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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 for 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 weeks 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. The good news is that modern technology now offers an easy, stream lined alternative to the big bank methods of the past.
At Infinite Giving, our goal is to democratize the ability for nonprofits to easily receive stock, crypto, and donor advised fund donations. We want to help even the playing field for high capacity giving. 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 a Nonprofit Brokerage Account
When accepting stock donations as a nonprofit, the first step is to have a place for those funds to go. This requires a brokerage account and finding the right partner to host it. Infinite Giving is one of the only technology platforms that includes opening and hosting a brokerage account. It's also the only brokerage account holder that has the technology to simplify this process for you.
To create a brokerage account with Infinite Giving, 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. You will also be asked to provide a secondary signer and acknowledge board approval. It may sound like a lot, but the application is fully digital and really quick to complete.
For most nonprofits, it takes about 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, your account can be ready to go within two to three business days.
Unlike other stock and crypto donation providers who take a pretty high percentage of every donation that flows through your account, there are no hidden fees and no transaction costs on stock donations through Infinite Giving.
Step 2: Share Your Nonprofit’s Stock Donation Link With Donors
With your Infinite Giving account open, you now have one fully customizable Donation Page that you can embed on your website as well as a unique giving link to quickly share en masse with your donors about your new giving opportunities!
Then, share your ability to easily accept stock donations in your fundraising outreach. Make sure you remind them about the tax savings available to them when giving stock gifts! And, 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, make stock, crypto, DAF, and endowment giving donations 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
With our platform, we reduce the friction for the donor and the organization to accept donations. Rather than having donors fill out a hard copy form and mailing (or faxing?!) it back to your nonprofit, or calling in to your office, or having their guy call your guy, your donors will now fill out a quick 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
There are no login or passwords required and we take zero transaction fees so the full gift goes to you. Once a donor fills this out, they’ll click submit, and in a matter of days the donated stock will be liquidated and deposited as cash into your bank account. On your end, you don’t even have to click a button.
Automatically Liquidate 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 deposited into your linked bank account.
We take care of the immediate liquidation of the gift and deposit it directly into your linked bank account while providing real time donor transparency and all donation receipts. We truly make it easy.
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!
Send the Donor a Tax Receipt
After receiving a stock donation, the final step is to send the donor a tax receipt that complies with IRS requirements. This can get tricky if you’re new to stock donations—it’s not as simple as just saying “Thank you for your $5,000 donation.” You shouldn’t even list a cash value on the donation receipt, since your organization may not be qualified to appraise the value.
For stock gifts, your tax receipt must include:
- The name of the stock
- The number of shares donated
- The date of the transfer
- The name of your organization
Sending correct tax receipts is vital to ensure that your donors can claim their charitable tax deductions. Fortunately, while traditional investment advisors often don’t send donation receipts at all, Infinite Giving automatically sends them for you.
Once we’ve liquidated the donation and sent it to your brokerage account, our stock gifting platform automatically generates a tax receipt with all the necessary information and sends it directly to your donor. We take care of all the details so you can focus on thanking your donors.
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 and nonprofits aren't asking for them.
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 gift their appreciated stocks to you.
On the backend, your organization can automatically send a stock donation acknowledgment letter and choose to hold, liquidate, or reinvest your new assets with the click of a button.
Plus, Infinite Giving charges zero transaction fees for stock donations, offers advisory support, and opens a brokerage account for your nonprofit to simplify the process. Just take a look at how we stack up compared to other stock donation platforms:
Wrapping Up
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:
- 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.
