By: Jeffrey Kowalczyk, CPA CFE CGAP
Since the roll-out of the TCJA in 2017, charitable giving has found a new rhythm. While some areas of charitable giving are in decline, others are rising. In fact, according to Blackbaud’s annual Charitable Giving Report and a Fundraising Effectiveness Project (FEP) recent study, overall giving is on the rise (1.5%, 1.6%, respectively). It appears that the ominous predictions on the demise of charitable giving have yet to come to fruition.
The Philanthropy Outlook 2019-2020, produced by researchers at the Indiana University Lilly School of Philanthropy, predicts that total giving is expected to increase by 3.4% in 2019 and by 4.1% in 2020. This news is a pleasant surprise to those who only months ago were bracing for demise. The report forecasts a season of growth due mainly in part to above-average progress in the S&P 500 in the preceding and projected years, increases in personal income, and expansion of the prior years’ GDP. Understanding your donors is a great way to anticipate your next move. The Outlook’s insight into expected giving patterns can help you prepare a solid strategy for the future. Below, we have summarized the trends that should be on your radar.
- Giving will continue to climb in 2019, rising above the year 10-average; however, in 2020, individual donations are expected to surpass the historical 10-year, 25-year, and 40-year annualized average.
- Growth in personal income, close-to-average growth in household and nonprofit net worth, and above-average growth in the number of itemizers are all cited as factors in influencing giving over this two-year period.
Concerning Foundations & Estates
- Foundations are expected to increase giving by 7.0% in 2019 and by 6.1% in 2020.
- Strong growth in the S&P 500 offers foundations room to run with their budgets.
- As the GDP also continues to climb, a similar trend in giving will emerge; however, analysts note that foundations may choose to defer giving in a period of economic downturn.
- Estates are expected to increase their giving by 5.4% in 2019 and by 5.6% in 2020.
- Projections for corporate giving predict an increase of 3.2% in 2019 and 2.6% in 2020.
- GDP and above-average growth in corporate savings are the reasons for this anticipated growth. However, it is important to note that these numbers are at risk for modulation. An increase in profits sometimes defers company resources away from philanthropic initiatives.
There are conditions; however, that could negatively affect this outlook. The Philanthropy Outlook itemized three potential deviation scenarios.
- The Uneven Growth Scenario uses trickle-down economics to explain an increase in individual/household and foundation giving.
- The Flat Growth Scenario shows total giving reaching the point of stagnation or decline due to a flattened market and economy.
- The Economic Downturn Scenario predicts imminent recession based on trade policy, stock market volatility, and rising interest rates.
While this forecast will help put nonprofit leaders’ minds at ease, it should not become an excuse to become too comfortable. While we continue to monitor tax law changes and their associated impacts on nonprofits, we encourage you to prepare for various scenarios. The professionals in our office can help you come up with a solid strategy to help you sustain and grow your organization. Call us today.