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Big Data Fundraising Trends from NY Nonprofits, Tax Reform and the Impact on Giving

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Presenters

Nathan Dietz, Ph.D.

Associate Research Scholar, Do Good Institute at the School of Public Policy, University of Maryland

Jon Biedermann

VP DonorPerfect

Board member, Giving Institute and Giving USA Foundation

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Research Topics

Are people less likely to give in recent years?
What has happened to retention rates by gift size over the last couple of years?
What has happened to upgrade and downgrade percentages (broken down by gift size) in the last couple of years?
What has happened to the “pyramid” of gifts in the last couple of years?
How have big donors changed their giving patterns in the last couple of years?
How does the Tax Cuts and Jobs Act of 2017 match up with these trends?

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Decline in Giving Rate

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Tax Cuts and Jobs Act

Increases the standard deduction for individuals (to $12,000), couples (to $24,000), and heads of households (to $18,000).
Raises the limit on cash donations for those who itemize deductions to 60% of adjusted gross income (AGI), up from the current 50% of AGI.
Repeals the “Pease limitation” on itemized deductions that limits deductions for upper-income individuals.
Maintains the estate tax, but doubles the exemption to about $11 million for individuals and about $22 million for couples.
Creates a new 1.4% excise tax on net investment income of nonprofit colleges and universities with assets of at least $500,000 per full-time student and more than 500 full-time students.

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Uncapped Charitable Deduction Bill

A bipartisan bill to expand charitable giving incentives was introduced [in May 2018] by Representatives Chris Smith (R-NJ) and Henry Cuellar (D-TX). If enacted, the Charitable Giving Tax Deduction Act (H.R. 5771) would enable all taxpayers to deduct charitable donations from their taxes, regardless of whether they itemize. The amount a taxpayer could deduct would not be capped, unlike similar universal, also known as non-itemizer, deduction bills introduced by Representative Walker (R-NC) and Senator Lankford (R-OK) last year.

Source: https://www.councilofnonprofits.org/civicrm/mailing/view?id=1407; see also https://medium.com/windfalldata/charitable-giving-tax-deduction-act-donors-and-nonprofits-win-96ab02caaf18

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The Data

Source data is actual gift transactions that have been rendered anonymous - no personal identifiable information was included
National dataset includes 19.5 million donors and 83 million gifts from 7,321 organizations
Some information about organization location (state, 3-digit ZIP, subsector, again anonymized)
Analyzed data from 279 organizations located in five boroughs to get the 2010-2018 giving history for 932,484 donors
95% Confidence level

This means that if we used data from the full national sample (83 million gifts), we would expect the true values to be within our margin of error 95% of the time. The margin of error is +/- .3% (Three-tenths of 1%)

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Donor Retention

New York state’s retention rate is slightly below the national average, but the gap has begun to close in recent years�
For repeat donors, the upgrade percentage is generally lower for NYC organizations than we see nationwide�
However, in recent years, the renewal rate has been higher for NYC organizations, and the downgrade rate has been lower

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Retention, 2015-2016 through 2017-2018, by State

Data taken from national 10% sample of organizations. We only present data for states with N = 1000 or more repeat donors during the 2016-2018 time period.

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NATIONAL: Need to make sure we define upgrades (larger gifts this year than the previous year). Good to see that the trend has been somewhat reversed, though by only ~10% (35.6% to 38.8%) in three years.

Nonprofits can develop a strategy to increase upgrades, by creating a multi-channel communication approach that targets donors to renew at a higher level. Specific tactics include measuring and testing ‘Gift Ask Strings’ in direct and online requests, or employing telephone to contact donors only 4-5 months after their initial gift to upgrade. Unicef International has a relentless phone program that engages donors much earlier than one might think- it’s an effort to both make sure the donor is retained (even if by offering to downgrade), but they have had great success with upgrading donors. Once a donor continues to give at least 6 times, the retention rate skyrockets to the low 90’s.

NYC: Upgrade percentage each year is about 5% lower than in the USA overall – we see a positive trend in recent years, as we see in the national stats. For the national stats, the increase in the upgrade rate offsets the possible negative impact (higher donor attrition) of the TCJA.

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Donor and Dollar Retention by Gift Size

For each year, retention rates are lower, usually by several percentage points, for all gift sizes than they are in the national sample�
In New York City and throughout the country, donor retention and dollar retention rates have both been on an extended decline�
However, NYC organizations saw an increase in dollars retained from big donors ($1000 and up) in 2017-2018, bucking the national trend�
Upgrade percentages are higher for large donors to NYC organizations, compared to the national sample

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NATIONAL: Decreases across the board at all levels are not surprising based on overall decline in retention rate. Correlation of Tax Reform effect is evident across all giving categories, even in the major donor level where donors are more likely to itemize. Decrease is most evident in $250-$999 gifts, which has historically fluctuated around 60%, but dropped by 8% between 2014-2015 and 2017-2018.

NYC: For each year, retention rates are lower, usually by several percentage points, for all gift sizes than they are in the national sample. Slight increases in retention rates for donors who make small gifts in recent years. However, declines in retention rates for large donors have not rebounded for NYC organizations like they have for organizations in the national sample.

Nonprofits with limited resources should also consider looking at ARR, or Annual Revenue Retention rate to measure, which is a better indicator of the overall health of the nonprofit since it measures the increase in giving $$$ from the same group of donors from one year to the next. [next slide]

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Donor Pyramid Statistics for New York Organizations

Major donors (who gave $10,000 or more) made up 1.1% of the donor pool for NYC organizations in 2018, and gave 62.9% of the total amount contributed. Nationally, it’s .8% and 52.3% respectively.

Only 0.7% of donors to NYC organizations in 2018 were monthly donors (who made 12 or more gifts to the organization in the past year, none of which were major gifts) – far below the national average of 3.0%

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Donor Pyramid Statistics for New York Organizations

9.3% of NYC donors in 2018 were 5 year annual donors (not major or monthly donors, but had given to the organization in each year from 2013-2017) – close to the national average of 9.5%

Together, gifts from 5 year annual and monthly donors constituted 5.2% of the total amount given to NYC organizations in 2018 vs. 12.2% nationally – the rest (31.9%) came from regular or episodic donors.

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NATIONAL: Very interesting to see that despite the focus on monthly giving programs, unreliable and episodic donors continue to increase as a percentage of the pie.

NYC: Contributions from major donors are a much larger percentage of the pie in NYC compared to the rest of the country (where these percentages are in the low 50s). However, nationally, gifts from monthly donors are a much larger percentage of the pie: in 2015, monthly donors contributed about 12% of the total amount given. This percentage dropped to 6.6% in 2018, but that’s still much higher than it is in NYC organizations.

Together, annual donors (who gave in each of the last five years) and monthly donors (who made 12 or more gifts in the year) contributed only about 5% of the annual total in 2018. Donor population is increasingly bifurcated in NYC (people are either major donors and irregular/episodic donors) in a way that you don’t see nationwide.

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Retention, 2015-2017 through 2017-2018, by Organization Type – NYC Organizations Only

* Statistics only presented for organization types with N = 1000 or more repeat donors between 2016-2018

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Resources

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Questions

Nathan Dietz Jon Biedermann

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