For nonprofit organizations, accepting stock donations can easily mean an increase in fundraising dollars by up to 37 percent. This is the amount that your donor can be taxed on the gift if they sell the stock to donate the cash to you. Even if the stocks increase in value, the nonprofits will never pay tax on the capital gains.
Because of the tax savings, stock donations are typically larger than cash gifts. If you add stock donations to your fundraising strategy, you can grow your donations six times faster than those who focus on cash gifts alone.
Once you begin accepting stock donations, make sure you focus on stewardship. When your donor sees the tax savings and how much more they were able to give, they are likely to repeat their donation the following year. Donors who make recurring gifts give 42 percent more than one-time donors.
How to Begin Accepting Stock Donations
But many donors simply don’t know how to give stock—this is a primary reason many have not. If you can make the process easy and help them see the tax savings they receive, you are likely to see the benefit of stock donations.
Having a simple web page to assist stock donors could increase your fundraising by 55 percent.
Set Up a Brokerage Account
To get started, you need to have a brokerage account where the stocks can be transferred. While there is a fee, nonprofits usually see a lower cost than for-profit businesses or individuals. You’ll want to research which brokerage firm is best for your organization.
To set up the account, you’ll need to fill out an application. This will include information about the organization, including who is managing the account and the tax ID. You’ll also need to submit your Articles of Incorporation and 501c3 Determination Letter.
You’ll need to monitor the brokerage account so the value of the shares donated can be recorded on donor receipts.
Determine Your Process for Accepting Stock Donations
Keep your donation process simple by designating staff members to manage the donations. Large organizations may have a finance department to handle the transfer and a development team to record the donation.
For small nonprofits, a single staff member could be responsible for both.
Setting up a stock donation web page can be especially beneficial to increasing stock donations. Visitors to your website will see the stock donation option and be able to connect their brokerage account to donate shares. Your brokerage firm can assist in what information you need to collect from your donors for the transfer.
Invest or Sell the Donated Stock
Once you own the stock, you have the option to keep and invest it. If you plan to invest, you’ll need a nonprofit investment policy. This communicates the goals of any investments and any restrictions on the length of time or type of investment the organization can make.
Many nonprofits choose to sell donated stock. If you sell, you’ll want to do so the same day you receive the stock so you can provide a receipt to your donor on the value they gifted to you. After you sell, simply transfer the cash into your organization's bank account.
A Whole New World for Donors
Accepting stock donations can feel overwhelming if you’ve never done it before—but it doesn’t have to be! Use these simple steps to get started…
And open up a whole new world of options for your committed donors!
