With the impact of the Tax Cuts and Jobs Act (TCJA)1 passed at the end of 2017 still unfolding and the stock market slowdown at year-end, 2018 was a transitional year in the charitable giving landscape.
While these developments will continue to shape U.S. philanthropy in 2019 and 2020, the Indiana University Lilly Family School of Philanthropy and Marts & Lundy have taken careful measures to account for potential effects of the TCJA in the baseline projections produced by The Philanthropy Outlook’s forecasting model.i Meanwhile, the longer-term implications of market volatility at the end of 2018 have yet to be determined.
After a tumultuous year, the S&P 500 finished the year down by 6.2%2. At the outset of 2019, concerns persisted about factors such as a bleak manufacturing report from China, sluggish global economic growth, increasing U.S. interest rates, and a drop in oil prices. However, other economic indicators were more positive. Annual GDP growth is expected to have reached about 3% by the close of 2018, performing better than some analysts projected. While several experts have predicted the onset of a recession by the end of 2020, the U.S. is not currently in a prolonged economic downturn.
The Philanthropy Outlook provides nonprofit scholars and practitioners with critical information about the charitable giving environment in 2019 and 2020. This includes projected philanthropic contributions by donor source (individuals/households, foundations, bequests, and corporations) and gifts to three recipient subsectors (education, health, and public-society benefit). While many reports contain anecdotal predictions for charitable giving, The Philanthropy Outlook provides empirical data produced through rigorous analysis that fundraisers and nonprofits can use to develop effective strategies for their organizations in the coming years.
This edition of The Philanthropy Outlook projects giving for the years 2019 and 2020 in relation to the year 2018.3 We explain how different economic variables will affect giving by source and to the three subsectors during these years, and provide additional context for the giving predictions. This context includes information about how broad economic conditions, in combination with specific policy changes, may alter the philanthropic landscape. We also offer insight on how overall giving and giving by source may be affected by these contingencies.
To understand the full scope of the dynamic giving environment in 2019 and 2020, the macro-economic climate, as well as ongoing behavioral responses to the TCJA, must be taken into account. While no one can know exactly how the confluence of these factors will play out for American philanthropy in the coming years, we draw on recent economic forecasts and analyses of the law’s anticipated effects to present three potential scenarios. These scenarios provide helpful context for the baseline projections outlined in this report.
Following descriptions of the three scenarios, this section of The Philanthropy Outlook also contains figures with the giving projections, as well as upper and lower bounds based on 10th and 90th percentile estimates for GDP.ii
Conditions That May Affect the Outlook for Giving
Although the full impact of the TCJA on philanthropy still cannot be determined with certainty, multiple reports were released in 2018 that examine the combined effects of various elements of the legislation on charitable giving. In this section, we provide a recap of the major provisions of the TCJA that are expected to impact philanthropy in the coming years. We then summarize the results of recent analyses that have estimated how the legislation will affect total giving, primarily as a result of changes in individual/household giving.
Philanthropy Outlook 2019 & 2020
This section presents the projections for total giving, giving by source, and giving to the three recipient subsectors included in this report and describes how different economic variables will impact giving. Overall, Americans should expect philanthropic growth in the coming years:
- The growth rate for total giving is expected to rise above the historical 10-year, 25-year, and 40-year annualized average rates of growth.4
- All sources of giving are projected to increase their contributions in 2019 and 2020. Giving by foundations will see the largest increases in both years, followed by giving by bequest. Increases in gifts from individuals/households will be higher than the increases in contributions made by corporations.
Among the recipient subsectors, giving to health will increase the most in 2019, while giving to education will increase the most in 2020. In 2019 and 2020, the health subsector will be the only one among those analyzed to see giving rise above the 10-year, 25-year, and 40-year historical trends.
In this section, we note important themes in the philanthropic sector and offer recommendations for use by practitioners in the course of their daily work. This year, we concentrate on high-net-worth philanthropy, offering a broad overview of patterns that have emerged before taking a closer look at various elements of high-net-worth giving.
This section provides a high-level summary of our methodology for creating The Philanthropy Outlook forecasting model and producing the charitable giving estimates. The Variable Definitions and Sources subsection explains exactly what the variables used in the forecasting model measure and where these variables are sourced. Finally, the Limitations subsection describes the limitations of using scientific methodology to predict future giving outcomes.
For more detailed information about the methodology used in The Philanthropy Outlook, please view the Guide to the Philanthropy Outlook Model at www.PhilanthropyOutlook.com.
We hope The Philanthropy Outlook 2019 & 2020 offers helpful insight on the complex factors influencing the philanthropic environment and assists you in making important decisions for the future of your organization.
- i Please see the Guide to the Philanthropy Outlook Model for details on how tax policy changes were accounted for in The Philanthropy Outlook’s
estimates for charitable giving in these years.
- ii The 10th and 90th percentile GDP estimates used for these bounds were provided by the University of Pennsylvania Wharton School of Business.