginning of your relationship with an organization and its work,” she says.
Here are some questions new donors should ask themselves to ensure that their year-end giving is effective for the causes they support.
Before you give, know that you can easily research nonprofits, as they are expected to maintain publicly accessible information on their mission, vision, programs and financial data.
The organization Candid offers resources including GuideStar, a database where you can look up a nonprofit’s financials and Internal Revenue Service Form 990 annual reports.
Charity Navigator ranks nonprofit efficacy among U.S.-based 501(c)(3) organizations—those recognized as tax-exempt by the IRS. It produces a ranking based on factors such as the impact a nonprofit’s programs have relative to their operating costs, an organization’s financial health, its leadership and board strength, and its culture and community.
The IRS also offers a lookup tool of current tax-exempt organizations and a list of those that have lost tax-exempt status.
A donor motivated by direct service might give to a food bank. Another donor might fund a nonprofit research initiative that spots problems in the food supply chain and makes more or better food available to the food bank. Which one you give to will depend on what you’re hoping to achieve.
“It’s easy to envision your gift going to work in a direct-service organization,” says Garry. “But donors might also ask themselves, ‘Do I want to invest in a long-term play to work on solving systemic problems?’ ”
Direct-service organizations do work that is immediately tangible and that may save lives, such as natural-disaster recovery or managing a food bank or women’s shelter, or a “backpack” program to route food to schoolchildren who may face hunger over the weekends.
Other organizations work upstream to curb the need for these “Band-Aid” measures, perhaps advocating for environmental policy to curb the pace of climate-related weather events, or investing in programs that help individuals and families achieve housing stability and tap education and work which would keep them from needing other supports.
Vu Le, a Seattle-based writer of industry blog Nonprofit AF and former executive director of Rainier Valley Corps, encourages newer donors to consider advocacy and intermediary organizations that do work beyond direct service in areas that matter to them.
It is one thing to support a program, he says, and another to support a program that trains leaders to deliver like programs in multiple communities. Le cites the work of associations, capacity-building initiatives that fund smaller organizations to work more effectively, and community organizations that might offer a broad mix of services spanning basic human needs like food and shelter to cultural preservation and arts programming.
For those who are uncertain which type of charity to support, Global Impact, a charitable research organization in Alexandria, Va., offers a quiz to help donors find organizations that align with their interests and passions.
Garry adds that many regional community foundations offer “giving circles”—groups you can join to learn about multiple organizations and causes, and where, collectively you choose where to make gifts.
At a minimum, you’ll get an acknowledgment. This typically comes in the form of a thank-you letter or email that counts as a receipt for your tax records. Additionally, you can expect to be named in annual donor reports—unless you requested anonymity—and to begin receiving newsletters and appeals about further fundraising initiatives or events.
The Association of Fundraising Professionals has a Donor Bill of Rights outlining what information donors can expect to receive or access when they begin a relationship with a nonprofit.
But the main thing donors get is intangible—the satisfaction that they routed some of their wealth to an organization that solves societal problems or contributes to cultural advancement, as in the arts or education.
One reason year-end donation rushes are effective is that many nonprofits use matching campaigns in which one donor—often an anonymous individual, a corporation, or foundation—will match others’ gifts dollar for dollar up to a certain amount to motivate giving at all levels. This can double your donation to a nonprofit immediately, and that can be motivating especially for people who can make only modest gifts.
Matching is often available year-round via employers, too, up to a company maximum. Some 65% of Fortune 500 companies make matching gifts available to employees but between $4 billion and $7 billion in giving goes unclaimed annually, according to Atlanta-based Double the Donation, a software company that develops tools for matching campaigns. You can also check Double the Donation’s database tool to see if your company matches employee gifts.
Many donors give online and organizations appreciate electronic donations as they clear faster than personal checks and are convenient for donors. However, not all online donations have an equal impact.
Social media-based online donations may take longer for a nonprofit to collect from the platform where they were solicited, and the nonprofit may not get sufficient data on who donated such that they can build a relationship with those new donors.
When your friends request donations for their birthday on Facebook, for example, and you give to those efforts, you’re generally doing so for your friend rather than the cause. “In this instance, the stickiness of the donor is lost,” Garry notes.
If you’re really interested in your friend’s cause, she adds, give directly to it.
Generally, to claim tax deductions from charitable giving you will need to make sure your gift goes to a 501(c)(3) organization—not a crowdfunding campaign for an individual in need or a startup—and save your receipts for tax season.
Sometimes, only a portion of a gift is deductible. If you attend a fundraiser, the hosting organization should provide deductibility information at the event or soon after. If you pay $100 for an event ticket, but the ticket includes food and drink, your ticket may indicate deductibility for only a portion of that $100, since you “got something” for your money. Similarly, if you bid $700 in a charitable auction for a painting worth $400, you won’t be able to deduct the full $700 because you got a $400 art piece.
Jane Hodges is a writer in Seattle. She can be reached at firstname.lastname@example.org.
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