End of year contribution

5 min read

When do we give

Need never takes a holiday. There will always be someone in need - no matter the time of the year. Thankfully, charitable giving also occurs every day of the year. There is always some generous soul donating time and resources to help others. However, there is definitely a cyclical trend in our giving when it comes to contributing monetary resources.

This trend is illustrated in what is referred to as "End of Year Contributions." In the last month of each year, 30% of all annual charitable giving is conducted. In 2017 over $410,000,000,000 (billion) was contributed within the United States. Of that sum, $130 Billion was contributed in December of that year. Even more astonishingly, $41 Billion was given in the last three days of the year!

In the last three days of 2017, donors contributed $13.5 Billion per day. That's $569,000,000 (million) per hour or $9.5 Million per minute! In 2017, End of Year Contributions amounted to $158,000 per second on the last three days of the year. That is an absolutely incredible statistic, and it occurs at the end of every year.

Why EoY contributions

Several factors influence End of Year Contribution behavior, ranging from simple procrastination to planned giving methods. But the most significant factor contributing to end-of-year giving is the tax credits offered by the Internal Revenue Service (IRS). These credits allow donors to deduct a percentage of charitable gifts contributed within a given year against their tax liability. In some cases, these tax credits for charitable giving can amount to millions of dollars of tax liabilities avoided through giving toward philanthropic causes.

Most individuals need more data to understand their tax liability in a given year until the calendar reaches December. At that point, a complete picture of the tax requirement is available. Some will choose to donate an End of Year Contribution to alleviate their tax liability.

To clarify, these End of Year Contributions, as with most charitable donations, result in the donors giving funds to registered nonprofits. They are not retaining the value of their contribution in their personal assets. They are choosing to give to charitable causes instead of paying a higher tax liability to the government. Our government provides this tax incentive so that more charitable outreach is supported within the U.S. and worldwide.

The effect of EoY giving

With 30% of overall charitable contributions occurring as late as the last month of the year, there must be an effect on the nonprofit industry. Indeed there is. Look at the average nonprofit's financial statements. You will see a significant deficit over the first 9 months of the year and a fourth quarter resulting in a balanced budget at the end of the year. Most nonprofit directors are thankful for that big 4th quarter. Most would also agree that having donations more evenly spread across the calendar year would assist significantly in managing their operations.

Honestly, it can become a master juggling act to make it work. For example, we keep our administrative costs below 6% of our total expenses at Mite. However, we have to pay for much of our project program costs upfront in the project process. Our projects released in January find a healthy level of funding available from the end-of-year contributions in the previous year. However, because of the EoY contribution cycle, available funds can become very scarce when we get into the middle of the year. Yet, we still need to front-load the project costs and cover all other expenses of the organization.

Mite's changing EoY contribution cycles

Thanks to our fantastic giving community, Mite has begun to realize a change in its revenue cycles. We are moving away from a highly concentrated end-of-year contribution cycle toward more balanced giving across all months of the year. This change can be attributed to the goodness of God, our fabulous giver community, and a couple of other factors:

  1. An increased number of donors contributing on a monthly giving program. Mite has a high percentage of its giving community which gives every month throughout the year. This tends to spread large donations that would have traditionally been realized at the end of the year.
  2. Mite is very popular with younger givers. We are excited about the trend that we are seeing in our donor community toward people younger than 40 years old. This group is, for all practical purposes, overlooked within the nonprofit sector. They are also relatively unaffected by the tax consequences of end-of-year contributions. This younger generation spreads their giving over the year, and we love them!

Final word on EoY contributions

Your giving is vital to the worldwide outreach helping people in need. Whether your practice is to hold all or a majority of your charitable donations until the end of the year or if it is to spread your giving throughout the 12 months of the year, Mite encourages you to give. Understanding the impact of your generosity and how it affects the nonprofits you support is vital.

You may be unaware of how your giving impacts the world, or you may consider your giving too small to have any effect. In that case, we encourage you to join the Mite community by giving to a project today. We will show you proof of impact.