Published on: August 30, 2013
Giving USA: Charitable Donations Grew in 2012, but Slowly, Like the Economy
Even with households across the country feeling continued financial pressure, Americans donated an estimated $316.23 billion to charitable causes in 2012. Modest overall gains in total contributions mirrored the nation’s recent economic trends, Giving USA Foundation™ and its research partner, the Indiana University Lilly Family School of Philanthropy, announced today.
The 3.5 percent year-over-year growth rate (1.5 percent adjusted for inflation) in gifts from American individuals (both households and bequests from their estates), corporations and foundations matches the same figurative portrait of 2012’s economic indicators – some trends were positive, others were negative, but overall, there was growth. Federal tax policy shifts likely also played a role in giving decisions made last year.
The findings are contained in the 58th consecutive edition of Giving USA, the seminal annual report on charitable giving in America. “When you consider all the factors that go into determining how much we give to charity, modest growth makes sense and is actually encouraging,” said Gregg Carlson, chair of the Foundation, which publishes Giving USA. “Most households feel pressured at every economic corner, but the longstanding social contract between Americans and the nonprofits they believe in remains resilient and intact; many see giving as a core budget item. The amount devoted to that category might shift up or down with annual economic realities, but it doesn’t go away.”
He added, “The $316 billion in total giving reflected by our 2012 data continues the positive twin trajectory of dollars coupled with hope. I would say the outlook is positive for those who believe in and understand the power of American philanthropy.”
Beyond financial pressures, 2012 also saw policy changes considered at the federal level that could alter future giving, including proposals aimed at capping or eliminating the longstanding charitable tax deduction. “Although the American Taxpayer Relief Act of 2012 preserved the deduction, the publicly aired proposals may have fueled some giving decisions,” said David H. King, CFRE, chair of the Giving Institute.
“Philanthropic giving fares best in a known environment, and has been dependent, in part, on certain factors holding true over the decades, including the charitable tax deduction,” said King. “The uncertainty among donors created by policy makers’ examination of the charitable deduction likely influenced giving in two very different ways in 2012. Some donors may have ‘prepaid’ gifts they had intended to make in 2013 to ensure they received a tax benefit, while others may have chosen not to donate out of concern that deductions for very large gifts would not carry over in 2013 and beyond.”
Nearly 50 years of data indicate that while the policy environment can have an impact on the timing and amount of charitable giving, especially from donors at higher income levels, the overall giving climate is primarily influenced by economic factors, which were mixed in 2012.
“As in the economy overall, some aspects of giving are growing more than others,” said Gene Tempel, Ed.D., CFRE, founding dean of the Indiana University Lilly Family School of Philanthropy. “For example, the 9.9 percent inflation-adjusted growth in corporate giving was driven by strong gains in corporations’ pre-tax profits, which marks a bright spot. In contrast, foundation giving grew by 2.3 percent after adjusting for inflation.”
Mixed economic factors are also shaping the slow uphill climb giving has been experiencing in recent years following several difficult years at the end of the last decade.
“While total charitable giving is continuing to grow, at current growth rates it is less likely to reach the 2007 benchmark high of $344.48 billion for at least six to seven years adjusted for inflation,” said Patrick M. Rooney, Ph.D., an economist who is associate dean of academic affairs and research at the Indiana University Lilly Family School of Philanthropy. “Individual giving rose 1.9 percent after inflation, perhaps reflecting the fact that the average household is still struggling in some areas.”
Topline Considerations from Giving USA 2013 about Donors:
• 2012 saw marked year-over-year growth in corporate giving, which is strongly linked to companies’ profits. For 2012, corporate pre-tax profits surged upward 16.6 percent, according to the Bureau of Economic Analysis.
“Corporations represent a vital portion of our country’s total charitable giving,” Carlson said. “And while their donations increased last year, corporate philanthropy represents only 6 percent of total giving.”
“Nonprofits should remember that in most cases, their mission must align with the company’s strategic priorities,” continued Carlson. “For example, you might see a grocery-store chain partnering with food pantries vs. other types of nonprofits, or a financial services corporation supporting math education.”
• Uncertainty fueled by mixed economic indicators may have moderated giving by individuals, who historically account for the largest percentage of total giving. Positive trends, such as the 13.4 percent increase in the Standard and Poor’s 500 Index between 2011 and 2012, the slight rise in home values, and overall lower unemployment rates and fuel costs, were combined with budget concerns and tax reform discussions. In addition, personal disposable income rose 3.3 percent and personal consumption expenditures rose 3.6 percent last year, virtually mirroring the growth in individual giving.
A Closer Look at the Data:
- Giving by individuals rose to $228.93 billion in 2012, an estimated 3.9 percent increase (1.9 percent adjusted for inflation). Income and wealth are key drivers of household giving, as is a sense of financial security. Giving by taxpayers who itemize their gifts represented 81 percent of the total donated by individuals in 2012
- Giving by bequest decreased an estimated 7.0 percent in 2012 (8.9 percent adjusted for inflation) to $23.41 billion. Itemizing estates contributed 78 percent of the total, or $18.31 billion. Bequest giving tends to be volatile from year to year, as it is highly influenced by very large gifts from estates that closed during that year.
- Giving by corporations rose 12.2 percent in 2012 (9.9 percent adjusted for inflation), to an estimated $18.15 billion, including gifts from both corporations and their foundations. The two entities provide cash, in-kind donations and grants. Increasing the 2012 total was the estimated $131 million corporations gave to nonprofits working on relief efforts in the aftermath of Hurricane Sandy.
- Giving by foundations increased 4.4 percent (2.3 percent adjusted for inflation) to an estimated $45.74 billion in 2012, according to figures provided by the Foundation Center. Giving by community foundations grew 9.1 percent last year, which helped to bolster the total. Operating and independent foundations increased grant making by 3.5 percent and 3.9 percent, respectively.
Topline Considerations from Giving USA 2013 about Recipients of Charitable Contributions:
• After a sharp decline of 17.6 percent in 2008 and slow growth through 2011, contributions to arts, culture, and humanities organizations rose an estimated 7.8 percent last year.
• Charities focused on the environment and animals also saw significant growth (6.8 percent) in 2012 over 2011.
• International giving, which had seen very high growth rates in some recent years, leveled off in 2012 to a modest estimated increase of 2.5 percent. With fewer high-profile international disasters capturing the attention of Americans than in previous years, donations for relief efforts made to domestic organizations in the aftermath of Hurricane Sandy might have replaced gifts that otherwise would have gone to entities working internationally.
“The arts, culture and humanities subsector, as well as the environment and animals subsector, which rely greatly on individual giving, were among the areas experiencing significant growth in 2012,” said Una Osili, Ph.D., director of research at the Indiana University Lilly Family School of Philanthropy. “Both types of organizations were impacted by the economic downturn as some donors shifted their giving toward what they viewed as essential services to help others in need. The growth in giving to arts- and environment-related organizations may be an indicator that donors began returning to their personal giving priorities amidst an economy that they perceived as recovering.”
A Closer Look at the Categories:
(Flat) Giving to religion was virtually flat (a -0.2 percent decline) between 2011 and 2012, with contributions estimated to be $101.54 billion. Adjusted for inflation, giving to religion declined 2.2 percent. Religious organizations, comprised mostly of houses of worship, continue to receive the largest share of total U.S. charitable giving (32 percent) in 2012.
- Giving to education increased an estimated 7.0 percent between 2011 and 2012 (4.9 percent adjusted for inflation), to $41.33 billion. The bulk of donations in this category (upward of 75 percent) go to four-year colleges and universities.
- Giving to human services totaled $40.40 billion in 2012. This estimate is a 3.8 percent increase over 2011 (1.8 percent adjusted for inflation). It includes $223 million given to support organizations working on Hurricane Sandy relief and recovery efforts.
- Giving to foundations is estimated to have declined by 4.6 percent in 2012 (a decline of 6.5 percent adjusted for inflation), to $30.58 billion. Estimated contributions to foundations can change dramatically from year to year, depending upon very large gifts received from the wealthiest donors in America
- Giving to health organizations increased an estimated 4.9 percent between 2011 and 2012 (2.8 percent adjusted for inflation), with $28.12 billion in total contributions.
- Giving to public-society benefit organizations
- Giving to public-society benefit organizations increased an estimated 5.4 percent in 2012 (3.3 percent adjusted for inflation), to $21.63 billion. The total was likely bolstered by continued strong growth in charitable gifts to national donor-advised funds. This category also included $54 million contributed to organizations assisting people affected by Hurricane Sandy.
A note on entities defined as “public-society benefit”: This category is almost wholly comprised of entities that receive donations and then redistribute them to charitable organizations. Certain types of donor-advised funds are in this classification, as are well-known umbrella groups such as United Ways, the Combined Federal Campaign and Jewish Federations of North America.
- Giving to arts, culture, and humanities totaled an estimated $14.44 billion in 2012, a 7.8 percent increase from 2011 (5.7 percent adjusted for inflation).
- Giving to international affairs was an estimated $19.11 billion in 2012, a 2.5 percent increase (flat when adjusted for inflation, at 0.4 percent growth).
- Giving to environmental and animal organizations saw an estimated 6.8 percent increase in 2012 (4.7 percent adjusted for inflation), to $8.30 billion.
- Giving to individuals decreased an estimated 6.8 percent in 2012 (a decline of 8.8 percent adjusted for inflation), to $3.96 billion. In large part, this category includes medications provided via Patient Assistance Programs administered by the operating foundations of pharmaceutical companies.
Unallocated giving totaled $6.82 billion in 2012, and includes itemized deductions by individuals and households they carried over from a previous year. “Carry-over” describes the difference between the tax year when a donor claims a gift on their return and the year when an organization receives a gift and reports it as revenue.
Unallocated giving also includes gifts to government entities, which do not report charitable contributions at the national level; gifts made to entities in other countries by foundations; and gifts made to new organizations that have not yet been classified as to what type of charity they are. In addition, when a donor forms a charitable trust and takes a deduction, but does not tell the recipient organization, there is an unallocated amount.
Brief Overview of Giving USA Methods
The Indiana University Lilly Family School of Philanthropy prepares all the estimates in Giving USA for Giving USA Foundation™. Giving USA’s annual estimates are based on econometric models using tax data, government estimates for economic indicators and information from other research institutions. Data sources for the 2013 report include the Internal Revenue Service, Bureau of Economic Analysis, Foundation Center, Committee Encouraging Corporate Philanthropy, Council for Aid to Education, and the National Center for Charitable Statistics at the Urban Institute (NCCS), among others.
Giving USA estimates changes in giving to charitable subsectors (health, arts, education, etc.), as well as giving to foundations and individuals. Most subsector estimates are based on econometric models and use historical data from Forms 990 submitted to the IRS, as well as contemporaneous economic variables found to be highly predictive of changes in how charitable gifts are used.
Giving USA’s estimates are calculated with the most-current data available. Annual revisions reflect newly available data, such as when sources such as the IRS release revised estimates. For the 2013 report, Giving USA incorporated historical Forms 990 data into estimates of how nonprofits use the donations given to them. These are provided by the NCCS, whose newest dataset was used for this year’s report. Revisions to 2011 and 2010 estimates are on the last two pages of the full press kit.
Since approximately one-third of U.S. households itemize deductions on their tax returns, Giving USA also calculates estimates from non-itemizing households based on the Center on Philanthropy Panel Study (COPPS), the largest, longest-running panel study of household giving over time in the world. This has become a key variable in calculating annual estimates because more than two-thirds of American households donate something to charity annually.
– See more at: http://www.philanthropy.iupui.edu/news/article/giving-usa-2013#sthash.Ur2nDPsh.dpuf