Giving is good; smart giving is better.
Whether it's an emotional response to a disaster or a tactical contribution to enact social change, charitable giving experts urge donors to take a second before reaching for their wallets.
"Everyone has their amount of research they need to feel comfortable," said Kris Kewitsch, executive director of Minnesota-based Charities Review Council. "Saying no gets to be really hard, and there's lots of need in the world. It comes down to figuring out what matters to you."
December is the biggest month of the year for charitable giving, and that altruism can lead to trouble if new or unknown charities aren't vetted properly.
Donors should "do their homework to ensure a charity is reputable and that their donation will actually go to a charitable purpose," says the Minnesota Attorney General's Office.
The Charities Review Council offers standards for nonprofits to follow that are supposed to make that work easier on donors.
"They are a great way to learn what you need to know to feel comfortable saying yes and feel comfortable saying no," Kewitsch said.
The Minnesota Council of Nonprofits says donors should take a "holistic" view of a nonprofit's health and mission. Director of Advancement Kari Aanestad offered four guidelines for donors to consider:
-Are they a tax-exempt entity in good standing with the Minnesota Attorney General's office and IRS?
-What do I as a donor care about and what type of change do I want to see made in the world?
-Who are the people, communities, or issues that this nonprofit impacts? What are the results in a given year (based on annual reports, impact stories, news coverage)?
- What do I as a donor know about this organization and what experiences have I or my community had with them?
While there are many tools to research and verify a charity's performance, Kewitsch said there's an easy place to start.
"There isn't a nonprofit around - if you're making a meaningful contribution - that wouldn't want to talk to you about the work they're doing," she said. "Call them and ask them about it."
You can find out whether a charity is registered with the state by searching on the Minnesota Attorney General's Office website or calling the office at 651-757-1496. The website offers a snapshot of financial information that breaks down where money comes from - contributions, government grants and other sources - and how much is spent on charitable purposes and how much goes into administration and other expenses. Look for the categories in the example below:
The Head of the Lakes United Way reported $2.4 million in direct public support in its most recent return - all but a sliver of total revenue. When looking at spending, the amount spent for program or charitable purposes totaled $1.8 million while management/general expense and fundraising expense came to roughly $520,000. That means about 75 percent of the group's total expenses went directly to charitable purposes.
The Charities Review Council says at least 65 percent of contributions should be spent on charitable programming - 70 to 90 percent is preferable, Kewitsch said.
"Part of why we give is because organizations can use the dollars for their mission, and we want them to deliver on that impact," Kewitsch said.
Aanestad cautions that donors should not rely on spending metrics alone when making their giving decisions.
"Equating 'low overhead' with 'good nonprofit' actually is counterproductive for nonprofit organizations who have complicated programming and/or deep fundraising and administrative needs," she said. "The vast majority of nonprofits in Minnesota are good, hard-working organizations that make incredible use of charitable dollars."
For deeper digging, try Guidestar.org or the ProPublica Nonprofit Explorer. Both provide access to lengthy financial reports filed with the IRS. The reports provide much detail, and the first page gives a useful overall summary.
What to watch out for
The Minnesota Attorney General's Office urges residents to be on alert for fraudulent charities that may request - or demand - money over the phone, email or other means.
-Sham charities: "These charities typically pick a sympathetic cause to target the heartstrings of the generous, but then use most or all of the donations for fundraising expenses or to line the pockets of the charity's fundraisers, executives, family members, or friends."
-Sound-alike organizations: "Scammers may attempt to impress a prospective donor with a respectable-sounding name or a name similar to a well-known charity. These charities try to capitalize on donors who do not ask questions or confirm to which charity they are actually donating."
-High-pressure tactics: "Some charities use high-pressure tactics to solicit donations, but fail to explain how the donation will be used. These types of charities often tell donors it is 'critical' that they donate 'immediately.'"
-False pledge claims: "Sometimes donors get telephone calls or mailings claiming that they have previously pledged to donate a certain amount (for example, $20) to the charity. In fact, no such pledge was ever made."
Federal tax reform that took effect this year will cause far fewer people to itemize their deductions, making charitable donations less of a federal tax benefit. The Tax Policy Center estimates just 11 percent of households will itemize, down from 26 percent in previous years - that's due to an increase in the individual standard deduction meant to make filing easier.
The Minnesota Council of Nonprofits says it's not yet clear what effect the tax change will have on charitable giving. A report from the Giving Institute due next summer should shed some light.
"Many nonprofit organizations are concerned about the potential impact of fewer donors itemizing, and therefore fewer with a direct federal tax benefit for charitable giving," the council says.
Kewitsch adds that nonprofits really need to refine their messaging in response to the change.
"It is more imperative that an organization is clearly able to articulate what your donation will do," she said.
The Council of Nonprofits explains that there is still a tax benefit for donating via state tax returns: "Minnesota's charitable deduction, also known as the non-itemizer charitable deduction, provides a tax deduction of 50 percent of total charitable contributions over $500."
Because the Legislature didn't pass laws to conform to federal tax reform, "we don't expect a significant change in the percentage of Minnesota taxpayers that itemize in 2018," Department of Revenue spokesman Ryan Brown said.
"Taxpayers can choose to itemize on their Minnesota returns even if they took the standard deduction at the federal level for tax year 2018," he said. "We encourage those who are itemizing on their state return to keep any receipts or documentation for those things they itemized."
Itemizing or not, filers should talk to tax professionals and the Department of Revenue with questions.
Though nonprofit technology firm NeonCRM says nearly a third of all charitable donations come in December - and a whopping 12 percent in just the last three days of the year - the need does not end on New Year's Eve.
"It's definitely helpful for nonprofits if donors 'spread out the love' and respond to appeals across the entire year (and not squeeze everything into December)," Aanestad wrote in an email. "But with that being said, a donation any time of year is a great donation to get."
Kewitsch recommends setting aside three buckets for giving throughout the year - one for where your passion lies, one for important annual gifts and another for one-time donations as they arise - and setting aside some time to research.
"What is the impact of the organization, what kind of difference are they making, what kinds of work do they do?" she said. "We want to make sure the money we're raising is being put to the cause we're serving."