Many states offer donors the ability to buy special tax credits.
How long will that last? The special tax credits are additional deductions allowed by the state for donation to special programming.
It is the state's way to encouraging donor support for certain programs.
The expectation is that by raising awareness of the need donors will respond.
The donor support will minimize the need for state support and reduce pressure on the state budget.
The tax credit is a good surrogate for our discussion.
In many states, a donor can "purchase" a tax credit from a nonprofit.
The donation entitles the donor to have a larger tax deduction for the donation than otherwise would be available.
This is good for the nonprofit.
They are able to offer a bonus to their donors.
It costs the donor nothing and provides a better than typical tax benefit.
The state gives up some tax revenue but has offsetting public support for a critical area.
Tax credits like this have been around for several years and in various forms.
The question is, "How much longer will they be around?" Many states are struggling with revenue shortfalls.
Eliminating these tax credits is one way to help close the budget gap.
It is unlikely to close the gap but in an atmosphere where "every dollar counts", ending them seems like a good idea to some politicians.
We know of organizations with several high-value donors who regularly make donations and expect to receive the additional tax credit.
If the additional tax credit is eliminated, how will that affect their donations? Our tax codes at the local, state, and national levels are complex.
There are many tax-favored opportunities like these "purchase" tax credits.
All of them are vulnerable with the budget stress at every level.
The tax-favored opportunities are more popular with the high-value donors.
This means that if the tax rules change, the impact can be significant since it affects large gifts.
It also affects only a small number of donors.
Having the number of donors limited helps reduce the amount of defensive work you have to do to retain the size of the gift.
Your challenge is to work with the donor to ensure that they are giving because of you mission and accept the tax favored status for their gift as a bonus.
If they are more interested in the tax advantage than your mission, the consequences for your budget are unlikely to be positive.
Next Step:
We recommend the number of high-value donors exceeds 10%.
A high-value donor is someone who has significant means and is among your most generous donors.
Besides seeking out new high-value donors, you should cultivate high-value donors from your existing donor base.
 Tax credits of all kinds (including normal charitable deductions) should be a bonus for giving.
The best reason to give is because the mission is important and valuable to all of us, especially the donor.
How many of your donors are more interested in the tax deduction than the mission?
How long will that last? The special tax credits are additional deductions allowed by the state for donation to special programming.
It is the state's way to encouraging donor support for certain programs.
The expectation is that by raising awareness of the need donors will respond.
The donor support will minimize the need for state support and reduce pressure on the state budget.
The tax credit is a good surrogate for our discussion.
In many states, a donor can "purchase" a tax credit from a nonprofit.
The donation entitles the donor to have a larger tax deduction for the donation than otherwise would be available.
This is good for the nonprofit.
They are able to offer a bonus to their donors.
It costs the donor nothing and provides a better than typical tax benefit.
The state gives up some tax revenue but has offsetting public support for a critical area.
Tax credits like this have been around for several years and in various forms.
The question is, "How much longer will they be around?" Many states are struggling with revenue shortfalls.
Eliminating these tax credits is one way to help close the budget gap.
It is unlikely to close the gap but in an atmosphere where "every dollar counts", ending them seems like a good idea to some politicians.
We know of organizations with several high-value donors who regularly make donations and expect to receive the additional tax credit.
If the additional tax credit is eliminated, how will that affect their donations? Our tax codes at the local, state, and national levels are complex.
There are many tax-favored opportunities like these "purchase" tax credits.
All of them are vulnerable with the budget stress at every level.
The tax-favored opportunities are more popular with the high-value donors.
This means that if the tax rules change, the impact can be significant since it affects large gifts.
It also affects only a small number of donors.
Having the number of donors limited helps reduce the amount of defensive work you have to do to retain the size of the gift.
Your challenge is to work with the donor to ensure that they are giving because of you mission and accept the tax favored status for their gift as a bonus.
If they are more interested in the tax advantage than your mission, the consequences for your budget are unlikely to be positive.
Next Step:
- Review your donor list and determine where your vulnerabilities exist
- Begin the process of talking to the donors who are benefiting from the special tax advantages available in your area and ensure they are giving to your mission rather than using your mission to avoid taxes
- If your donor list is devoid of vulnerable donors, rather than breathing a sigh of relief, ask yourself why there are so few high-value donors supporting your mission
We recommend the number of high-value donors exceeds 10%.
A high-value donor is someone who has significant means and is among your most generous donors.
Besides seeking out new high-value donors, you should cultivate high-value donors from your existing donor base.
 Tax credits of all kinds (including normal charitable deductions) should be a bonus for giving.
The best reason to give is because the mission is important and valuable to all of us, especially the donor.
How many of your donors are more interested in the tax deduction than the mission?