About twice each year I do a “Fundraising 101” workshop that highlights how and why people give to charity in the United States. I cite study after study that proves it isn’t logic that usually drives decision making. It’s emotion.
I’ve given this particular workshop for a long time, in many different states and cities. So when I moved to Arizona, I assumed that things would be the same here.
Wow! Was I wrong.
Tax credit lures savvy donors
It wasn’t because people here are more or less generous, or that the charitable sector was different. It’s because of Arizona’s tax credits. Specifically, what used to be called the working poor tax, the school and the foster care tax credits.
These all work slightly differently, so I’ll focus here on just the working poor tax credit, a.k.a. the Credit for Contributions to Qualifying Charitable Organizations.
For many donors, a tax credit is a “stronger” incentive than a deduction. And in Arizona, you don’t even have to itemize to take advantage of the credit on your state taxes. What’s more, you get to deduct the donation from your federal taxes, too.
Conventional wisdom gets schooled
I discovered the real power of the AZ tax credit after a few months of working at a “basic needs” charity. I began to notice many gifts in exact amounts of $200 and $400. Nice gifts!
But why those amounts? I’ve worked at enough charities to know that if you see more than a few gifts of specific amounts it means something. Think a special $33.33 campaign, or $16.72 for a [fill in the specific need]. But I just couldn’t wrap my head around this one.
I quickly learned more about the AZ tax credit, but I was still skeptical. Are people really giving in those amounts just because of the tax credit? (Yes. Duh, Terri.)
Then in 2017, the state raised the amount you can deduct as an individual to $400 and as joint filers to $800. Can you guess what happened? Those $200 and $400 gifts became $400 and $800!
Can you believe I still had a major disconnect? And then I included the tax credit in another Fundraising 101 Workshop and, for the first time, it finally clicked.
In Arizona, it’s time to get transactional
I’ve based all of my successful fundraising strategy around emotion backed up by logic, not the other way around. But now I know there are specific times when the exact opposite is true. Ahead of tax day, Arizonans are acting in their own best financial interest first (highly logical), and then backing that up with emotion (Which charity is meaningful to me?). It’s a matter of sequencing, not either/or.
So in Arizona, if you are a qualifying organization, some of your fundraising should be transactional. It’s the right offer to the right person at the right time—and that’s just great fundraising.
Just don’t forget to back up your ask with a great impact story and fantastic stewardship. After all, there are hundreds of other qualifying organizations on that list. And you never know if these kinds of legislative windfalls will last.
So bring that emotion to the party, too. It will make your tax credit donors feel even better than the day they get that refund back.
And if you work at a charity in Arizona that could qualify but you haven’t filled out or maintained the paperwork, do that. TODAY. Being on “the list” can change your fundraising dramatically.