With Halloween just passed, and Thanksgiving right around the corner, Christmas decorations now fill retail shelves. This must mean only one thing for nonprofits – the end of the year is upon us.
Now is the time to start planning your year-end strategies. For effective and efficient organizations, this means two things, Tax Letters and Year-end Campaigns.
Annual Tax Letters
The IRS requires all donations of more than $250 to any nonprofit (including faith-based) need a written acknowledgement from the organization in order for an individual to claim a deduction on his or her income tax return. According to Rick Wolfish, CPA, and Partner at Gallagher, Flynn and Company, and a nonprofit tax expert, even items such as church and synagogue dues and High Holiday tickets, which are considered “intangible benefits”, require written confirmation (if in excess of $250). To comply with these requirements, organizations can send a formal thank you letter either at the time of payment, or a special end of the year tax letter. Even when a thank you note (with the required detail) was sent earlier in the year, tax letters can still be beneficial. Putting aside the obvious that some donors may have lost their thank you letters, tax letters provide a wonderful opportunity to once again thank the donor and share your story.
To meet the IRS requirements, the letters must state:
- The amount of the gift
- Confirmation that the receiving organization is a 501c3
- The year in which the gift was received
- A declaration that the donor received no goods or services in exchange for the gift (items such as coffee cups with your logo do not count).
It, of course is understood that when preparing year-end tax letters, it is imperative that EVERY detail is 100% accurate, not only for the purposes of the IRS, but also, most critically, for purposes of donor stewardship. Double and triple checking is a worthwhile exercise. When a donor receives an inaccurate statement, non profits lose credibility and often future donations. For further information concerning tax letter rules, please read IRS Publication 1771, which is a simple, but effective resource.
End of the Year Campaigns (including the proverbial question of should you, or should you not include a solicitation in your EOY tax letter).
According to Blackbaud’s 2013 Charitable Giving Report, 33.6% of all annual charitable giving takes place from October – December. 17.5% of it takes place in December alone (as compared to 4.8% in January). Online donations were even higher. More than 20% of annual online giving, according to the study, occurred in December. The trend is the same in every nonprofit sector.
Whether the end of year donation spike is due to bonuses, the closing of individuals’ books, or holiday season inspiration, it behooves every organization not to miss this opportunity. If the 4th quarter is when people prefer to donate, organizations need to both provide and be prepared for this opportunity.
While some donors, do not like to receive multiple asks (these people should immediately be removed from this appeal), experience teaches that if the organization truly explains the “why “, the benefits can far outweigh the potential negative reactions. December solicitations (even as a part of a tax letter) truly do provide a special opportunity to communicate with donors, as well as share the value of its work at a time when donors are most receptive.
Whether it is a dedicated campaign or adding a note and envelope in the year- end tax letter, effective organizations affirm the importance of the donor’s previous gift, while also explaining why they are providing another opportunity to give. Most importantly, year-end giving provides one more opportunity to help donors feel that they are truly making a difference (while also elevating their holiday spirits).
If you have a year-end plan now is the time to review it, challenge your assumptions, and refine it to make it even more effective. If you do not yet have one, use the next few weeks to create a plan that assists your donors, and enhances your organization. It is not too late. The Presidents Day sale signs haven’t yet appeared.
The entire Dynamic Change Solutions team wishes you the happiest of holiday seasons. May you truly find holiday joy, as you provide your supporters with the chance to help your organization, and make the world a more joyous place.
Lou is the CEO of Dynamic Change Solutions, brings over thirty year’s of nonprofit and consulting experience to you. For a free 30 minute consultation on developing your year-end plan, please email me or to learn more about how we can assist you, please visit Dynamic Change Solutions.