Understanding (and Asking for) Stock Donations

In the evolving landscape of nonprofit fundraising, stock donations have emerged as a powerful yet underutilized tool. Many organizations focus primarily on cash contributions, overlooking the substantial benefits that non-cash donations such as stocks can offer. 

By embracing stock donations, nonprofits can unlock new avenues for funding, enhance donor engagement and promote long-term financial sustainability.

The Advantages of Accepting Stock Donations

Donating appreciated stocks allows donors to bypass capital gains taxes and claim a charitable deduction for the full market value of the stock. This dual benefit can make stock donations more appealing than traditional cash gifts. Stock contributions can change the game for nonprofits willing to embrace new ways of giving.

Despite macroeconomic headwinds and the tumultuous stock market, high-capacity donors are still willing to give these assets. Incorporating stock donations into your fundraising strategy diversifies income sources, reducing reliance on cash donations and enhancing financial resilience.

How to Establish a Nonprofit Brokerage Account

To accept stock donations, your organization must first set up a brokerage account. This account will serve as the recipient for donated securities, which can then be liquidated or held according to your investment strategy. Here are the four steps to opening an account:

1. Gather documentation. Prepare your IRS 501(c)(3) determination letter, articles of incorporation and tax identification number.
2. Choose a brokerage partner. Select a brokerage firm experienced in working with nonprofits. Some platforms offer streamlined processes tailored for nonprofits.
3. Complete the application. Fill out the brokerage account application, providing all required information and documentation.
4. Set up online access. Establish online access to monitor the account, receive notifications and manage transactions.

Once this account is in place, your nonprofit will be equipped to receive and manage stock donations efficiently.

Promoting Stock Donations to Donors

Once your brokerage account is active, it's essential to inform and encourage donors to consider stock contributions. Be sure to: 

• Educate donors. Present information on the tax advantages and impact of stock donations through newsletters, social media and your website.
• Simplify the process. Provide clear instructions and assistance to ensure the donation process is straightforward.
• Highlight success stories. Share testimonials or case studies demonstrating the benefits and impact of stock donations.
• Include in campaigns. Integrate stock donation options into fundraising campaigns and donor outreach efforts, especially during peak times like year-end.

By actively promoting stock donations, you can tap into a valuable source of funding and provide donors with a tax-efficient giving option.

Investing Nonprofit Funds for Growth

Beyond accepting stock donations, nonprofits can consider investing funds to support long-term financial health. Investing can help your organization grow its reserves, support programs and achieve greater financial stability.

To get started with nonprofit investing, nonprofits often look to lower-risk options, such as mutual funds, money market accounts and U.S. Treasury bonds. From there, it’s wise to develop an Investment Policy Statement with your board. This document outlines your goals, risk tolerance and general guidelines to help ensure your funds are managed responsibly and in alignment with your mission. 

And don’t be afraid to lean on the professionals. Working with financial advisers who understand the nonprofit sector can help your organization build a thoughtful investment strategy.

Embracing stock donations offers nonprofits a strategic opportunity to enhance fundraising efforts, provide donors with tax-efficient giving options and strengthen financial sustainability. By establishing a brokerage account, promoting stock contributions and considering investment strategies, your organization can unlock new potential and further its mission.

The preceding content was provided by a contributor unaffiliated with NonProfit PRO. The views expressed within may not directly reflect the thoughts or opinions of the staff of NonProfit PRO.