2017’s Most Charitable States

How would the current House GOP Tax Reform plan affect charitable giving?

I honestly believe that most Americans would give to charity regardless of whether they could claim it on their taxes, because they believe it is the right thing to do. On the other hand, I think we would see a significant decrease in giving from the highest-income earners if they couldn't itemize giving as a deduction. This would cause significant harm to the charities that rely on these monies.

What are the biggest challenges facing US-based charities in the current economic environment?

I see two major challenges for U.S.-based charities, which hold even in different market conditions. The first is a legitimacy issue. Potential donors hear negative anecdotal evidence that most charities are corrupt, poor use of resources (not innovative), were created for personal (instead of public interest) reasons, attempt to influence politics, have high overhead (not efficient), pay their executive directors too much, etc. They use this to make value-based judgments about all nonprofits, when in reality, the nonprofit sector is diverse. Yet, citizens judge nonprofits based off a few bad eggs, when much of the sector is doing a great job of addressing the failures of the public and business sectors. It's an image issue. The second issue is competition from social enterprise and business firms in traditionally nonprofit domains. It's challenging for nonprofits to professionalize and compete with these firms while still remaining true to their expressive logic.

What percentage of income should households donate to charity?

This is a personal choice. For example, if you have a low income but can donate time, that is a great alternative. If you don't want to donate at all, that's your choice. It's about what values are important to you. That being said, I would implore individuals to be invested in their communities. We've seen a decrease in social capital in the United States and a divisiveness that moves us in the wrong direction. Investing in communities has personal benefits because when societies do better, we all do better.

What advice do you have for choosing the right charity?

First of all, you should find a cause that is personal to you. Most people don't have the disposable income to donate to many causes, so choose one or two that speak to your personal interests. I would also encourage people to investigate the charities they give to. Look up their 990s on GuideStar to see how they spend their money. Google them to see if any Watchdog organizations have investigated them, and what the outcomes of these investigations were. Keep in mind that charities need an overhead, but at least 50 to 60 percent of their expenditures should be programmatic. Make sure the organization is really doing the things they say they're doing.

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

This is a tough question. On the one hand, I believe that charities already face significant scrutiny. One the other hand, I think increased regulation and scrutiny could assuage some citizens’ concerns regarding charities. We've heard about the questionable relationships between charities and their for-profit counterparts. These should be investigated.

Should all non-profits be able to receive tax-deductible contributions regardless of their mission?

No, but I think the question needs some clarification. The term nonprofit refers to a large body of organizations. All 501(c) organizations are technically nonprofit, but only 501(c)(3) organizations receive tax-deductible contributions. Some of these other types of organizations are not serving the public interest, but instead, the interests of their members. For example, 501(c)(7) organizations are social and recreational clubs. While they undoubtedly provide benefits to their members and don't distribute their profits to shareholders, only organizations that are public benefit should be eligible for tax-deductible donations.

How would the current House GOP Tax Reform plan affect charitable giving?

It discourages and diminishes charitable giving -- to what extent, is not known at this time.

What are the biggest challenges facing US-based charities in the current economic environment?

Competition, donor fatigue, and determining the authenticity of the charity.

What percentage of income should households donate to charity?

I look at it the same way as you would for church -- tithing is generally 10 percent.

What advice do you have for choosing the right charity?

Check CharityNavigator, examine the charity’s website, talk with others who have donated to the charity, and determine the amount that goes to administration .

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

It depends on the nature of the regulation, but if reducing fraud or those set-up to support overseas organizations require either additional regulation or enforcement of what’s on the books, it is fine.

Should all non-profits be able to receive tax-deductible contributions regardless of their mission?

Exemptions should not be granted carte blanche, and I think any charity’s status must be determined by the IRS.

What are the biggest challenges facing US-based charities in the current economic environment? How would the current House GOP Tax Reform plan affect charitable giving?

I'm going to combine these here because this is the area where I'm admittedly least versed since I've been on sabbatical this year and have been out of the country for a good part of it conducting research on something non-fundraising related. My view on the tax reform plan as it pertains to charitable giving is that it likely would reduce the number of people filing itemized tax filings since the standard deduction has been proposed to be doubled. But, currently only 30% of US households prepare itemized filings. But keep in mind 90% give. People are already giving, albeit at lower gift levels, to nonprofits without itemizing it on their taxes. From what I've read about the proposals, the biggest impact would come from the elimination of state/local taxes since that's by far the largest segment that's filed. Interest from mortgage and student loans are next, then charitable deductions. It certainly will have an impact on the wealthy and how money is transferred to nonprofits and heirs. But, the elimination of the estate tax would seem to have a bigger impact on the dollars and assets transferred to the nonprofit sector. I don't see the doubling of the standard deduction in the proposal as having as big of an impact on how many dollars are actually given to the nonprofit sector as some scholars have claimed. It will have some impact, but people will still be giving. The bigger focus should be on the estate tax, and until the Senate votes on its proposal, we'll have to wait and see what the reconciliation of the House/Senate versions includes. But, tea leaves seem to indicate the Senate is leaning toward a no. So maybe we'll continue to see continued growth in overall donations from individuals, foundations and corporations (per the 2017 Giving USA Foundation report).

What percentages of income should households donate to charity?

I don't think there's a certain percentage that anyone should aim to give. Giving is a personal decision that is based on personal financial situations, connections to community nonprofits, and concern for different causes. It's perfectly acceptable to give to some nonprofits and not give to others that have very worthwhile programs and services. We can only give what we can afford to give. The important thing to remember is to give somewhere, and most do in the United States. The Association of Fundraising Professionals' research from 2016 concluded that 89% of households give to charitable nonprofits (501c3 organizations) and the average (mean) gift was close to $1,600. The National Philanthropic Trust's 2015 study showed that 67% of households that submitted tax returns with deductions included charitable giving, and the average size of that gift neared $2975. Giving is part of who we are as a people. Ever since colonists rallied together to survive the harsh winters and living conditions they faced, we have come together to help support each other and worthwhile causes. So, to me, focusing on giving at a certain percentage of income isn't that big of a deal as much as getting involved with giving.

What advice do you have for choosing the right charity?

It may go without saying, but the first thing to focus on is the cause. What cause are you most concerned about? That should be the question people ask themselves and let that be the first guide. It may be one's church, it may be the arts and humanities, and it may even be something that others consider silly. Yes, there are bigger needs (e.g., human services, health), but if you're guilt tripped into giving, you won't continue to give because you'll tune out the messages that pushed you into giving in the first place. Once someone has decided what is most important to himself or herself, I would recommend getting involved in some level beyond reading Charity Navigator, GuideStar, or the other watchdog groups. These groups mostly focus on percentage of expenses spent on fundraising and overhead to receive their gold stars and seals of approval. But, what about results? Sometimes it does cost more overhead to reduce social ills. Someone who actively follows a nonprofit on social media, volunteers with that organization, or even just signs up and pays attention to their email newsletters will be in a better position to decide if that nonprofit is worth continued support. Nonprofits show their successes, and donors that care about a cause will take the time to move beyond the watchdog groups' rating systems to see who really is making a difference.

Should all nonprofits be able to receive tax-deductible contributions regardless of their mission?

First, not all nonprofits do. Keep in mind there are 27 distinct types of nonprofits according to the IRS classification code, and only 501c3s are eligible to receive tax-deductible contributions. Fees, dues, and other monies paid to the other 26 types of nonprofits are not tax-deductible. To be a 501c3, you must address an exempt purpose (https://www.irs.gov/charities-non-profits/charitable-organizations/exempt-purposes-internal-revenue-code-section-501c3). Everyone is not going to place the same social value on each exempt purpose. One could easily argue that religions that have strong positions against other groups may not serve a universal purpose; likewise, one could easily argue that organizations that don't even spend the interest that their endowments earn each year on programs and services should be stripped of their tax-exempt status. I would not argue or support these positions. If the government has reviewed the organization's initial application and subsequent filings that show it is maintaining its exempt-status and not straying significantly from its stated mission, then removing the ability to offer tax deductions creates a slippery slope that will be subject to the political whims of the day--conservative, liberal, or whatever direction we may go in the future. And, that's not good.

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

I'm not against increased regulation if it truly helps reduce fraud and eliminate those that deceive the public. In wake of the Enron and MCI WorldComm crises, nonprofits voluntarily enacted many provisions of the Sarbanes-Oxley Act of 2002. But, I'm not sure it goes far enough to ensure that nonprofits are open and accountable. The IRS tried to make organizations more accountable to the government by requiring the annual filing of the 990-N postcard if they were small community nonprofits of less than $50,000. But, IRS filings are long and complicated, and most of the public won't dive into those. I truly believe that legit nonprofits want to share their information--successes and failures. These are the stories of their hard work, challenges, and risks taken that compel many to become a supporter or volunteer. Perhaps a form that doesn't focus solely on financials might be one way to help make ti more clear as to which organizations are doing good.

How would the current House GOP Tax Reform plan affect charitable giving?

Certainly, those taxpayers who do not itemize their deductions may give less due to the lack of incentive in the proposed system. I don’t think individuals will stop giving, especially in the current situation with the improved economic environment. My hope is that individuals will become more selective with their gifts and do the research in advance of making donations. I also hope that charities will become far more transparent in publishing data on their websites about their expense ratios, and manage even more actively to this -- with the result of becoming more efficient and focused on their missions.

What are the biggest challenges facing US-based charities in the current economic environment?

U.S. charities are actually in a great position as 2017 winds down. The S&P 500 is up over 17 percent this year, and there will be many individuals, corporations, foundations, bequests, and other organizing looking for U.S.-based charities for tax purposes. One of my former students, Mallory St. Claire contributed to the “Giving USA 2016” edition, which noted that “American individuals, estates, foundations and corporations contributed an estimated $390.05 billion to U.S. charities in 2016.” I hope we might see the giving pass the $400 billion mark by the end of this year. I expect that the economy will continue to improve and be the bigger factor in driving contributions.

What percentage of income should households donate to charity?

There is no “right answer” for the percentage of income that households should donate to charity -- this really depends on an array of personal and family circumstances. Certainly, there are religious groups which set guidelines for followers, that tend to range from 2.5 percent to 10 percent.

What advice do you have for choosing the right charity?

I would urge everyone who is thinking of giving to check Charity Navigator and GuideStar, to determine how the funds have been put to use over the years. Unfortunately, many charities spend a disproportionate amount of funds on activities that are not linked to the mission. For example, only 21.5 percent of one particular Veteran charity’s expenses are on programs and services that it delivers -- the bulk of the expenses (70.1 percent) are on fundraising. There are many other terrific Veteran charities, like Soldiers’ Angels, The Mission Continues, Travis Manion Foundation, and Honor Flight Network that do terrific work in this area that serve constituents. I always find it ironic when a person says that they object to a corporate CEO earning over $1 million, yet the same person will donate to charities where the CEOs make over $1 million -- probably because they don’t check.

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

As a board member of a 501(c)(3) in the educational space, I am quite comfortable with the current level of regulations and scrutiny. We do not need more regulations in the charity space.

Should all non-profits be able to receive tax-deductible contributions regardless of their mission?

It is not the role of the government to determine which nonprofits should be eligible for which tax deductions.

What are the biggest challenges facing US-based charities in the current economic environment?

Considering that charities and non-profits really started in a grassroots style, I'd say that it's beginning to be more difficult to attract a potential donor or corporate sponsor for those new organizations or smaller organizations -- the ones that largely make up the backbone of services to communities across the nation. Bigger isn't always better -- but often, that's how grants and awards are distributed.

What percentage of income should households donate to charity?

I don't think I can answer that for every household, but look at it this way -- spend time volunteering or donating dollars to causes you care about. If income is limited, make sure that your donations can be tax-deductible (and keep track of those deductions). Consistent, small donations can mean the world to nonprofits, so any dollar amount can be really helpful. Donations don't have to hurt your household budget, and they shouldn't. So, examine your budget a few times per year and see what you are comfortable donating on a monthly basis. Setting aside a few dollars per month can also make it much easier to make donations around the holidays.

What advice do you have for choosing the right charity?

• Check for legality -- make sure the organization is an actual nonprofit organization. Make sure you know who runs the organization, and look at GuideStar to make sure they aren't overspending on salaries and overhead.
• Do they walk the talk -- make sure you are comfortable with all facets of the services they offer, and volunteer or visit whenever possible before giving dollars.
• Do they believe what you believe -- does their mission resonate with you? Is it achievable? Do the people working there resonate that mission?

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

I don't know if more regulation is really necessary, if consumers have access to an organization's financials, and they actually get to know the charity they contribute to -- most of this can be mitigated through due diligence.

I, too, am weary of organizations that are large and how they spend their money, but the best part of being a donor is that you don't have to contribute if you aren't comfortable with that organization's financials.

What are the biggest challenges facing US-based charities in the current economic environment?

There is so much uncertainty that nonprofits have to deal with. They deliver programs, but are unsure if they’ll receive the contracted payments. There is staff turnover due to uncertainties, and often, salaries are too low to retain people. Uncertainty itself is difficult to handle, as it precludes organizations from planning ahead. Scenario-planning is helpful, but doesn’t guarantee that things will change in a positive fashion. I still believe that the public is generally inadequately informed about the value of the nonprofit sector, and the contributions that it makes to the overall economy (just over 5 percent of GDP, according to the NonProfit Times -- Oct. 28, 2014). It is that lack of understanding that contributes so much to a willingness to “throw the nonprofit sector under the bus” far too often.

What percentage of income should households donate to charity?

Individuals should determine for themselves what they wish to donate to charitable organizations. I don’t agree with any predetermined percentage that is required.

What advice do you have for choosing the right charity?

It’s always important to consider what cause is important to you and/or your family. I receive all sorts of charitable solicitations, but I know which causes are meaningful to me personally. I also work with my senior citizen mother, to help her decide to discard many solicitations she receives, and to focus only on her own preferred charities. To learn more about a given organization, I suggest going to GuideStar to review the 990 tax form. In that way, you will learn more about an organization’s finances and governance.

Another resource is to check with Charity Navigator. Never, never give your information over the phone to anyone who calls to solicit by phone. There continue to be all sorts of scams, and giving credit card information by phone to someone who calls to ask for a contribution to an organization -- even one whose mission you care about -- is the wrong approach. Ask them to mail you the request. Or you can always find the organization online, and give electronically.

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

Charitable nonprofits are already scrutinized -- they report to the Secretary of State in their given state, and are required to complete and submit the 990 tax form. Unfortunately, anytime one organization is found to have a problem, the public’s perception about the entire nonprofit sector is impacted. Trust is key for nonprofits, and any case of fraudulent behavior casts a shadow on the entire sector. Organizations need to learn to strengthen their internal management and leadership capacities, in addition to focusing on enhancing their programs. The programs cannot be effective if they’re not supported by a strong organizational foundation. It seems the public doesn’t believe that is important when it comes to charitable organizations.

Somehow, nonprofit organizations are perceived as “different” organizations, and that they must be run on “air” -- not based on high-quality staff, with sufficient internal organizational infrastructure to ensure efficiency and effectiveness. Unfortunately, a perception remains that nonprofit organizations should do more with less, and still be effective. That is not a sustainable model. Ask someone to run a business based on “air” and inadequate salaries (e.g., paying someone with a master’s degree and 15 years of experience only $48K, for a FT position in operations).

How would the current House GOP Tax Reform plan affect charitable giving?

I understand that the House version still removes incentives for making charitable deductions. Although people don’t give solely to receive a tax benefit, it can be an added incentive. There is a great concern about what happens to charitable giving if the bill passes and ultimately becomes law. In other words, there is fear that giving would decline. I imagine that giving among lower- and middle-income groups might be impacted to a larger degree, as it is those groups (myself included) that consider both the mission, and whether there will be a need to add to the amount of charitable giving in order to minimize the chance that taxes will be owed in April.

Should all non-profits be able to receive tax-deductible contributions regardless of their mission?

There are over 26 different categories of tax-exemption; the 501(c)(3) organizations are the charitable category, and the only one I believe that should continue to be eligible to receive tax-deductible contributions.