Let’s begin with a statistic: Nonprofits receiving stock donations (in addition to cash) can increase their fundraising contributions by 55% over those only accepting cash donations.
Accepting stock donations can be an incredible fundraising incentive. When selling stocks, individuals usually have to pay 37% tax on the appreciated value of their shares. But if they donate those stocks directly to a nonprofit, they not only don’t pay taxes but also receive a tax deduction.
However, despite the fact that stock donations offer such significant benefits, many nonprofits have yet to enter the discussion.
We want to change that! In this guide, we’ll cover how to accept stock donations without causing your nonprofit financial or emotional stress plus the top three ways it can benefit your nonprofit.
2 Easy Steps to Accept Stock Donations to Your Nonprofit
Historically, to receive a single stock gift, nonprofits had to do a lot of work. To process stock donations, a nonprofit would have to work with each donor individually to send the donation form, track and record the gift, send an acknowledgment letter, ensure paperwork was correct, liquidate and reinvest funds, and avoid forgery and fraud—all by hand! Even the first step (opening an account with a brokerage firm) could take months to complete.
As a result, accepting stock donations was a time- and resource-consumptive task for nonprofits and donors alike, eluding all but the largest nonprofits.
Today, however, accepting stocks from donors doesn’t have to be a burden to your organization. Automated investing, also known as robo-advising, offers a cost- and time-efficient alternative to the big bank methods of the past.
At Infinite Giving, our goal is to democratize investing for all nonprofits. For this reason, we’ve simplified the process of accepting stocks to just two easy, user-friendly steps. Let’s take a look!
Step 1: Set Up an Infinite Giving Investment Account
When accepting stock donations as a nonprofit, the first step is to have a place for those funds to go. To create a brokerage account, you’ll provide your nonprofit’s contact information, copies of your 501(c)(3) IRS Determination Letter and Articles of Incorporation, and your tax identification number, as well as a secondary signer, board approval, and a minimum initial investment of $25K.
For most nonprofits, it takes about 15-20 minutes to apply for a brokerage account with Infinite Giving.
With this information, we’ll quickly verify your 501(c)(3) status and activate your account. Unlike investing with a big bank or active wealth advisor, for most nonprofits, their account can be ready to go within two to three business days.
Before you create an account, make sure to compare the fees of different services and platforms. Some investment platforms, for example, will take a percentage of every stock donation that flows through your account. At Infinite Giving, it’s free to open an account and receive stock donations with our stock gifting tool. No hidden fees. No added transaction costs.
Step 2: Share Your Nonprofit’s Stock Donation Link With Donors
With your Infinite Giving account open and your policy statement in place, you’ll have access to a unique giving link to quickly share en masse with your donors.
Then, advertise your ability to easily accept stock donations in your fundraising outreach. Consider including a link with easy-to-follow stock donation instructions in the following places:
- Website. When donors visit your nonprofit's donation page on your website, list stock donations as a clear, easy option.
- Email. Plan an email campaign announcing that your nonprofit can accept stock donations.
- Social media. Share your link on your social media accounts and explain the donor benefits of stock donations, such as avoiding capital gains tax, decreasing taxable income, and receiving a bigger tax deduction.
By using a donation link, you not only make it easier to accept stock donations and for donors to give them, you also keep your nonprofit’s tax information safe, mitigating the potential for fraud and related risks.
What Comes Next
Once you’ve taken the above steps, your job is done. For a look behind the curtain, here’s what happens next.
Donors Donate Stock to Your Nonprofit
Rather than having donors fill out a hard copy form and mailing (or faxing?!) it back to your nonprofit, donors will fill out a stock donation form online that automatically begins the stock transfer process.
At Infinite Giving, this form consists of the following seven fields:
- Nonprofit recipient
- Donor’s name
- Donor’s email address
- Donor’s brokerage firm
- Stock identifier
- Quantity of shares
- Donation date
Once a donor fills this out, they’ll click submit, and in a matter of days the donated stock will appear in your nonprofit’s account. On your end, you don’t even have to click a button.
Automatically Liquidate and Reinvest Stock Donations
Perhaps the easiest (and most exciting) part of the process, in this step, you don’t need to lift a finger. Following your account settings and preferences, donated stocks can be automatically liquidated and reinvested in a diversified portfolio.
That’s all there is to it! By following these steps, you’ve quickly amplified your fundraising, raising more for the important work your nonprofit does in your community!
3 Reasons Why Nonprofits Should Accept Stock Donations
Donating appreciated stocks directly to nonprofits is a giving channel that is not often well understood or widely used. However, it’s also one of the easiest and most tax-efficient ways donors can give more to causes they care about.
Now that we’ve covered how to accept stock donations for your nonprofit, let’s take a look at three reasons why your organization should be asking donors for their stocks.
1. Donating Stocks Is Tax-Efficient
Donating stocks directly to registered charities can be one of the most tax-smart ways for donors to give.
When a donor gives stock shares directly to a nonprofit, they avoid having to pay capital gains tax on those shares AND they can still deduct 100% of the value of their contribution. Thus, they can receive a tax write-off at the market value of the stock upon donation—regardless of what they bought the stock for. Sometimes, the resulting tax deduction can even be more than what they originally paid! It’s a win-win. Donors save more. Nonprofits receive more.
2. Stocks Offer Immense Giving Potential
On top of their tax-efficiency, appreciated stocks are everywhere. According to a 2016 study by Fidelity Charitable, “80% of donors own appreciated assets, such as stocks, mutual funds or bonds, but only 21% of those donors have contributed these types of assets to charity.”
Generally, donors aren't making stock donations simply because they don’t understand the benefits.
A study by Dr. Russell James of Texas Tech University found that just mentioning strategic tax deductions increased charitable giving by almost 20%. Because donors hold more wealth in stock than in cash, stock donations tend to be larger than cash donations.
3. Stock Donations Can Be Easy
Historically, giving and accepting stocks has been messy and overly complicated for both donors and nonprofits. Its benefits have been hard to understand, and nonprofits often don’t know how to help donors through the process.
Today, however, accepting stock donations can be incredibly easy. When your organization registers for a brokerage account with Infinite Giving, you’ll receive a giving URL that you can embed in your website as well as your email and giving campaigns. With this link, donors can quickly deposit their appreciated stocks directly into your account.
On the backend, your organization can automatically send a stock donation acknowledgment letter and choose to hold, liquidate, or reinvest your new assets into a diversified portfolio with the click of a button.
Ultimately, stock donations allow for donors to give more to the causes that are meaningful to them and for nonprofits to maximize their fundraising potential.
If your donors aren’t giving you stocks, it’s probably because you aren’t asking for them or because your current process is overly-complicated. Luckily, education and opportunity can open this giving channel up for your organization. With transparency and convenience, Infinite Giving can change your stock-giving narrative. Together, let’s help donors help you.
Interested in other resources to help your nonprofit more effectively accept stock donations? We’ve compiled a list of tools and guides to help you out:
- Free Tools and Resources for Nonprofits. Most investment resources are hidden behind expensive paywalls. In order to democratize nonprofit investing, we’ve compiled a list of free critical investing tools for your nonprofit.
- Nonprofit Investing | The Ultimate Guide to Grow Your Giving. Nonprofit investing is just as important as the fundraising itself! Use this guide to learn about different ways and strategies for reinvesting the stock donations you receive.
- Nonprofit Reserve Funds: Using Capital & Operating Reserves. Want to learn more about how stock donations can help your nonprofit’s growth? In this article, we discuss how and why your nonprofit should prioritize growing its reserves.