Fundraising serves as a vital mechanism to support a 501(c)(3) public charity’s mission. In today’s world where a reputation can be made or broken in a matter of seconds, effective governance lies at the heart of every successful public charity. Board members assume a critical role in this endeavor as they are the guardians of the nonprofit’s reputation, financial health, and commitment to ethical practices.

According to IRS Compliance Guidelines for 501(c)(3) Public Charities, “A governing board should be composed of persons who are informed and active in overseeing a charity’s operations and finances. To guard against insider transactions that could result in misuse of charitable assets, the governing board should include independent members and should not be dominated by employees or others who are not independent because of business or family relationships.”

Board members must grapple with the many perplexing rules and regulations connected to nonprofits that heavily rely on public and governmental support. Failure to comply with these rules may trigger severe repercussions including hefty fines, forfeiture of government grants, or even the loss of their 501(c)(3) status. Ensuring compliance is an essential duty for every board member.

Here are some key insights we share with our clients to ensure adherence to 501(c)(3) fundraising regulations.

Understand Form 990

More than just a tax document, Form 990 is vital tool for nonprofit organizations. It showcases a nonprofit’s financial information, mission, and governance practices to both the public and the IRS. It sheds light into how donations and funds are utilized.

According to the IRS, “While 501(c)(3) public charities are exempt from federal income tax, most of these organizations have information reporting obligations under the IRC to ensure that they continue to be recognized as tax-exempt. In addition, they may also be liable for employment taxes, unrelated business income tax, excise taxes and certain state and local taxes.”

Which Form 990 an organization files depends on their financial activity.

• Form 990-N: Gross receipts are $50K or less
• Form 990-EZ: Gross receipts are less than $200K and total assets are less than $500K
• Form 990: Gross receipts are $200K or more or total assets are $500K or more

Failure to file a Form 990 annually with the IRS can come with substantial penalties including steep fines or revocation of tax-exempt status. No matter what the level of activity, some Form 990 must be filed each year. The IRS considers it a best practice for the 990 to be presented to the full board before filing each year.

There are also a number of other federal compliance requirements related to donor acknowledgements and fundraising solicitations. The IRS provides a wealth of information on these requirements on their website www.irs.gov.

Know Your State Filing Requirements

Forty-two require nonprofits to register with the state before soliciting donations. State laws may have additional requirements that also need to be followed like providing donors with a written disclosure statement.

For example, in Florida disclosure requirements must include all of the following at the point of solicitation: (a) The name of the charitable organization or sponsor and state of the principal place of business of the charitable organization or sponsor.; (b) A description of the purpose or purposes for which the solicitation is being made.; (c) Upon request, the name and either the address or telephone number of a representative to whom inquiries may could be addressed.; (d) Upon request, the amount of the contribution which may be deducted as a charitable contribution under federal income tax laws.; (e) Upon request, the source from which a written financial statement may be obtained. Whereas, New York disclosure requirements must include all information specifically required by Exec. Law 172-e(2); AND a copy of the Annual Financial Report(s) encompassing the entire reporting period for which the Funding Disclosure is made, or the most recent Annual Financial Report filed, including all required forms and attachments and the associated Schedule B(s).

As with federal compliance, failure to meet state obligations can result in fines and revocation of nonprofit status. In some states (e.g., California, New York, Massachusetts), board members can be held personally liable for several reasons, including failure to file necessary tax returns. It is imperative for both the nonprofit and its board members to meet their state’s requirements.

The IRS provides state government website links for tax-exempt organizations so you can easily access your state filing requirements.

Don’t be surprised that the requirements in every state are different. It’s important to re-consider every year if your organization is correctly registered in the states where you are soliciting.

Staying Up-to-Date on Compliance Regulations

As fundraising compliance regulations are essential and noncompliance can impact both a nonprofit as well as a board member’s reputation, it’s essential to stay well-informed and up-to-date on the latest regulations. One effective approach is to establish an oversight committee tasked with regularly reviewing, interpreting, and disseminating information regarding evolving compliance standards and legal updates.

Engaging in continuous education and training programs focused on compliance issues is also extremely beneficial for board members. Our nonprofit experts at HBK can help ensure your organization stays up-to-date and informed on all fundraising compliance issues.

Is donor information disclosure required?

It’s important to know if your organization might need to disclose donor information. Some organizations are required to file a Schedule B with their Form 990, 990 EZ, or 990PF, including:

In general, a tax-exempt organization is not required to publicly disclose on Form 990 Schedule B the names or address of its contributors. Key to note here is that “publicly” refers to anyone other than the IRS. All other information reported on Schedule B, including the amount of contributions, the description of noncash contributions, and any other required information, must be made available for public inspection unless it clearly identifies the contributor. Regulations specifically exclude the name and address of any contributor to the organization from disclosable documents. The exclusion does not apply to private foundations or 527 political organizations.

What does the regulation really mean? First, if a Schedule B is required when filing a 990, a complete filing for IRS purposes includes a Schedule B showing donor names, addresses, amounts given, and various other data. For many organizations, total annual donations from a single donor will be disclosed over $5,000. Larger organizations can elect to only disclose donors over a 2 percent threshold calculated each year. In the end—that is, the complete Form 990—donor information is provided only to the IRS and not to the general public or any other reporting entity, except for private foundations and 527 organizations.

The history and the debate

Anonymous giving has a long history. Philosophical thinking on anonymous giving goes back at least as far as the first century with the Roman philosopher Seneca, who wrote that anonymous gifts allow a person to avoid both praise and blame for the gift.

The freedom to keep philanthropic contributions anonymous is not just about the religious, cultural, or practical reasons that motivate many donors’ desires to keep their giving private. The rights to associate privately and contribute to organizations anonymously are also intrinsic to effective exercise of the First Amendment. Based on this premise, the U.S. Supreme Court has long recognized that compelled disclosure of the identities of people who give to charity as well as many other organizations and causes is unconstitutional.

The debate to disclose or not disclose donor information continues to this day. Various states have attempted to circumvent federal rules by passing state regulations. In 2023 alone, 24 states have donor disclosure and privacy bills under consideration.

Gather but do not disclose

Whether the organization is required to disclose or not and no matter what side of the political debate you take, organizations are required to gather and maintain donor data. An organization must keep its donors’ names and addresses in its records and make them available to the IRS in the event of an examination.

Beyond IRS examination, some reasons for maintaining donor data are driven by specific requirements:

Other reasons are more about relationship building:

One of the common failures by many organizations is that they do not correctly identify the actual donor. I often ask, “Where did the funds come from?” Historical data is often incomplete and incorrect. Here are a couple of examples.

Organization A is actively engaging a potential donor for a gift. Success: a check arrives! Mr. and Mrs. Y are happy to contribute but the check comes from their family foundation. Correct donor data should show the foundation name and address as the donor, not Mr and Mrs. Y.

Banker C is a board member and promises to contribute. Success: two checks arrive, one paid by the board member’s bank and one paid by Banker C. Correct donor data should show two unique donors.

Identifying the actual donor is vital, particularly for determining when Schedule B disclosure is required. In our second example, if the bank contributed $3,000 and the individual banker contributed $2,500, these amounts would not be combined—and neither meets the $5,000 disclosure threshold.

One challenge is that organizations need to maintain data over many years; best-practice document retention guidelines dictate at least seven years. For 501(c)(3) public charities, donor records must be kept for a minimum of five years in order to calculate the required public support test on IRS Form 990. There are many effective donor management systems available no matter the organization’s budget.

Managing donor expectations

Donors are more informed than ever about the organizations they support. One of the premier policies organizations should adopt concerns the collection, management, and use of confidential donor data. Best practices indicate policies should include:

The watchdog groups are watching! In order to meet CharityWatch’s informational Privacy Policy benchmark, a charity must have a privacy policy (or policies) that apply to the collection of donor information both online and offline, and the charity must post the policy on its public website. As part of a charity’s Governance & Transparency benchmarks on charitywatch.org, CharityWatch also reports on the type of donor privacy policy a charity maintains, either “no sharing,” “opt-in,” or “opt-out,” all of which are driven by the donor and not the organization. Charities whose privacy policies lack clear information about how donors can opt-in or opt-out of personal data sharing will not satisfy CharityWatch’s Privacy Policy benchmark.

Challenging Times

Nonprofits face many challenges around donor data management and donor privacy. Here are just a few:

Conclusion

Contributions are the primary source of funding for many exempt organizations. Gone are the days when all the organization had to do was say “thank you.” The management of donors and their data is a big responsibility for all organizations.

A private foundation is an organization that is exempt under IRC § 501(c) (3), but does not meet the requirements to be considered a public charity. This is generally because the private foundation is either not operating an activity that would qualify as a private charity, or the source of funds is limited to a family group, and therefore the organization is unable to show sufficient support from the general public. When an organization is classified as a private foundation, it must comply with several complicated rules governing its assets and activities. This article addresses one of the most important of those rules: the requirement to make annual qualifying distributions to avoid significant excise taxes.

Overview

In general, a private foundation is required to distribute annually an amount equal to the foundation’s “minimum investment return” in order to avoid the excise tax for a failure to distribute income. The minimum investment return generally calculates to 5 percent of the net fair market value of the foundation’s assets, with some exceptions. Only distributions that meet the definition of a “qualifying distribution” will count toward the requirement. However, if a foundation qualifies as a “private operating foundation,” it is not subject to this distribution requirement.

Minimum Investment Return

A private foundation’s minimum investment return is generally defined under IRC § 4942(e)(1) as 5 percent of the net value of the foundation’s income producing assets. Assets used directly by the foundation in carrying out its exempt purpose are not included in the net value. Whether or not an asset is used to carry out the foundation’s exempt purpose depends on the facts and circumstances, and generally requires that the foundation have a charitable activity.

For example, a private foundation that purchases a building to carry out its future plans of operating a museum should be able to exclude the value of the building from the foundation’s minimum investment return calculation. However, if the private foundation does not have plans in place to create a museum, or purchased the building solely for the purpose of generating rental income, the value of the building should not be excluded.

There may be instances where assets are used for both direct charitable and non-charitable purposes. In those instances only a portion of the asset value will be included in the minimum investment return calculation. When at least 95 percent are used in direct charitable activities, assets can generally be fully excluded from the calculation.

The timing of the value is also important when calculating the minimum investment return. Cash accounts will generally be valued as a monthly average balance, whereas other assets may be valued on any day of the year, assuming the same day is used consistently each year. Real property may qualify for a special rule that allows the private foundation to obtain an appraisal every five years.

Private foundations should look at valuations carefully to ensure they are accurate. While an excise tax may apply if the valuations used are later determined to be too low, IRC § 4942(a) (2) prevents the imposition of this excise tax, provided the foundation did not act willfully and made a good faith effort to ascertain accurate values.

What Are Qualifying Distributions?

Qualifying distributions are generally administrative expenses, payments to other exempt organizations, or amounts set aside for a specific project that has a charitable purpose:

• Administrative expenses tend to be expenses that are reasonable and necessary to accomplish the exempt purpose of the foundation. Legal and accounting fees generally qualify, as do state registration fees, trustee fees, and banking fees. To the extent any of the administrative expenses of the foundation are incurred partly for the foundation’s charitable purposes and partly for other purposes, the foundation will need to allocate the expenses between purposes. Allocation is done on Page 1 of Form 990-PF. There is no defined method for allocation, though allocations should be reasonable and consistently applied each year. We recommend looking at each administrative expense separately to determine the most accurate method of allocation. For instance, trustee fees may be allocated based on hours spent reading grant applications versus monitoring investments. In contrast, legal fee allocations may be based on the specific matter they pertain to—for example, drafting internal governance documents or giving an opinion on whether an investment strategy is aligned with the foundation’s charitable purpose.

• Payments to other exempt organizations may be qualifying distributions as long as the designated organization is not controlled directly or indirectly by the foundation or its disqualified persons, with some exceptions. In addition, payments to other private foundations will generally not qualify unless the foundation receiving the payment is a private operating foundation. Interestingly, payments made to foreign organizations may be considered qualifying distributions if the foundation has made a good faith determination that the foreign organization is not considered a private foundation.

• Amounts set aside for a specific charitable project can be a qualifying distribution when the amount set aside will be used on the project within five years. In addition, the foundation must either show that the project is better accomplished by setting aside funds instead of making immediate payments during the term of the project, or meet a mechanically defined cash distribution test that generally principally applies to foundations applying the setaside rule shortly after organizing as a private foundation.

Ordering of Qualifying Distributions

Qualifying distributions made during a current year will first reduce any undistributed income—that is, of the minimum investment return—from the immediately preceding year if the private foundation was subject to the income distribution requirements for that year. To the extent that there are excess qualifying distributions for the current year, the private foundation can elect to apply the excess to undistributed income from years prior to the immediately preceding year. If the election is not made, or there is no undistributed income for prior years, the current year qualifying distributions will reduce distributable income for the current year. Any excess qualifying distributions are deemed “distributions of corpus,” which may reduce distributable income in future years.

IRC § 4942 Excise Taxes

If a private foundation does not make sufficient qualifying distributions to distribute the entire minimum investment return for the year, the undistributed amount carries forward to the following year. The private foundation must then make sufficient qualifying distributions to cover the undistributed amount from the prior year, or a 30 percent excise tax will be imposed on the amount that remains undistributed as of the first day of the third taxable year after the amount was required to be distributed. The excise tax will continue to apply each year until qualifying distributions are sufficient to offset the undistributed amount subject to the excise tax. (See example below.)

IRC § 4942 Excise Taxes:an Example

The Smith Family Foundation calculates a minimum investment return of $10,000 during tax year 2019, but does not make any qualifying distributions. The minimum investment return for tax year 2020 calculates to $12,000, and the foundation makes qualifying distributions of $5,000 by the end of tax year 2020. The qualifying distributions of $5,000 first offset the distributable amount from tax year 2019, leaving a balance of $5,000, against which the 30 percent excise tax is assessed in tax year 2021. The foundation will need to make qualifying distributions of at least $17,000 during tax year 2021, and apply excess qualifying distributions to undistributed income from 2019 in order to avoid the excise tax in tax year 2022.

Conclusion

Private foundations need to be aware of their distribution requirements and the excise tax that could be assessed if the qualifying distributions they make are insufficient to meet those requirements. HBK Nonprofit Solutions is well versed in those requirements and regularly consults with nonprofits on adhering to qualifying distribution rules. To discuss the rules, or for a better understanding of how they could impact your private foundation, we encourage you to reach out to HBK Nonprofit Solutions.

Read the full Spring issue of Insights, the HBK Nonprofit Solutions quarterly newsletter.

The first donor-advised funds appeared back in the 1930s but were not formally recognized in the Internal Revenue Code until the Pension and Protection Act of 2006. Today, these funds are one of the fastest-growing vehicles for making current charitable contributions but are also being incorporated in many tax planning strategies. Exactly, what are donor-advised funds?

A donor-advised fund (DAF) is a separately identified and managed charitable investment account that is operated by a Sec. 501(c)(3) organization, also known as a sponsor or sponsoring organization. Often these sponsoring organizations are affiliated with brokerage houses and community foundations, but more recently with hospitals, universities, charities associated with affiliated corporations and religious institutions. Increasingly more DAFs are being used to facilitate workplace giving and online fundraising. Recent reports indicate that more than 1000 DAFs exist.

How does a DAF operate? Many times, donors have never heard about a DAF before this donation strategy is recommended by an accountant, attorney, tax planner or investment manager. Generally, the donor makes what will become a charitable donation to an existing DAF. The donor benefits by enjoying an immediate tax benefit for the contribution. That contribution is 100% irrevocable and is ultimately destined for distribution to a 501c3 organization, including a foreign equivalent of a 501c3. The final distributions to a grantee are not necessarily immediate, or even in the same tax year, hence the ongoing controversy surrounding DAF giving. Once received, the sponsoring organization has legal control over those funds. The donor retains advisory rights with respect to the investment of those funds and the ultimate distribution of those funds. At some point after the original donation, the donor or the donor’s representative, recommends that the sponsor donates to a public charity. The sponsor is not legally bound to the donor’s request and will usually perform due diligence to verify the grantee’s tax-exempt status and may reject the donor’s request. The great end result, the charity gets its donation.

The donor would be wise to research DAFs before randomly selecting one. Some of the factors to consider:

• Is there a minimum initial contribution?
• Are there minimums for additional contributions?
• What assets will the DAF accept? Cash, stocks, bonds, IRA and 401k funds, cryptocurrencies, life insurance, real property?
• What investment options are available for the account?
• Is there a minimum amount for grants to charities?
• How often can grants be recommended by the donor?
• How much are the annual admin fees, investment fees and maintenance fees? DAFs make money from these fees.
• What is the reporting, performance and governance of the DAF?

Many donors are seeking local impact, so they might be more interested in a community DAF as opposed to a larger sponsoring organization. Some sponsors offer customizable DAFs based on the donor’s impact, geographic and investment preferences.

Donors can make contributions in a variety of ways including induvial giving, supporting charitable special events, creating private foundations or opening a DAF fund, to name a few.

What are the advantages DAF fund donors enjoy:

• DAF funds are relatively simple and cheaper to establish.
• DAF giving works for all levels of wealth.
• Administrative work shifts from the donor to the DAF sponsor.
• Donors may retain investment decisions or allow fund managers to make these decisions.
• Charitable donations can be bundled for tax purposes into one year, while outgoing grants can be spread over time.
• Many sponsoring organizations allow the donor to name a successor of the DAF if the donor should become incapacitated or pass away.
• Multiple donors can contribute to the DAF. Think about bequest and memorial type contributions.
• Allows a donor to reach international charities and other non-governmental organizations while still receiving a federal tax credit.
• Helps a donor create a philanthropic vision, philosophy and legacy.
• Allows for the more beneficial tax treatment of contribution as opposed to donating to a private foundation and finally,
• Protects the privacy of donors, by allowing the individual donors and grants to be kept private.

So, what are some of the disadvantages?

• The contributions to the DAF are irrevocable.
• The donor gives up full control over the funds and relies on the sponsor to approve their recommendations.
• Investment options and contribution amounts might be limited by the sponsor.
• DAF participants cannot receive any personal benefit from a grant request, such as tickets to a charity gala.

The controversy and what to watch for your future giving

The great debate about donor-advised funds is centered around the fact that DAF sponsoring organizations are not getting funds out fast enough to the charities. Not that the DAFs are inefficient, but that there is no required distribution amount or percentage for a DAF like there is for a private foundation.

Introduced in July 2021 a Senate bill, proposes to influence the deductibility of charitable contributions if not disbursed within certain time frames like 15 or 50 years. Under current law, assets can remain in a DAF indefinitely, tax-free. There are great debates on both sides of this discussion, including the impact on sponsoring organizations as well as charitable recipients. In February 2022, the House introduced its version of the legislation on this issue calling the “Accelerating Charitable Efforts Act” the “ACE Act” The House version, which almost mirrors the Senate bill, would place additional restrictions on the deductions for contributions to DAFs, establishes minimum payouts and establishes failure to payout taxes.

No matter, where you fall on this great debate, if you are a DAF donor or a charity recipient of DAF donations, new legislation will impact those contributions.

If you have any questions regarding DAFs, please reach out to an HBK Tax Adviser.

Online technology can be an excellent enabler for nonprofit organizations; how it is leveraged varies depending on several factors. As CAAS professionals, we want to help the organizations we work with achieve efficiencies and adopt best practices in accounting, finance, and governance. Technology and its users play an integral role in this effort, and management accountants can help ensure that nonprofit organizations use these tools properly and follow established best practices. Having a better understanding of how nonprofits use available technologies will help that effort.

Cloud-based financial technology for 501(c)(3)s

The annual Blackbaud State of the Nonprofit Industry Survey asked nonprofits around the world about their technology and Internet usage. More than 2,000 nonprofit organizations from 10 countries responded. In all the countries surveyed, the study found that small nonprofits— revenues between $250,000 and $2.4 million—use online tools for advocacy, e-mail, and social networking at a higher rate than larger nonprofits. Measuring those efforts against their finances is a logical next step. Cloud-based financial technology makes it possible to integrate different data sets and quantify powerful scorecard metrics, which are essential tools for demonstrating accountability and transparency.

Scorecard metrics can be used to measure financial or non-financial criteria that reflect the efficacy of an organization’s programs and initiatives. Without cloud-based financial tech, it can be challenging and laborious to start to analyze scorecard metrics. When you focus on what and how to measure, you inform other aspects of your strategic planning, strengthen your stewardship and performance, and increase your mission impact. Some scorecard metrics that many organizations have found helpful include:

• Program efficiency = total program services expenses ÷ total expenses: This metric may be the most important for many charity evaluators, board members, and donors because it shows how funds are used for overhead or for making progress.

• Revenue per member = member revenue ÷ member count: Many membership-based organizations rely heavily on membership dues and program fees. How much revenue are you generating from your membership?

• Fundraising efficiency = unrestricted fundraising expenses ÷ total unrestricted contributions: How much do you spend to raise a dollar? This metric shows how efficiently your organization raises funds.

Cloud-based financial technology for government entities

Government accounting needs differ from those of private organizations. Government accounting requires specialized software for better compliance and financial transparency for the Government Accounting Standards Boards (GASB) and to help manage a municipality’s many budgets. Well-designed accounting software reduces municipalities’ stress related to adhering to government regulations, audits, and data reporting. Government agencies are also under the scrutiny of the public, specifically on how those agencies spend taxpayers’ funding.

While outsourcing the accounting functions for a government agency may seem feasible at first, it takes a dedicated, experienced vendor who works specifically in government accounting to check all of the boxes required for government agency accounting. Those specialists are expensive, and taxpayers don’t like to see their funds spent on expensive outside services. Cloud-based financial technology can solve the dilemma. After a decade of outsourcing all city accounting, one municipality successfully implemented an easy-to-use and well-supported cloud-based accounting system. They were able to reduce costs and reliance on outside accounting professionals and have improved data integration and reporting flexibility.

Processes to Upgrade to Cloud-Based Financial Technology

A common hurdle to using any technology is the anxiety of implementation. New technology means learning the intricacies of a new system, possibly new hardware challenges accessing legacy data, and perhaps, the fear of automation and efficiency coming at the expense of someone’s job. In reality, technology is for the betterment of the organization, its mission, and its people.

Let’s explore the three Es for the best implementation of financial technology: evaluation, education, and execution.

• Evaluating technology options should be a team effort that includes the finance department’s analysis of the present process and possible future applications and efficiencies and executive leadership’s desired outputs. It is essential that the day-today users of cloud technology be involved in the evaluation. Choosing software that best addresses the goals of the finance department and the entire organization should include considerations such as transferability of data into the cloud, ease of use, cost, support, and others’ reviews of the software.

One of the many benefits of evaluating cloud-based technology is having access to demonstration files. Ask your potential vendors for demo files to use for a period of time to explore the technology at your leisure.

• Once leadership has decided on financial technology, daily users of the software need to be educated, typically through structured training by the provider, on how to become power users and get the most value out of their decision. Education should involve the constant sharing of information about how cloud technology is used. That education can come externally from the service provider or other organizations and internally among the staff members using it.

Some helpful training tips:

– Never assume that what you hear is understood as intended. Explain to your instructor how you interpreted their direction.

– Request group training sessions.

– Ask your instructor to avoid abbreviations and “tech speak.”

• When executing the implementation of new, cloudbased technology, it is essential to plan, plan, plan—and do so in a timely manner. Follow that implementation plan and be ready for a few possible changes, of course, along the way, as no transition is perfect. Recommendations for executing a smooth implementation:

– Run the legacy system parallel with the new system, instead of setting a hard stop/start date. The period should be relatively short to prevent an unreasonable amount of redundancy.

– Designate a staff member to be the in-house “pro” to lead, train, and dedicate additional time to learning the new system.

– Make sure the legacy system is backed up or that the data is migrated to a separate cloud storage facility for access if needed in the future.

Once your cloud-based financial technology system is in place, you should revisit the three Es frequently. Evaluate if your system is still the best option, educate your organization periodically to stay up to date on upgrades, and execute any improvements and upgrades available for your system.

Real-time, cloud-based financial management enables nonprofits to take advantage of the same functionality, performance, security, and infrastructure that major corporations use. Modern fund cloud-based software can easily track and tag your expenses and revenue to specific funds and automatically calculate and report on these and many other scorecard metrics, giving you instant visibility and insights so you can proactively manage locations, programs, members, and funds.

Best of all, because cloud-based financial systems are typically open source and can pull information from other cloud-based sources of data, you can automatically integrate non-financial data with financial data without manual input. The right financial management system, such as Sage Intacct, along with the right team of financial professionals, like HBK’s CAAS office, can provide access to statistical data that enables you to automatically calculate scorecard metrics such as financial (revenue), statistical (membership), or a combination (donations per attendee). And it can offer the visibility, automation, access, and adaptability you need to grow your organization and succeed. From the benefits of fast and easy reporting to automated processes that yield greater efficiencies, you will be a better steward of your funds.

Read the full Summer issue of HBK Nonprofit Solutions quarterly newsletter.

Article updated November 2024.

Most of us know about Thanksgiving Thursday, Black Friday, and of course, Cyber Monday. In 2023, 34 million people participated in a day of giving on the Tuesday after Thanksgiving called Giving Tuesday. So, what exactly is Giving Tuesday?

Giving Tuesday started in 2012 as a special day to kick off the “open giving season.” It was a simple idea and has become a global movement that encourages us all to make a difference. This year, more than ever, this international day of philanthropy and generosity will help many charities continue to do great things in their communities. In its first year Giving Tuesday generated $10 million in donations. In 2023 that number rose to almost $3.1 billion, with over $13 billion raised since inception in 2012. The statistics from 2023 are fascinating:

• 90 countries and 300 communities participated in 2023
• There was a 34% increase in recurring giving
• For 2023 participants 36% of donors gave money, 20% gave goods, 18% volunteered
• 25% of giving is done between Giving Tuesday and year end.

Despite the current economic and political environment donations have continued to flow. Many donors accelerate donations rather than waiting until year-end as they typically do. For that group we all talk about, those 18-34 who know about #Giving Tuesday, 82% of them participated in 2023.

Maybe you are one of the fortunate ones this year and you have some extra to give. Maybe you have a few favorite charities or maybe you’re a novice in making donations. Let your dollars make a difference. Be smart about doing your homework first. Here are a few things to remember:

Is the organization a registered public 501c(3) organization? This is easy to check by going to the IRS website tax-exempt organization search. The IRS Tax Exempt Organization Search Tool provides a lot of information on listed charities such as:

• Is the organization tax-exempt and eligible to receive tax-deductible charitable contributions?
• Has the organization had its exempt status revoked?

41 states also require state registration and most have charity directories.

If you itemize, remember donations to 501c(3) organizations are still tax  Contact your tax advisor to help plan your charitable giving if you are seeking a deduction for 2024.

Get to know one or more of the big watchdog groups. Groups like Charity Navigator, Charity Watch, BBB Wise Giving Alliance, or Guidestar (now called Candid). These independent organizations will help you make sure your donation is to a real charity that uses your donation well. You should research to find a charity with a proven track record of success.

Know who you are giving to before you click the “Donate Now” button. So many charities have similar names and it is confusing to donors. A google search will help locate a charity’s website to help validate it is the charity you are looking to support. Remember most nonprofits have a .org website rather than a .com site.

“Give Local.” We all talk about the success of many main street communities of the “Shop Local” movement. You should also “Give Local”. Think about what you value and where you’d like to make a difference. Look around your community and you’ll see so many wonderful charities suffering now. Long lines at food banks, theater groups that are still shuttered, teachers without classroom supplies, and churches with fewer pews filled due to capacity limits all need your help. On Giving Tuesday, yes, I’ll support my alma mater but I’ll also support my local soup kitchen. It’s heartwarming to be able to see and feel my dollars at work.

Giving Tuesday is about encouraging people to do good in any way they can. Maybe it’s giving money, but maybe it’s giving your time, talent, energy, or expertise. Maybe, it’s just about being kind to someone. With no money required, everyone can participate. This is the year to join in this movement. I know what I’ll be doing on December 3^rd; Do you?