Posts tagged ‘myths’

August 17, 2018

It’s Time to Stop Whining about Donor-Advised Funds!

The New York Times whined recently about Donor-Advised Funds in an article carrying the headline, “How Tech Billionaires Hack Their Taxes With a Philanthropic Loophole.”

While you personally might not complain about DAFs, you can sure bet some of your organization’s senior staff and board members may line up with some of the experts cited in the misleading piece in the Times.

I’m here to tell you and others that it’s time to stop whining about DAFs. Regardless of how you feel about them, DAFs have been with us since the 1930s, and they’re not likely to go away anytime soon. So, you and your organization will be far better off if you understand how to benefit from DAFs.

I’ll give you six tips. However, as a former newspaper editor, I feel compelled to first bust the myths peddled by the Times.

“Billionaires.” The Times seems to suggest that DAFs are a tool being used by and only available to billionaires. David Gelles writes, “DAFs allow wealthy individuals like Mr. Woodman to give assets — usually cash and stock, but also real estate, art and cryptocurrencies — to a sponsoring organization like the Silicon Valley Community Foundation, Fidelity Charitable or Vanguard Charitable.” While many wealthy individuals establish DAF accounts, so do middle class people. Some sponsoring organizations require just a $5,000 contribution to create one.

As a result of the new tax code, some donors will no longer itemize deductions on their tax returns because of the increase in the standard deduction. However, if they are close to being able to itemize beyond the standard deduction, some will choose to bundle their charitable giving. In other words, they’ll give in some years but not others. In the years they give, they’ll itemize. One way some of these donors will give is to establish a DAF with a large contribution in a given year. Then, they’ll continue to support their favorite charities each year by recommending annual grants from their DAF account.

The bottom-line is that DAFs are not just for the super-wealthy.

“Hack Their Taxes with a Philanthropic Loophole.” The headline in the Times lets you know the reporter’s inappropriate bias right from the start. The wealthy are not doing anything cute, clever, sloppy, or nefarious by creating a DAF. Any donor who creates a DAF is simply following the clearly written provisions of the law.

If giving to charity is a “hack” in the pejorative sense, if receiving a charitable-gift deduction for donating to a nonprofit organization is exploiting a “loophole,” then perhaps we should do away with the deduction for donations all together. However, can we agree that would be stupid?

The bottom-line is that setting up a DAF is no more evil than creating a foundation or trust or, for that matter, giving directly to a charitable organization. Donors who engage in careful tax planning have more disposable income or assets, which has historically led to more giving.

“Charities Can Wait for Funds Indefinitely.” Gelles writes, “So while donors enjoy immediate tax benefits, charities can wait for funds indefinitely, and maybe forever.” He goes on to state that foundations are required to give away five percent of their assets each year, but DAFs have no similar requirement. That’s true, but…

While DAFs are not required to make minimum distributions, the average DAF distributes far more than the minimum required of foundations. According to the 2017 Donor-Advised Fund Report, compiled by The National Philanthropic Trust, DAFs contributed 20.3 percent of assets to charities in 2016, the most recent year for which data is available. For the third year in a row, growth in grants from DAFs has outpaced the growth of giving to DAFs.

Why would a donor just let money sit in a DAF account “forever” after setting up the irrevocable account? While the sponsoring organizations would love that – they earn fees for managing the accounts – a donor derives zero benefit from warehousing money in a DAF, beyond the initial deduction. Instead, donors benefit when that money can be put to good use. Furthermore, they’ll benefit when the recipient charities recognize their support and express their gratitude.

The bottom-line is that most donors have no interest in warehousing their money. They want to use their DAFs to help build a better world. It’s the job of fundraising professionals to inspire these people to recommend grants from their DAF accounts.

“Philanthropy is Becoming Less Transparent.” The article quotes David Callahan, author of The Givers, as saying, “The world of philanthropy is becoming less transparent, and that’s not a good thing.” While I’m not really sure what point Callahan was making, the Times wants us to believe that DAFs are part of the transparency problem as people use them to hide their giving.

A few years ago, I was curious about how secretive DAF grantmakers really are. Here is what I was able to report:

Vanguard Charitable reports that 95 percent of its grantmakers share their name with the charities they support. Schwab Charitable, another large DAF management organization, says that 97 percent of its grantmakers share their name. Fidelity Charitable reports that 92 percent of its grantmakers provide information for nonprofit acknowledgment. This means that charities are able to continue to cultivate and steward these donors.”

The bottom-line is that when donors are inspired to give through their DAF, they almost never do so secretively.

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November 23, 2011

Most of What You Know about Thanksgiving is Wrong!

My blog posts are usually about serious matters. I write about nonprofit management issues, fundraising techniques, and government policies impacting the nonprofit sector among other topics. This time around, I thought we could step back and have a little fun this Thanksgiving season.

If you’re like me, there’s a lot about Thanksgiving that you think you know that is simply wrong. So, I’m going to set the record straight so you can regale your family and friends with the facts:

Myth 1: The Pilgrims Held the First Thanksgiving in 1621

While the Pilgrims did hold a Thanksgiving in 1621, it was definitely not the first such celebration on what would eventually become U.S. soil. Berkeley Plantation on the James River in Virginia claims to be the home of the first official Thanksgiving which was held in 1619. In 1963, President John F. Kennedy even recognized the Plantation’s claim.

However, there are several even older claims to the first Thanksgiving: In 1610, colonists in Jamestown, Virginia celebrated a Thanksgiving when a ship arrived full of food. In 1607, English colonists and Abnaki Indians observed a Thanksgiving at Maine’s Kennebec River. In 1598, San Elizario, a small community near present-day El Paso, Texas, held a Thanksgiving celebration. In 1565, the Spanish held a day of Thanksgiving in what is now Saint Augustine, Florida. In 1564, a Thanksgiving was held by French Huguenot colonists in present-day Jacksonville, Florida. In 1541, Francisco Vásquez de Coronado and his troops celebrated a Thanksgiving in what is now the Texas panhandle.

Myth 2: Thanksgiving has Always Been in November

While Thanksgiving is celebrated in the U.S. on the fourth Thursday of November, this has not always been the case. In fact, Thanksgiving hasn’t even been annually celebrated. While the Pilgrims marked Thanksgiving in the autumn of 1621 — there’s no record of the month — they did not do so again until 1623 and then it was a summer event.

The first Berkeley Plantation Thanksgiving was held on December 4. The San Elizario Thanksgiving wasn’t even held in the autumn or early winter; it was celebrated on April 30. The Saint Augustine Thanksgiving was held on September 8.

As for our modern Thanksgiving celebrations, the holiday was marked on different dates by the states until 1863 when President Abraham Lincoln declared the final Thursday of November to be a national day of Thanksgiving. It wasn’t until 1941 that the date was permanently established as the fourth Thursday of November.

Myth 3: Thanksgiving was a Harvest Celebration

Well, it depends on which Thanksgiving you’re talking about. While the first Pilgrim Thanksgiving was a celebration of the harvest, the Berkeley Plantation Thanksgiving marked the anniversary of the establishment of the colony. The Jamestown Thanksgiving marked the arrival of a ship full of food desperately needed by the starving colonists. The original San Elizario Thanksgiving celebrated the arrival of Spanish explorer Juan de Onate and his followers on the banks of the Rio Grande.

Myth 4: Thanksgiving was Always Celebrated with a Feast

Nope. William Bradford, Governor of Plymouth Colony, called for Thanksgiving to be celebrated in 1623 with a fast.

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