IRS reports provide key information about charitable giving.
The way in which donors report their charitable giving to the IRS has evolved through the years. Prior to 1969, donors used IRS Form 1040 to itemize their gifts. Starting that year, taxpayers transitioned to a separate Schedule A to detail charitable gifts. In 1985, the IRS introduced Form 8283 for reporting noncash gifts greater than $5,000. The form was modified in 1986 to report noncash charitable contributions under $5,000 in Section A and larger gifts in Section B. Since then, the IRS’s periodic release of data and analysis of these forms has provided a treasure trove of information for gift planners.
For example, when charitable giving declined after the Great Recession and subsequent financial crisis, IRS reports revealed that virtually the entire decrease was attributable to a major decline in noncash gifts (mainly securities) from taxpayers with incomes of $200,000 or more. The reports also showed that the recovery of giving is also tied to the recovery of noncash charitable gifts, mainly in the form of corporate stock, mutual funds and other investments.
This summer, the IRS released information for 2015 returns that allows us to observe trends in individual noncash contributions from before the recession through the recovery. To illustrate the ties between overall giving and noncash gift trends, it may be instructive to simply follow the largest form of noncash gifts during this period—corporate stock. In 2005, charitable gifts of stock were $16.3 billion. Gifts of stock increased 40.7% in 2006 to $23 billion and accounted for almost half of all noncash contributions. Growth was flat in 2007 when stock gifts totaled $23.7 billion and declined to 44.9% of noncash gifts. Even though gifts of stock still accounted for the largest portion of noncash gifts, stock gifts fell 48% in 2008, dropping to $12.3 billion.
In 2009, stock gifts fell again, dropping to $9.7 billion. Finally, the downward trend reversed in 2010 after the recession and financial crisis ended. In 2010, gifts of stock climbed 38% to $13.4 billion, but still had a long way to go to recover to pre-recession levels. Steady increases followed in 2011, 2012, 2013 and 2014, and even during the decline, gifts of stock were the largest percentage of noncash gifts.
By 2015, IRS data reveals that noncash gifts were once again hitting all-time highs with some $64 billion claimed on Schedule A. More than 50% was in the form of gifts of corporate stock, mutual funds and other investments. Over half of that amount, $18.7 billion, came from donors over the age of 65. The next largest group of donors were age 55 to 64, who contributed another $6.87 billion in these types of investments.
Gifts of stock and other noncash gifts have been critical to the recovery of giving since the Great Recession started, and these trends likely contributed to record levels of giving in recent years as household wealth levels continued to grow and exceeded the $100 trillion mark for the first time in 2017. Experienced fundraisers should utilize what they know about the age, income and wealth of their donors to proactively seek noncash gifts of security, real estate and art and collectibles.
SHARPE newkirk Donor Data Enhancement Services and your SHARPE consultant can provide the tools and advice to help your donors maximize their charitable gifts. ■