Is Your Nonprofit Accepting Stock Donations? Here Are 3 Reasons Why It Should:
In this day and age, there are many different ways someone can choose to support a nonprofit.
Whether it’s monetary, through volunteering time, or volunteering skills, supporting a mission comes in all kinds of forms.
There are even a multitude of monetary ways your supporters can help your organization. If your organization should allow it, they can have their choice of writing a check, paying with a credit card, or paying through cryptocurrency.
They can even offer stock donations to your nonprofit!
And that’s exactly what we want to tell you about – is your nonprofit accepting stock donations? Because if not, here are 3 major reasons why it should:
What Are Nonprofit Stock Donations?
What exactly are stock donations?
Stocks themselves are investments in companies or corporations that symbolize ownership in the business. And a stock’s value raises and lowers depending on the company’s actions and the current economic climate. But ultimately, the public’s overall opinion of the company typically offers a large impact on the value of a stock.
Stocks do have value, and they can be sold for liquid assets (AKA – dollars). That in and of itself means a nonprofit can benefit from obtaining stocks!
Why Do Supporters Give Stock Donations to Nonprofits?
People donate their stocks for a variety of reasons. But one of the biggest reasons why someone may opt into a nonprofit stock donation is to avoid taxes.
If someone decided to sell their stock for a higher value than what they bought it at, they would be subject to a capital gains tax. So, if someone already has intentions to donate the money, they are better off donating the stocks rather than a cash gift!
It’s certainly a business-savvy way of contributing to nonprofit organizations!
3 Major Reasons Why Your Nonprofit Should Consider Accepting Stock Donations:
Avoiding the capital gains tax is one of the primary reasons why donors consider contributing stock donations.
But why should your nonprofit accept stocks? Here are our top 3 reasons:
1. Diversify Your Revenue Stream
The very nature of fundraising ebbs and flows. At one point, your nonprofit will see an influx of donations, and at another point, you’ll see a dip.
When you diversify your revenue stream, you can balance out the ebbs and flows by offering a choice for your supporters.
Those who give major gifts may prioritize doing so at the end of the year. You’ll see an influx of them at that time, and a dip throughout the remainder of the year.
Those who give medium-sized gifts may give once a quarter. So you’ll see more of those types of gifts coming in around the start of each new quarter. Otherwise, you’ll see fewer.
And supporters who opt for small gifts may give monthly! You can see how diversifying your options for your donors allows your nonprofit to balance out the funds received.
With stocks, you can further diversify your revenue stream. Supporters who prefer to give stocks may do so at a different time of the year than those who give large gifts. That balances out your books so you won’t feel major tides in fundraising.
2. Widen Your Pool of Potential Supporters
Offering supporters the opportunity to donate stocks to your nonprofit is a great way to encourage new potential donors.
Those who want to donate stocks are more likely to find a nonprofit that allows them to do that, rather than settling on one that doesn’t.
That’s more than likely because they want to avoid the capital gains tax, as we mentioned earlier.
When you choose to open your nonprofit to accepting stock donations, your organization can attract those that are determined to only offer stocks for charitable purposes.
3. Collect On the Trend of Securities-Based Gifts
Finally (and perhaps the largest reason), your nonprofit can collect on the current trend of securities-based gifts.
Supporters donating appreciated assets is rising year over year. In fact, over 50% of all charitable donations between 2017 and 2020 were non-cash assets.
That means more and more people are prioritizing other ways to support nonprofits other than handing out a cash gift.
Dr. Russell James at Texas Tech University studied over 1 million nonprofit tax returns between 2017 and 2020. The study included e-filings of over 200,000 nonprofit organizations.
He found that nonprofits that accepted only cash gifts grew 11%. Those statistics were just above the national inflation rates.
Dr. James found that nonprofits that accepted any kind of non-cash gifts (as well as cash gifts) saw a growth of 50%. That included donations of property and deferred gifts.
Finally, his studies showed that organizations that accepted securities-based non-cash gifts (think credit card gifts and stocks!) grew a substantial 66%.
That’s simply by adopting a fundraising strategy that opens the door to all kinds of gifts, including stock donations.
A Quick Overview of How a Nonprofit Can Accept Stock Donations:
To allow your nonprofit to accept stock donations, everyone involved (your donor and your organization) must work together through a stock brokerage account.
The typical process of accepting stock donations looks like:
- The prospective donor reaches out about donating stocks
- Your nonprofit’s financial team sends over brokerage account information
- The prospective donor fills out a donation stock transfer form
- Your nonprofit’s team and the donor stay in touch as your team awaits the filled-out form
- The donor receives a tax-deductible donation receipt
- Your nonprofit typically sells the shares right away to convert the stocks into cash funds
- Your nonprofit team follows up with the donor to thank them for their contribution
Of course, there is more involved with accepting stock donations. But, this gives you a broad overview of what the process generally looks like!
And while it can feel overwhelming at first, the process isn’t as daunting as it may seem! If you’re curious to learn more about:
- Why stock gifts benefit both your nonprofit and your donors,
- How to accept stock gifts and what you need to start doing so,
- How to tailor your marketing messaging on your online landing pages to encourage donors to contribute stocks,
- And how to identify donors who are likely to donate their stocks,
Then we’d love to invite you to our free training which teaches you exactly that!