Posts tagged ‘tax deduction’

December 16, 2014

Special Report: Congress Passes the Charitable IRA Rollover

At 7:32 PM (EST) this evening, Dec. 16, 2014, the US Senate passed HR 5771, the bill that retroactively extends several tax provisions, including the IRA Rollover. The law will expire on Dec. 31, 2014, without any grace period. However, it’s important to note that the measure will not become law until signed by President Obama, which is expected.

While approval of the IRA Rollover is good news, it unfortunately comes extremely late in the year. This means most nonprofit organizations will be unable to fully take advantage of the provision. Nevertheless, there are a couple of simple actions you can take:

  1. Look at your donor file to see which individuals have made gifts from an IRA in the past. Then, call those donors to let them know of the opportunity for 2014, assuming President Obama signs the measure. At the very least, email those donors.
  2. Email all of your older donors to alert them to the opportunity for them to give from their IRAs. Even if they don’t take advantage of the IRA Rollover, they’ll appreciate that you informed them about this late breaking news.

December 7, 2014

Special Report: House of Representatives Approves IRA Rollover

[Publisher’s Note: “Special Reports” are posted from time-to-time as a benefit for subscribers and frequent visitors to this blog. “Special Reports” are usually not widely promoted. To be notified of all new posts, including “Special Reports,” please take a moment to subscribe in the right-hand column.]

 

On Wednesday, Dec. 3, the US House of Representatives passed a short-term tax extenders bill. The bill extended certain tax provisions for 2014, including the IRA Rollover, a provision long supported by the nonprofit sector. The package would cover 2014 but NOT apply to 2015 or beyond. The bill now goes to the Senate.

US Capitol by Glyn Lowe Photoworks via FlickrSen. Harry Reid (D-NV) has questioned whether the Senate will have time to pass the House bill before the end of the year. However, Sen. Ron Wyden (D-OR), Chair of the Senate Finance Committee, and the White House have shown a willingness to move forward with this one-year retroactive fix, according to Jason Lee, General Counsel at the Association of Fundraising Professionals.

For more information about the bill, click through to:

The Hill“House Approves Slate of Tax Breaks”

The Hill“Reid Indicates Senate Might Not Pass House Tax-Extender Bill”

The sad reality is that even if the tax extenders bill passes the Congress and is signed by Pres. Obama, there is precious little time for charities to take advantage of the IRA Rollover provision in 2014.

December 5, 2013

Special Report: No Tax Reform Bill in 2013

[Publisher’s Note: “Special Reports” are posted from time-to-time as a benefit for subscribers and frequent visitors to this blog. “Special Reports” are not widely promoted. To be notified of all new posts, including “Special Reports,” please take a moment to subscribe in the right-hand column.]

 

A tax reform bill will not be introduced in the US Congress before the close of 2013, House Ways and Means Chairman Dave Camp (R-MI) indicated to The Hill.

US Capitol by Kevin Burkett via FlickrGiven that this is the first week of December and that House Republicans plan to leave Washington at the end of next week for the holiday break, the news is not surprising, even while important.

As soon as one month from now, the House could resume wrangling over a possible tax reform bill, according to Jason Lee, General Counsel for the Association of Fundraising Professionals. However, while the issue will be on the table in 2014, it will be a major challenge for Congress to move something as significant as a tax reform bill with the mid-term elections looming in November.

November 1, 2013

6 Ways to Raise More Money without New Donors!

If you achieve your fundraising goal this year, your reward will likely be an increased goal next year. At most nonprofit organizations, the struggle to raise ever-increasing amounts of money never ends. This drives many nonprofits into a continuous donor-acquisition mode.

However, you don’t need a single new donor to raise more money.

Given that the cost to acquire a new donor is often $1, or more, for every $1 raised, finding a new donor does not even help most organizations with short-term mission fulfillment.

So, how can you raise significantly more money for mission fulfillment without acquiring new donors? Here are just six ideas:

1. Ask for More. I still receive direct mail appeals that say, “Whatever you can give will be appreciated.” Ugh! That’s not an ask. If you want people to give, and give more, you need to state your case for support. Then, you need to ask for that support in the correct way.

Many charities simply seek renewal gifts. If I gave $50, the charity will simply ask me to renew my $50 support. Sometimes, a charity will randomly ask me for an amount series (i.e.: $100, $250, or more) that has nothing to do with my previous level of support.

However, there is a better way. Try saying this:

I thank you for your gift of $50 last year that helped us achieve __________. This year, as we strive to __________, may I count on you to increase your support to $75 or $100?”

Thank the donor. Mention how the organization used her previous gift. Establish the current case for support. Ask for a modest increase linked to the amount of the previous gift. A hospital in New York state tested this approach against its traditional approach and saw a 68% increase in giving.

2. Second Gift Appeal. Just because someone has given your organization money does not mean you have to wait a year to ask for more. If you first properly thank the donor and report on how his gift has been put to use, you can then approach him for a second gift. However, you need to have a good case for going back to the well.

Growing Money by Images_of_Money via FlickrMost grassroots donors don’t think, “What’s my annual philanthropic sense of responsibility to this charity? Fine. That’s how much I’ll give.” Instead, most grassroots donors look at the charity they wish to support and then consider how much money they have left over after they pay the monthly bills. Then, they give from that reservoir of disposable income. Guess what? Next month, and every month thereafter, that reservoir usually gets replenished. So, going back to the donor for an additional gift can work, again, if you have a strong case for support. By the way, the replenishing disposable income reservoir is one reason why monthly donor programs can be effective (see below).

3. Recruit Monthly Donors. Way back in 1989, I wrote an article for Donor Developer in which I predicted that every nonprofit in America would have a monthly donor program within five years. Sadly, I was very mistaken. Even in 2013, too few charities host a monthly donor program.

October 4, 2013

New Pew Report Sheds Light on Tax Deductions and Philanthropy

[Publisher’s Note: Michael J. Rosen, CFRE will be interviewed by CausePlanet in a free webinar about his award-winning book, Donor-Centered Planned Gift Marketing. Learn more and register for the October 17 program by clicking HERE. If you need a speaker or trainer, contact Rosen today.]

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A new report issued by the Pew Charitable Trusts provides valuable insights into the effect that tax deductions and credits have on charitable giving. The report comes at a critical time as federal and state governments continue to look for additional sources of revenue including cuts to charitable-giving tax deductions.

The Pew report, written by Elaine S. Povich, looks at the impact of tinkering with tax write-offs for charitable giving in a number of states including Kansas, Michigan, Missouri, New York, North Carolina, and Vermont. The report nicely summarizes the impact of tax policy on philanthropy:

Tax incentives for charitable giving directly affect donations, particularly from high-income donors, according to Jon Bakija, an economics professor at Williams College. ‘Tax incentives for charitable donations in the US succeed in causing donations to increase, probably by about as much or more than they cost in terms of reduced tax revenue,’ he wrote in a paper published recently by the journal Social Research.”

Bakija went on to write:

This strengthens the case for the tax subsidies for donations.”

In an illuminating case study, the Pew report looks at what happened in Hawaii when the state government imposed a cap on the charitable giving tax deduction. According to Mallory Fujitani,Money Grab by Steve Wampler Photography via Flickr of the Hawaii Department of Taxation, the state expected the move to generate about $12 million to the state treasury. Unfortunately, the move cost charities $50 million to $60 million in lost donations, according to Tim Delaney, President and CEO of the National Council of Nonprofits.

In other words, Hawaii found that for every new dollar of tax revenue it generated from the cap on the charitable giving deduction, charities lost five dollars!

David L. Thompson, Vice President of Public Policy at the National Council of Nonprofits, summarized the experience of the various states that have tinkered with the charitable giving deduction:

What we learned in the states is that the charitable deduction is not just a nice thing for taxpayers, it’s vital to the communities. All politicians from across the political spectrum have come to the same conclusion that we are hurting our communities by discouraging giving to charities.”

Given the crystal clear Pew report, the experiences of various states, and the findings of academic research studies, a number of important questions come to mind:

July 6, 2013

WARNING: Do Not Stick Your Head in the Sand!

I’ve warned the nonprofit sector.

Over the years, I’ve warned the nonprofit sector many times.

Most recently, I provided a warning last month in my post “Special Report: America’s 50 Worst Charities Named”:

As a profession, we must do more to self-regulate. If we do not, we can expect others to fill the vacuum. The [“50 Worst Charities”] investigative report is one example of how those outside the nonprofit arena are filling that vacuum. It’s only a matter of time before government regulators become even more engaged.”

Well, sticking one’s head in the sand did not work. Declaring that most community benefit organizations efficiently do good did not work. Instead, just as Head in Sand by tropical.pete via FlickrI predicted, government has stepped into the void. Due to the nonprofit sector’s failure to self-regulate or to lead the way with government officials, politicians are taking action to further regulate charities.

Oregon has become the first state in the nation to “eliminate state and local tax subsidies for charities that spend more than 70 percent of donations on management and fundraising, rather than programs and services, over a three-year period,” according to a report in The Statesman Journal. This might be a model law that other states soon consider.

Recently, the good leaders at GuideStar, Charity Navigator, and the BBB Wise Giving Alliance penned a Letter to the Donors of America. In the open letter, the authors stated:

We write to correct a misconception about what matters when deciding which charity to support.

The percent of charity expenses that go to administrative and fundraising costs—commonly referred to as ‘overhead’—is a poor measure of a charity’s performance.”

Reading the opening paragraphs of the letter, one might be led to believe that overhead costs should not factor into our giving decisions. However, the authors are quick to point out:

That is not to say that overhead has no role in ensuring charity accountability. At the extremes the overhead ratio can offer insight: it can be a valid data point for rooting out fraud and poor financial management.”

In Oregon, state legislators were clearly motivated to act by the behavior of charities at the extreme.

The Statesman Journal reports:

The Oregon Department of Justice has already identified the top 20 ‘worst of the worst.’

They include charities such as Michigan-based Law Enforcement Education Program, which spent just 2.7 percent of its funds on programs over the past three years; California-based Shiloh International Ministries, which spent 3.2 percent on programs; and Florida-based American Medical Research Organization, which spent just 4.2 percent on programs.”

As a result of the Oregon law, donors to the disqualified charities will no longer be able to take a state tax deduction for their contributions. Also, the disqualified charities will no longer be exempt from property taxes.

June 19, 2013

What You Really Need to Know about Giving USA 2013

Philanthropic giving in the USA increased for the third straight year in 2012, but only modestly.

Overall giving in 2012 totaled $316.23 billion, an increase in current dollars of 3.5 percent over 2011. Adjusted for inflation, the increase is just 1.5 percent. That’s the finding presented in Giving USA 2013, the report researched and written by the Indiana University Lilly Family School of Philanthropy and just released by the Giving USA Foundation™.

Click the photo to get a free copy of Giving USA Highlights.

Click the photo to get a free copy of Giving USA Highlights.

I had a chance to sit down and talk with Dr. Patrick M. Rooney, Associate Dean for Academic Affairs and Research at the Lilly Family School of Philanthropy. He asserts that, at current growth rates, it would take at least six years for a return to pre-recession giving when adjusted for inflation. He anticipates growth will indeed continue to be slow since the overall economic recovery is slow.

For more than half-a-century, giving has hovered at two percent of Gross Domestic Product. When GDP grows strongly, giving is robust. When GDP growth is sluggish, so is philanthropy. With many economists predicting 2013 GDP growth of just 1.9 percent, Rooney’s prediction seems entirely reasonable.

Here are some highlights from the report:

–2012 saw marked year-over-year growth in corporate giving (12.2 percent in current dollars), which is strongly linked to companies’ profits. For 2012, corporate pre-tax profits surged upward 16.6 percent, according to the Bureau of Economic Analysis.

–Uncertainty fueled by mixed economic indicators may have moderated giving by individuals, who historically account for the largest percentage of total giving. Positive trends, such as the 13.4 percent increase in the Standard and Poor’s 500 Index between 2011 and 2012, the slight rise in home values, and overall lower unemployment rates and fuel costs, were combined with budget concerns and tax reform discussions. In addition, personal disposable income rose 3.3 percent and personal consumption expenditures rose 3.6 percent last year, virtually mirroring the growth in individual giving (3.9 percent in current dollars).

–Giving by individuals rose to $228.93 billion in 2012, an estimated 3.9 percent increase (1.9 percent adjusted for inflation). Income and wealth are key drivers of household giving, as is a sense of financial security. Giving by taxpayers who itemize their gifts represented 81 percent of the total donated by individuals in 2012.

–Giving by bequest decreased an estimated 7.0 percent in 2012 (8.9 percent adjusted for inflation) to $23.41 billion. Itemizing estates contributed 78 percent of the total, or $18.31 billion. Bequest giving tends to be volatile from year to year, as it is highly influenced by very large gifts from estates that closed during that year. For example, Rooney explains that if we remove one exceptionally large bequest from the 2011 numbers, we find that bequest giving was close to the same in 2012 and 2011 when adjusted for inflation. So, the big dip in 2012 should not set off alarm bells. With real estate values and stock portfolios rebounding, the future for bequest giving is encouraging.

–Giving by corporations rose 12.2 percent in 2012 (9.9 percent adjusted for inflation), to an estimated $18.15 billion, including gifts from both corporations and their foundations. The two entities provide cash, in-kind donations and grants. Increasing the 2012 total was the estimated $131 million corporations gave to nonprofits working on relief efforts in the aftermath of Hurricane Sandy.

–Giving by foundations increased 4.4 percent (2.3 percent adjusted for inflation) to an estimated $45.74 billion in 2012, according to figures provided by the Foundation Center. Giving by community foundations grew 9.1 percent last year, which helped to bolster the total. Operating and independent foundations increased grant making by 3.5 percent and 3.9 percent, respectively. While stock values increased in 2012, foundations often use a multi-year rolling average when valuing their portfolios. Therefore, as stock values continue to climb, we should see stronger future growth in foundation giving.

–Looking at foundation giving, 45 percent comes from family foundations where a member of the family continues to be actively involved in running the foundation. In a sense, these organizations blur the line between foundation and individual giving. Giving by family foundations can often be very relationship driven as with individual giving.

While the data provides a number of interesting insights about the charitable behavior of Americans, it also hints at serious warnings, according to a panel of experts that gathered in Philadelphia to present the Giving USA findings. The panelists included Jon Biedermann, Vice President of DonorPerfect; Robert Evans, Founder and Managing Director of The EHL Consulting Group; Eileen R. Heisman, ACFRE, President and CEO of the National Philanthropic Trust; and Rooney. Here are their warnings:

May 31, 2013

15 Common Planned Giving Myths Debunked (Part 1)

Sadly, many myths about planned giving continue to exist. Some of these keep nonprofit organizations from engaging in gift planning. Others lead development professionals to make terrible, costly mistakes.

All planned giving myths are dangerous.

Goddess Athena by Great Beyond via Flickr

Statue of Athena, Greek Goddess of Wisdom.

That’s why I believe that debunking common planned giving myths is important. In fact, I feel it’s so important that I addressed five of them in the very first chapter of my book, Donor-Centered Planned Gift Marketing. I’ll summarize them next week in Part 2 along with some other myths.

For now, I’m going to share eight myths identified by the members of the Smart Planned Giving Marketers Group on LinkedIn. The remaining seven will be featured next week.

Greg Warner, President of MarketSmart, started the Group which now numbers 577. If you have any interest in planned giving, you should join.

Recently, Greg started a terrific discussion to identify and debunk common planned giving myths. So far, the Smart Planned Giving Marketers Group has identified and debunked 15 planned giving myths. While I have numbered the myths, strictly for reference purposes, I am presenting them here in alphabetical order by contributor:

Ronald Blaum, Director of Gift Planning, Church World Service:

MYTH 1 — The Estate Tax is a mandatory tax.

To stimulate conversation in a group setting, I’ll often ask this question: ‘Paying estate taxes are voluntary, right?’ And, of course, people say, ‘No, they are not.’ Then, I proceed to show how the use of charitable gifting strategies and other techniques can make most, if not all, estates tax-free. With the higher estate exemption, the far greater concern for most people should be minimizing the negative impact of Income Tax on qualified plans, not estate tax. Think about what assets to use for gifting, not just the dollar amount or percentage of an estate.”

Reeve Chudd, Partner, Ervin, Cohen & Jessup:

MYTH 2 — My kids will resent me doing it.

I’ve been handling estates with charitable bequests for 34 years, and not once have I heard the heirs doing anything but enjoying the recognition their parents receive posthumously from charitable recipients. Further, when a name appears on a building or a program as a permanent memorial of a deceased donor, I see their children relishing their name connection to such philanthropy.”

Greg Lassonde, CFRE, Legacy Giving Specialist:

MYTH 3 — Age is an important factor in list segmentation.

The reality is that sometimes age is an important secondary factor in list segmentation. One example of this is Charitable Gift Annuities. If your organization’s minimum age for issuing a CGA contract is 70, you might want to mail only to those older than 55 (going that low for deferred CGAs).”

As Greg notes, while age can be an important secondary factor, the reality is that planned gift opportunities exist at every age level. For example, while it’s best to make a CGA appeal to older prospects, Bequests should be marketed to a broader age band, particularly those in their 40s and 50s. The points here are that while age is certainly of some importance, it is more important to recognize that the quality of the relationships is what is critically important, and that virtually everyone is a prospect for some type of planned gift.

Hazel Lloyst, CFRE, Capital Campaign Manager at Loyalist College:

MYTH 4 — [You can] judge a donor by their outward appearance.

From experience, I have found that many of my most frugal donors turned out to be the most generous, altruistic donors upon their passing. It was a pleasure to work with them over the years and hear their stories. It was always with tremendous gratitude that I was able to ensure their wishes were followed upon their passing while helping to ensure the timely transfer of their estate.”

Phil Melberge:

MYTH 5 — It costs too much.”

March 28, 2013

Special Report: Senate Passes Budget Resolution, Charitable Deduction in Danger

Days ago, the US Senate passed the Senate Budget Resolution by a vote of 50-49 with one senator not voting. During the deliberations leading up to the vote, the Senate refused to consider an amendment offered by Sen. Roy Blunt (R-MO) and Sen. John Thune (R-SD). That amendment would have protected the charitable deduction.

When the House and the Senate come together to reconcile their budget proposals, one of the items they will likely discuss is whether to preserve, restrict, or eliminate the tax deduction for charitable giving.

March 14, 2013

Special Report: Charitable Giving Deduction in the Crosshairs, Again

The US Senate Budget Committee has just released its FY 2014 Budget Resolution. On pages 65 and 66, the Democratic-controlled Committee asserts that the wealthy are unfairly benefiting from “tax expenditures.”

The Budget Committee calls on the Senate Finance Committee to reduce the deficit by limiting or reforming “unfair” tax breaks for the wealthy. The Committee specifically mentions itemized deductions with various options listed for limiting them (i.e.: a percentage cap, hard dollar cap, etc.). The charitable deduction is not exempted from these various proposals.

The Obama Administration has previously floated a similar proposal. You can read my analysis of that in my post: “Obama Plan Could Cost Nonprofit Sector $5.6 Billion a Year.” In short, limiting or eliminating the tax deduction for charitable giving is expected to have a significant, negative impact on giving.

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