The Fiscal Cliff and Nonprofit Theaters

In the famous final scene of the 1991 film 'Thelma & Louise' the heroines are confronted with a do or die decision. The scene may be an apt analogy for the so-called fiscal cliff and nonprofit theaters. Year-end is normally a time of great generosity for charities and nonprofits, but will economic uncertainty put a damper on donations? Green Means Go looks at the current climate of giving, as it affects nonprofit theaters, with the fiscal cliff looming.

Executive's note: With respect for your time, Green Means Go posts highlight the salient points and solutions for theaters and nonprofit entities.

Action Alert

The issue of the Federal deficit deadline (aka "fiscal cliff") is a very complicated issue and a point of contention across the country. Pausing the rancor for a moment, setting aside myriad other details, the possibility of tax-deductible charitable giving to nonprofit entities being greatly limited, if not eliminated outright, is of the greatest concern to nonprofit theaters. The fiscal cliff may very well be resolved before the end of the year, and current deductions will be left intact, but theater owners may ask what can be done now to help ensure that.

The 'Americans for the Arts Action Fund' in Washington, DC has issued an "Action Alert' to urge Congress to preserve charitable giving incentives during the fiscal cliff negotiations. The fund is a 501(c)(4) nonprofit itself and is staffed with the leaders in tax law, The Arts and philanthropy.

The action alert issued speaks directly to the issue of the fiscal cliff and nonprofit theaters:

As Congress and the White House consider various proposals to avoid the impending fiscal cliff scenario of more than $600 billion in federal spending cuts and tax increases for 2013, some have set their sights on limiting the deductions for charitable gifts and possibly even the status of nonprofit organizations as an answer. In particular, we are deeply troubled by reports of proposals under consideration that would create an aggregate dollar limit or percentage cap for all itemized deductions as a potential short-term revenue solution during the lame duck session...Because of the importance of this issue, a new Charitable Giving Coalition has also emerged, in which Americans for the Arts Action Fund is a member.

Strong words for a noble cause.

Narric Rome, Senior Director of Federal Affairs and Arts Education, has been active on social media cheering the public on to join the cause and keep the current tax deductions in place, which benefit all charities and non-profits, including theaters.

Should nonprofit theater owners wish to be part of the campaign, the Arts Action Fund website has press kits, to-do lists and talking points to share with their patrons. Time is short. As of this writing, the fiscal cliff deadline is less than two weeks away, but that is ample time for posters and hand-outs to be presented to patrons for the remainder of the 2012 season of performances.

Improving Mood

When the mood will strike someone to give to a charity is not an easy thing to predict as it is, without the fiscal cliff's entanglements. Nonprofit theaters are utterly reliant on the generosity of their patrons to keep the doors open and the performances in production. Caught between a rock and a hard place, nonprofit theaters must operate just like a business, with revenue projections and quarterly forecasts, yet the income is based on giving and altruism, not retail sales.

The Los Angles Times has some comforting news for theaters when it comes to the climate of giving, and ticket sales in an article titled 'Nonprofit theaters' fiscal mood improving' by Mike Boehm.

Boehm cites a recent survey by the Theatre Communications Group (TCG) that contains very encouraging financial projections.

Trustees came through most consistently, with 77% of the companies reporting that board members met or surpassed their expected giving. The figure was 72% for giving by other individuals, and 73% for government contributions -- which might reflect lowered expectations for what federal, state and local arts agencies are willing or able to give, rather than any increase in actual grants. Foundations (67%) and corporations (57%) were less likely to match or exceed theaters' philanthropic expectations.

All theater owners and nonprofit trustees are strongly encouraged to read the entire 'Taking Your Fiscal Pulse, 2012' survey to offset any fiscal cliff worries. A small sampling of the data contained therein shows ticket revenue meeting budgets, fundraising goals are being met, and on the whole nonprofit theaters are optimistic.

• 73% reported similar to or higher than expected overall paid attendance.
• 72% reported overall ticket income equal to or greater than budget.
• 70% reported operations expenses to be on or below budget.
• 40% reported having cash flow problems this year.
• 90% believe their situation is holding steady or on the upswing.

So the public is in a giving mood and while buying tickets - with or without a plunge over the fiscal cliff.

Persuasive Precedent

Robert J. Shiller, a professor of economics and finance at Yale, wrote an OpEd for the New York Times this week-end that has had far reaching influence among the key fiscal cliff decision makers. The title of the OpEd, 'Please Don’t Mess With the Charitable Deduction', sounds like a polite request, but belies Shiller's authority in tax codes and economics.

Congressional leaders on both sides of the isle must consult experts on how to go about resolving the issue of the fiscal cliff. Non-partian opinions such as professor Shiller's carry a lot of weight, even more so when published in a widely read source such as the business section of the Times. Shiller's opening paragraph could not make the case for nonprofit theaters any clearer:

Whatever else we do about the tax code, we need to save the charitable deduction, which has done so much good in our country and springs directly from some of our deepest values.

The forceful argument made to keep deduction mechanisms as they are now gains steam as Shiller chronicles the history of American philanthropy and it positive impact on society. Of note is the call to action for Congress to treat the need for charitable donations as a shared "national value", as it soothes any burgeoning resentment between the variances in means.

Instead of curtailing the charitable deduction, we should be aiming to make it an even bigger part of our culture...There is good reason to suspect that American income inequality will grow further in coming years. Preserving and strengthening the charitable deduction will help thwart the resentment and social unrest caused by that inequality, while reinforcing generosity as a national value.

Nonprofit theater owners can find considerable persuasive precedent in Shiller's OpEd. Citing it while asking for donations from patrons may generate higher donations. Theaters can also use excerpts from the OpEd as part of the prompt displayed to ticket buyers during the purchase process.

We're In This Together

The next few weeks will be critical for nonprofit theaters as we edge closer and closer to the fiscal cliff. The possibility of sweeping changes to the public's ability to make charitable donations tax deductible means now is the time to review how you take donations online, as part of the ticket purchase process.

ThunderTix has extensive tools for asking for and accepting donations online, as part of the special place nonprofit theaters have in our hearts. We are in this fiscal cliff situation together, riding the roller coaster right along side our current and future customers. We want to offer the best ticketing software for nonprofits. By not charging ticket fees, building custom seating charts on a per venue basis, and accelerating liquidity with nightly deposits we have helped many theaters meet their financial goals - and we would love the opportunity to do the same for your theater. We also offer the ability to embed your events on any website with our event calendar HTML and other embed options.

What is 'Green Means Go'? ThunderTix’s commitment to The Arts doesn't end with a sold out performance. We want to help theaters, big and small, meet their operational goals by sharing new ideas and best practices for accepting donations and increased ticket sales. 'Green Means Go' is a series for performing arts theaters and chronicles the latest developments in fundraising, event awareness and ticket sale technology.

The previous installments in this series include:

Nonprofit Theaters – Any port in a storm will do

5 Big Funding Announcements For Performing Arts Theaters

Should Theaters Use Dynamic Pricing?

Green Means Go for Performing Arts Theaters