Answering your questions: What you need to know before you give
At Candid, we get asked all kinds of questions. As you can imagine, lately we’ve seen quite a few relating to COVID-19, our democracy, and racial equity in our society. So many in fact that we created a place to answer the ones we are seeing over and over again. But there are even more out there. Here are some of the questions about what to know before you give that we’ve been hearing recently.
How can I be sure my charitable donation is going to the right place?
Sometimes with nonprofits, what you see isn’t what you get. There are more than 1.7 million nonprofits registered as tax exempt with the IRS. With this many organizations in our country, there are bound to be some with similar names and missions. There are a few things you can do before you give to make sure your donation is getting to the right place.
Do your research. If you are interested in donating to a particular organization or cause area, use the internet to your advantage. Take a look at the organization’s website, follow it on social media, or visit its Nonprofit Profile on GuideStar. You can discover a lot about an organization through these sources, such as its mission, location, guiding principles, and leadership. In some cases, the information will be very straightforward; in others it may be a bit more complicated.
For example, this summer many donors who intended to give to the Black Lives Matter movement directed their gifts instead to the Black Lives Matter Foundation. The Black Lives Matter Foundation (EIN: 47-4143254) is a 501(c)(3) organization in good standing with the IRS, but it is distinct from the Black Lives Matter movement, which receives donations through a fiscal sponsorship agreement with Thousand Currents (EIN: 77-0071852). By using a fiscal sponsor, the Black Lives Matter movement collects tax-deductible donations under the sponsor’s exempt status.
More and more people are choosing to give via crowdfunding campaigns. The key in those cases is still to do your research to ensure your contributions are going to your intended causes and communities.
Reach out. There’s nothing wrong with giving an organization a call, sending an email, or contacting it via social media. Getting in contact with an organization can help get your questions answered and make sure that its mission aligns with yours.
What kinds of donations are tax deductible?
Short answer: monetary and in-kind gifts to 501(c)(3) public charities—501(c)(3) refers to the section of the Internal Revenue Code under which the organization is tax exempt. These organizations are what people usually think of when they hear nonprofit—houses of worship, animal welfare organizations, PTAs, domestic abuse and homeless shelters, literacy organizations, nonprofit hospitals, food banks, scholarships, and more.
Longer answer: technically, gifts to 501(c)(3) private foundations are also tax deductible. Many private foundations don’t accept donations from the public, however. Also, the amount you can deduct is lower than that for public charities.
Finally, gifts to charitable funds sponsored by non-501(c)(3)s may be deductible. Let’s say your local chamber of commerce has a scholarship fund. Although you can’t give to the chamber of commerce itself—it’s a 501(c)(6) organization and therefore cannot accept contributions—you can contribute to the scholarship fund. The scholarship fund is a charitable activity, and donations to it should be deductible. When in doubt, ask the sponsoring organization.
Donations to individuals (using crowdfunding platforms or otherwise), politicians, political parties, or political action committees (PACs) are not tax deductible. (A handful of states, however, offer a tax credit for political contributions—be sure to check state guidelines.)
Learn more: Charitable Contribution Deductions
Can tax-exempt organizations engage in political activities?
Yes and no. Section 501(c)(3) organizations cannot endorse, oppose, or contribute to the campaigns of specific candidates for office. They can, however, encourage voter engagement and conduct get-out-the-vote activities as long as they do so in a nonpartisan manner. They may also advocate for or against issues that further their missions and engage in limited lobbying related to them. There are, however, very strict rules about what a 501(c)(3) can and cannot do related to political campaigns. Violating these rules can result in a 501(c)(3) losing its tax-exempt status.
That does not mean that if you work at a 501(c)(3) organization, you are prohibited from engaging in political activity on your own time. You just need to do so as an individual, not as a representative of your organization.
How has giving changed this year?
It’s too soon to tell what the full impact of the coronavirus pandemic will be on individual giving this year. Here’s what we know so far: surveys from early in the pandemic suggest that donors did not anticipate that their giving would change—but the experiences of nonprofits say otherwise.
A survey conducted in March by Fidelity Charitable found that the majority of donors (those that gave at least $1,000 in 2019) anticipated that the amount they would donate in 2020 would remain the same as in 2019. A quarter said they would donate more than they usually do, and less than a tenth anticipated they would donate less. Similarly, a report by Indiana University’s Women’s Philanthropy Institute found that, in the initial months of the pandemic, the majority of U.S. households maintained their overall giving levels.
But by April, 90 percent of U.S.-based nonprofits had experienced revenue loss, according to a survey by LaPiana and Associates. And a survey of nonprofits by the Center for Effective Philanthropy, taken in May, found that funding from individual donors took a hit: 43 percent of nonprofits reported that gifts from major donors decreased, and 51 percent of nonprofits reported that gifts from individual donors below the $7,500 per year giving level decreased. Nonprofits that rely on foundation funding experienced fewer negative impacts than those that depend on earned revenue or gifts from individual donors.
Some types of organizations are faring better than others. Human service charities, such as food banks and homeless shelters, saw an increase in grants awarded through donor-advised funds, as did society benefit charities, such as community foundations and social advocacy groups. Still, the needs are so great, even nonprofits responding directly to COVID-19 and related issues are struggling to meet increased demand caused by the pandemic. Others fear their donors will re-direct their giving to COVID efforts instead of them.
With giving season upon us, only time will tell the true impact of the COVID-19 pandemic on individual giving.
Ask us your questions
We know you have many more questions before you give. We want to hear them.
What do you want to know? How can our data and experience help you do good? Drop your questions in the comments section below or through social media using the hashtag #WeHaveSomeQuestions. We’ll be adding new blog posts monthly to answer your questions.