A Guide to Leveraging Stock Donations for Your Nonprofit
The world of online fundraising is constantly evolving, and nonprofits must evolve with it. In recent years, noncash gifts like stocks and cryptocurrency have been on the rise due to their popularity with wealthy donors and the major tax benefits they offer. To ensure your organization can accept and leverage these gifts, you need to have the right infrastructure in place.
When you expand your fundraising strategy to include stock donations, you’ll engage high-income donors by offering more beneficial ways for them to give. Especially when 84% of US adults with incomes over $100,000 own stock, leveraging stock donations for your nonprofit is an opportunity you don’t want to miss out on. To set you up for success, we’ll cover the following steps you can take to start leveraging stock gifts:
- Understand the basics of stock donations
- Set up a brokerage account for your nonprofit
- Make it easy for donors to give by leveraging a stock donation page
- Promote stock donations to your donors
If your nonprofit hasn’t started accepting stock donations yet, it’s not too late to get in on the action. Let’s start with the basics.
1. Understand the basics of stock donations
Before you can begin soliciting stock gifts, it’s important to have a baseline understanding of the process and legalities. There are three main things you need to know about accepting stock donations:
- What types of stocks you can accept: Nonprofits can accept publicly traded stocks, privately held stocks, and mutual funds. Publicly traded stocks are often the most common type of stock you’ll receive.
- What you can do with stock gifts: Once a donor transfers ownership of stock to your nonprofit, your organization can choose to hold, liquidate, or reinvest the stocks to increase the value of the donation.
- How donors benefit: Normally, people who hold stocks that appreciate in value must pay capital gains tax on the appreciation. By donating stocks, however, donors don’t have to pay capital gains tax. Plus, they get an additional tax deduction for the full market value of their charitable contribution.
Let’s take a look at an example of what this could look like in practice.
Imagine that a high-income donor who normally donates mid-level cash gifts to your nonprofit also owns multiple publicly traded stocks. When your nonprofit lets them know they can give a larger contribution and reduce their own tax obligations, they jump at the chance to donate high-value stock. Once your nonprofit receives the donation, you may choose to reinvest it to increase the donation’s value even further or liquidate it into cash.
Because of the major tax benefits for donors and the potential for your nonprofit to increase the value of donations over time, stock gifts are an incredible opportunity to help your organization fund your mission.
2. Set up a brokerage account for your nonprofit
Ready to start increasing your fundraising capacity with stock donations? The next step is to set up the necessary infrastructure internally.
To accept stock gifts, your nonprofit needs to have a place to receive them. A brokerage or investment account allows you to receive, liquidate, and reinvest stocks on behalf of your organization. Applying for a brokerage account can be relatively straightforward but often time intensive, so be prepared to provide the following as part of your application:
- Contact information
- Your 501(c)(3) IRS Determination Letter
- Your organization’s Articles of Incorporation
- Proof of board approval
- Your nonprofit’s tax ID number
With a standard brokerage firm, this process can take weeks. If you work with a nonprofit investment advisor, they can simplify and speed up this process significantly. Plus, they’ll give you general guidance on nonprofit investing best practices, in case you decide to reinvest any of your stock donations.
3. Make it easy for donors to give by leveraging a stock donation page
Once you have your brokerage account set up and ready to receive stock gifts, it’s time to provide your donors with an easy way to give. The simplest way to help donors make stock donations quickly and easily is to leverage a donation page that lists stocks and other noncash gifts as options.
By creating a designated stock donation page or adding a widget to your existing donation page, donors will be able to quickly fill in information about their brokerage firm and chosen stock gift to start the stock transfer process. From there, the donor’s brokerage firm will verify and complete the transfer, and you’ll receive the stocks in a few hours.
Remember to reduce any friction with your donor by making the process as easy as possible. Make sure that any platform you use to streamline the process doesn’t require your donors to create a username and login. The simpler it is to give, the better.
Some platforms, like Infinite Giving’s stock donation tool, can even automatically liquidate and reinvest stock gifts if your nonprofit chooses. This takes the bulk of the work off your staff’s plate and gives your stock donations the potential to start appreciating in value as soon as possible.
4. Promote stock donations to your donors
Don’t forget this important step—it’s crucial to thoughtfully market your new stock gifting option to the right supporters.
When you’re ready to start marketing stock donations to your supporters, create a promotion plan that includes the following key considerations:
- Donor segmentation: Not every supporter owns stocks, so use segmentation to make sure you’re suggesting stock donations to the right donors. Create segments based on historical giving amounts, and use prospect research to find wealth indicators that suggest donors may be capable and willing to donate stocks.
- Emphasizing tax benefits: Stock gifts offer major tax advantages to high-income donors, which is the most common motivator for donors to give stocks instead of cash gifts. In your marketing materials, include eye-catching information and statistics about the tax benefits donors receive when they donate stock.
- Providing clear instructions: Donors may hesitate to donate noncash assets because they don’t understand how the process works. Encourage them to give by breaking down the process for them in social media posts, emails, or your newsletter.
When donors start giving stock to your nonprofit, ask for feedback on their giving experience. Consider sending a short survey that asks why they decided to give stock, how easy the process was, and what you can do to improve their experience. Use this information to tailor future outreach based on what tactics successfully encourage donors to give stock.
You want to encourage donors who give stock once to do so again in the future, so remember to thank each donor personally and thoughtfully. eCardWidget’s guide to thanking donors suggests establishing a set of appreciation tactics that align with different giving levels. Make sure that stock donors have a place near the top to adequately express your thanks.
With these tips in mind, your nonprofit will be on the path to leveraging stock donations in no time. Once you start seeing positive results, consider branching out to accept other noncash donations as well and truly tap into the future of online giving.
