Donations to nonprofit organizations in Arizona are becoming scarce as fears of an oncoming economic recession rise.
The holiday season is here and donations are more important than they are at any other time of year. However, inflation is increasing. Data from the Fundraising Effectiveness Project shows that individuals giving to nonprofits has declined by 7% in the first half of 2022, compared to donations during that same time period last year.
“What we’re seeing is a slowdown in giving,” said Jennifer Purcell, senior vice president and director of development for the Alliance of Arizona Nonprofits. “And the giving slowdown that we’re seeing the most (is) in our people who tend to give under $100 annually.”
Donation numbers did rise in 2020 over 2019, a trend that was likely spurred by the Covid pandemic. However, things are looking a little different now. The number of individuals giving to charity has lowered for five consecutive quarters.
One thing that nonprofits can do to survive a recession, according to Purcell, is have a financial reserve. However, according to her this solution is only possible for larger organizations. This type of saving may not be viable for newer, smaller organizations.
Numbers of one-time donors and donations of less than $500 are dropping. The number of people donating $100 or less decreased by 17%, and the number of donors donating between $101 and $500 dropped by 8% between the first half of 2021 and the first half of this year.
“People who live on fixed incomes, like some of our elderly, if they’re seeing increases in their normal costs, like significant increases for food, in services and things that they pay for, they may not have as much expendable income to be able to give to charity to help and they may actually become recipients of those services versus givers,” Purcell said.
Woodrow Rosenbaum, chief data officer of Giving Tuesday, cautioned that the nonprofit sector is not ready for a recession. Small donations from the broader community are critical in times of economic slowdown. This is because wealthy donors tend to reduce giving during recessions.
Giving Tuesday was last held on Nov. 29, and offered an opportunity to rally community and support for nonprofit organizations. It is operated by Arizona Gives, which is a statewide program from the Alliance of Arizona Nonprofits. Rosenbaum said there are Giving Tuesday movements in 85 countries this year.
One issue Rosenbaum noted was the need for a strong base of smaller level donors. This is because wealthier donors are more responsive to economic downturn, but donate less during financial slowdowns.
“The good news is although people appear to be concerned about the economy, people appear to be feeling fairly positively about their philanthropic intentions,” Rosenbaum said. “The surveys we’ve seen by others indicate that people are concerned about the economy but are expecting to either maintain or increase their giving.”
During the past couple of years, the federal government created ways to help nonprofit organizations stay afloat during the peak of the pandemic. According to the Alliance of Arizona Nonprofits, changes in tax laws, which provided relief to nonprofits in 2021, may impact federal tax returns for this year.
The CARES Act, passed in 2021, expanded and extended several federal tax-donation benefits to those who gave to 501(c)(3) public charities in the previous year. Deductions for single taxpayers increased by $150 from previous years and rose to $12,550 and $25,100 for married couples filing jointly. For head of households, the deduction will be $18,800, up by $150.
The Alliance of Arizona Nonprofits is a statewide resource and advocate for the state’s nonprofit and philanthropic sector. In August, the organization merged with Arizona Grantmakers Forum. This merger was meant to help maximize resources available to the sector. The Alliance is composed of more than 1,100 members, including nonprofits. It was founded in 2004 to empower and support nonprofit and philanthropic organizations.
The Alliance recommends that those who donated to nonprofits keep receipts and documentation. Those who gave over $250 to a single organization in 2021 need a letter of acknowledgement from the nonprofit. Those who donated food, clothes or other non-monetary items will not be able to deduct that donation without claiming itemized deductions on their federal taxes.
According to the Arizona Department of Revenue, Arizona has two separate state tax credits for those making donations to charitable nonprofits. This includes donations to Qualifying Charitable Organizations with a maximum of $400 for single filers and $800 for joint filers. It also includes donations to Qualifying Foster Care Charitable Organizations with a maximum of $500 for single filers and $1,000 for joint filers.
“I want to stress how important giving back to our community and being philanthropic is and that every dollar amount makes a difference.” Purcell said. “So, whether you can give $5 or you can give $500 or you give $5,000, it impacts the nonprofit sector doing the work in the community. If you have a nonprofit that you are really passionate about, then just give to that one once a year. Or once a quarter, once a month, whatever that looks like and put it into your budget.”