Uncertainty boosts donations at the end of 2012
Donors worry that deductions will be capped in 2013
The threat of losing a tax break, it seems, can make some people feel especially generous.
Charitable giving soared in the final months of 2012, the heads of major Boston fund-raising organizations said, as donors raced to make gifts before Congress has a chance to limit deductions on such contributions this year.
Fidelity Investments said gifts by clients to charitable accounts jumped 24 percent to $3.6 billion last year. And despite an economy that remained sluggish, the Boston Foundation saw donations nearly triple in the last six months of the year, to $93 million, putting the nonprofit on pace for a record.
“It was really extraordinary. It wasn’t just a little bump,’’ said Paul S. Grogan, president of the Boston Foundation, a community nonprofit that funds numerous causes. “It was a river of money flowing in here for the last few months of the year.”
The drumbeat of raising taxes and cutting deficits that dominated headlines and politics from the presidential election through the end of 2012 appears to have rescued many nonprofits from what might have been a down year. Longer term, however, charity leaders are fearful that capping the tax deduction could harm the sector.
President Obama has proposed capping the charitable gift deduction at 28 percent, instead of 35 percent, for families earning more than $250,000. That would mean a tax break of $2,800 on a $10,000 gift. And while no such cap was imposed during the fiscal cliff negotiations, the measure could be resurrected in the coming months.
It is early yet for many charitable organizations to release their 2012 fund-raising results. But anecdotally, the looming tax fears played out to the benefit of an array of nonprofits. At Beth Israel Deaconess Medical Center, for instance, donations hit $46 million for the fiscal year ended in September, exceeding the Boston teaching hospital’s goal, and then accelerated for the last three months of the year.
Kristine Laping, Beth Israel’s senior vice president of development, said donors made a host of new gifts, and a number were inspired to pay off million-dollar pledges early, rather than spreading payments over several years.
“There was obviously a lot of uncertainty about tax issues, and there was a very high volume of giving at the end of the calendar year,’’ Laping said. “It really did feel like a feeding frenzy.”
Giving was brisk, too, at Combined Jewish Philanthropies in Boston, which funds thousands of groups and, like Fidelity, oversees charitable accounts for individuals and families. The group had its biggest December ever, according to Charlie Glassenberg, director of gift planning, raising $105 million and opening 34 new accounts. That is as many as it often opens in a year.
“The tax issues were a motivator for some people,’’ Glassenberg said. “It certainly got a lot of people off the fence.”
Americans give away almost $300 billion annually, to religious groups, educational institutions and social service organizations. But growth in giving had slowed since the recession and predictions for 2012 were dour, due to the economy and the limbo of an election year. Philanthropists also feared that wealthy people might devote some of their extra money to presidential campaigns and super PACs instead of to charity.
While the 400 top fund-raising charities in the country grew by a median 7.5 percent in 2011, they were forecasting growth of less than 1 percent last year, according to the Chronicle of Philanthropy.
But the prospect of losing part of a cherished tax deduction was an incentive for many people to write checks or donate appreciated stocks before the new year.
And the stock market was strong last year, noted Sarah Libbey, president of Fidelity’s charitable group.
She attributed both the tax issue and higher stock values to customers opening 32 percent more charitable accounts in 2012.
Groups around the country felt the same wind at their backs.
The Boston Foundation’s Grogan said many community foundation leaders attending a meeting in Charlotte, N.C., last week reported spikes in donations at year’s end.
But he can’t help worrying what will happen next year. While pleased with last year’s gains, Grogan sees it as further evidence that tax policy has an impact on charitable giving.
If Congress caps deductions, and Obama has said he would support such a plan, nonprofits could take a multibillion-dollar hit, he said.
“This is still very much on the table,’’ Grogan said.