Posts tagged ‘tax deduction’

July 7, 2016

Should You Worry about Election-Year Tax Plans?

As Americans, we should be generally concerned with who our next President will be. The outcome has both personal and professional implications for you, even if you’re one of my international readers.

Presidential Seal by Jason Seliskar via FlickrWho will be best for the future of the nation and the world? Who will voters elect?:

Whether you’re a nonprofit manager, fundraising professional, and/or donor, you should also be concerned about which of the candidates will be best for the charity sector. Government policies, particularly tax policies, can have a significant impact on charitable giving.

If new government policies lead to greater economic growth, nonprofit organizations will likely benefit. Giving USA has shown that charitable giving consistently correlates to roughly two percent of Gross Domestic Product. So, if the nation experiences more robust economic growth, we can expect more robust philanthropic growth. The converse is also true.

If new government policies lead to greater personal income, nonprofit organizations will likely benefit as Giving USA has revealed that giving also consistently correlates to approximately two percent of personal income.

So, which Presidential candidate is best? Well, that’s a simple question with a complex answer. Evaluating the potential impact of each plan will never generate a consensus among economists. Furthermore, it’s doubtful that any of the plans will be adopted as presented. Congress will still have its say. And Speaker of the House Paul Ryan has introduced his own tax proposal.

While I will not tell you which candidate will be best for the country and the nonprofit sector — I don’t happen to own a crystal ball — I will provide you with a few key, relevant highlights of each plan. I hope you’ll then take the time to learn a bit more about each candidate and his/her proposals so that you can make an informed choice this November and be prepared when change arrives.

I also encourage you to visit the seemingly non-partisan website I Side With to take a quiz that will match your answers with the positions the candidates have taken on a variety of issues. At the conclusion of the quiz, you’ll be told how your positions align with those of each of the candidates. The results might surprise you. If you’re one of my international readers, I still encourage you to take the quiz to see how our presidential candidates align with your values so you’ll know who to root for.

Now, let’s take a brief look at some of the highlights from the various tax proposals:

May 18, 2016

New Donor Advised Fund Legislation Introduced in Congress

Late last year, the Federal Government made the IRA Charitable Rollover permanent. Now, just months later, Congress is considering a bill that would expand the IRA Rollover provision. If passed, the measure would allow donors to contribute IRA dollars to a Donor Advised Fund in addition to 501(c)3 nonprofit organizations.

Arc of Washington by Eric B Walker via FlickrIn the US Senate, Sen. John Thune (R-SD) introduced S-2750, Charities Helping Americans Regularly Throughout the Year Act. In the US House of Representatives, Rep. George Holding (R-NC) introduced a companion bill: HR-4907, The Grow Philanthropy Act of 2016.

(Just as an aside, I have to ask: Who came up with these bill names? I’m not sure if they suffered from too much creativity or not enough. In any case…)

The Senate bill has been assigned to the Finance Committee while the House bill has been sent to the Ways and Means Committee. At this point, it’s unclear whether either bill will receive a floor vote. And, if a vote is held, it’s uncertain whether the measure would pass. You can track the progress of the bills at GovTrack.us.

Even if the bills do not pass this year, it’s doubtful the matter will be dropped. Remember, it took many years before the existing IRA Charitable Rollover became permanent. So, unless the new measure passes this year, I think we can expect the matter to come up again.

Some fundraising professionals believe that DAFs are good for the nonprofit sector because they encourage more giving. Others believe that DAFs are harmful because they divert funds away from operating nonprofit organizations. Still others believe that it doesn’t matter what we think about DAFs because they’re here to stay.

February 5, 2016

It’s Not Too Late to Think about Year-End Giving

No, the headline does not contain a typo. It’s not too late to think about your 2015 year-end giving. It’s also not too early to begin planning for your 2016 year-end appeal strategy. Let me tell you why.

Only about one-third of tax filers itemize on their tax returns. Therefore, year-end giving for tax avoidance is simply not that important to the majority of donors. Furthermore, survey after survey indicates that tax avoidance is a very low motivating factor for most donors. So, why put a tremendous amount of energy and resources into doing a year-end fundraising campaign? Here are some of the rationales:

Herd Mentality. The fourth quarter of the calendar year is a busy time for charity appeals. The largest number of direct mail appeals is sent at that time. For phone fundraising, it is also the busiest time of year. So, since everyone else is doing it, fundraisers think they should be out there, too. #GivingTuesday helps perpetuate this mentality.

Heaping Pile of Mail by Charles Williams via FlickrIt’s the Right Time. For some charities, doing a year-end campaign around the holidays is appropriate given the mission and/or history of the organization. Consider The Salvation Army and its red-kettle campaign, or the Toy-for-Tots effort geared to providing holiday presents for children. For other organizations, donors are simply accustomed to seeing and responding to a year-end appeal.

Year-End is a Time of Giving. With Hanukah and Christmas falling at year-end, there is certainly a giving spirit leading into the end of the year. Charities hope to piggyback on that giving spirit.

Charities Simply Must Appeal at Year-End. This relates to the first two reasons above. Fundraisers think they have to do a year-end appeal because it’s the thing to do or because the organization has always done one. Without giving it much thought, fundraisers conclude that a year-end appeal is simply something that is best practice.

Despite the conventional wisdom, doing a year-end appeal might actually short-change your organization. There might be a more effective way for you to raise money.

I’ve worked with charities that have tested a year-end appeal against a beginning-of-the-year campaign. Many of these charities found they could raise far more money in January and February instead of at year-end.

Why did those charities raise more money at the beginning of the year rather than at the end of it?

Interestingly, the reasons can be found when taking a closer look at the reasons I’ve outlined for year-end giving:

December 21, 2015

Breaking News: Charitable Giving Incentives Made Permanent!

The US Congress has approved and President Barack Obama has signed the so-called Tax Extenders package that not only includes a number of charitable giving incentives, such as the IRA Charitable Rollover, it has made those incentives permanent.

An article in Forbes, prior to passage of the legislation, nicely outlines the measure’s major provisions including the key charitable giving incentives:

  • deduction allowed for charitable contribution of real property for conservation purposes,
  • taxpayers over age 70 1/2 may make donations directly from an IRA and will not be taxed on the amounts (up to $100,000),
  • a shareholder in an S corporation will be required to reduce his basis in the S corporation’s stock under Section 1366 only for his share of the basis of property contributed by the S corporation; not the fair market value.

This is a tremendous moment for the nonprofit sector. Not only have these important giving incentives been renewed, they have been made permanent!

We all owe thanks to the staff and volunteers of the Association of Fundraising Professionals, particularly General Counsel Jason Lee. AFP has taken the lead in fighting to get these giving incentives and making them permanent.

Santorum and MJR

Sen. Rick Santorum (R-PA) and Michael J. Rosen on Capitol Hill.

For more than a decade, I’ve worked with my AFP colleagues, first as a member of the US Government Relations Committee, then founding Board Member of the AFP Political Action Committee, and then as Board Chairman of the AFP PAC.

Our efforts date back to assisting with the drafting of the CARE Act with then-Sen. Rick Santorum (R-PA). The bill was co-sponsored by then-Sen. Joe Lieberman (D-CT). Despite the bipartisan effort, the CARE Act failed to pass. However, certain charitable giving incentives that were part of the CARE Act were adopted, on a year-to-year basis, including the IRA Charitable Rollover. It took a decade but, finally, the incentives are now permanent!

I’m proud to have been able to play a significant role on this issue. I’ve enjoyed working with other passionate volunteers and staff.

We also need to take this opportunity to thank The Charitable Giving Coalition and its member organizations along with every individual who has worked for this legislation.

Let’s take a much deserved victory lap! Let’s do an end-zone dance! Let’s toast this achievement! Then, let’s get back to work. There’s much to be done to promote the giving incentives.

To help you promote the IRA Charitable Rollover, The Council on Foundations has put together an excellent free, downloadable toolkit that includes:

  • Talking points, a fact sheet, and web content;
  • An event presentation;
  • Tools that explain which available options might best serve donors;
  • Donor and professional advisor advertisements.

You can download the Council’s “Charitable IRA Worksheet” for donors by clicking here. You can find the full toolkit by clicking here.

October 9, 2015

Do Not Make This Year-End #Fundraising Mistake

The fourth quarter of the calendar year is a popular time for charities to send out fundraising appeals. As a result, nonprofit organizations raise a lot of money during the fourth quarter. In addition, many nonprofit organizations host galas in the fourth quarter. Love it or hate it, #GivingTuesday is in the midst of the holiday season.

‘Tis the season to fundraise.

If you doubt that, just Google “year-end fundraising.” You’ll get over 20 million results!

Unfortunately, despite all of the terrific how-to articles, blog posts, books, webinars, and seminars, most nonprofit organizations continue to make a massive year-end fundraising mistake:

They overlook planned giving.

When developing a year-end fundraising strategy, most charities fail to include planned giving for a variety of reasons including:

  1. They don’t have a planned giving program.
  2. They think all planned gifts are deferred.
  3. They think that planned gifts are not time-of-year sensitive.

Let’s take a moment to look at the above reasons more closely.

Keep Calm - Management Center Mugs by Howard Lake via FlickrIf your charity does not have a planned giving program, it probably should, assuming you have individual donors. The effort does not need to be elaborate or fancy. The most common planned gift is the simple Charitable Bequest through the donor’s will.

While Bequests are the most common type of planned gift, not all planned gifts are deferred. Don’t over think it. Planned gifts are simply any gift that requires planning. Here are some examples of planned gifts that result in current, rather than deferred, giving:

Gifts of appreciated stock or property (i.e.: real estate, art, collectibles, etc.):

When a donor makes a gift of appreciated stock or personal property, she can avoid capital gains tax and receive a charitable gift deduction. Sadly, many fundraising professionals believe that individuals with appreciated stock or property somehow already know about the advantages of gifting such assets. However, that’s not always the case. Consider this true story from my book, Donor-Centered Planned Gift Marketing:

A member of the board of a scholarship foundation was approached at a cultivation event by a modest donor who wanted to give a $5,000 cash gift. The board member thanked the donor but asked, ‘Do you own any appreciated stock?’ The donor was a bit puzzled by the question, but replied, ‘Yes, I do. Why do you ask?’ The board member then explained that if the donor contributed appreciated stock valued at $5,000, rather than cash, she could avoid the capital gains tax, thereby resulting in a savings. The donor replied, ‘I can avoid giving my money to the government, by giving the foundation stock? That’s a great idea! And, since I really don’t need the money, why don’t I just increase my gift by the amount I’ll save in taxes?’ She did exactly that. However, her generosity did not end there. She was so moved by the work of the foundation and the good advice she had received that allowed her to avoid some capital gains tax that she consulted with her family and her advisors eventually giving over $15,000 to create a namesake scholarship fund.”

Since over half of all Americans own stock (Gallup, 2015), it’s very likely that some of your donors are in a position to donate appreciated securities to your organization. They just need to understand how they can benefit and what the mechanics are.

Gifts from a Donor Advised Fund:

September 30, 2015

Extra! Extra! Updates to 6 Popular Posts

Fundraising news is dynamic. It’s constantly changing. So, I thought I’d look back on some of my more popular posts of the past several months and provide you with important updates to some of those stories.

“Cheating Death”

About a year ago, I outlined my personal battle with a very rare form of cancer: Appendicial Carcinoma with Pseudomyxoma Peritonei. While my recovery following last year’s 14-hour surgery has been good, I hit a bump in the road last week when a post-surgery complication sent me to the hospital for the week. That’s why I haven’t posted and haven’t engaged much on social media.

The good news is that my problem resolved naturally. Now, I’m working on regaining strength and the more than seven pounds I lost. As I return to “normal,” I’ll resume regular blogging and engagement.

I thank you for your patience and support.

“Update: Spelman College Returns Gift from Bill Cosby”

Spelman College terminated the William and Camille Olivia Hanks Cosby Endowed Professorship and returned the establishing donation to the Clara Dog Reads Newspaper by Steve Eng via FlickrElizabeth Jackson Carter Foundation, established by Camille Cosby. The move comes as the negative news surrounding Bill Cosby continues to mount.

Now, Central State University in Ohio has changed the name of the Camille O. & William H. Cosby Communications Center to the CSU Communications Center. The Cosbys had given the University a donation of $2 million to name the Center. It is unclear whether or not the University has returned the contribution. The University has failed to respond to my request for more information.

“Special Report: Hillary Clinton Wants to Limit Charitable Deduction, Could Cost Charities Billions”

As the US presidential campaign season heats up, some candidates have released their tax proposals. Hillary Clinton’s plan could cost the nonprofit sector billions of dollars in voluntary contributions each year. In an unscientific reader poll, 91.67 percent of respondents said they opposed Clinton’s proposal to reduce the charitable giving deduction.

Recently, Jeb Bush released his tax plan which preserves the deduction for charitable giving as it now stands. Donald Trump’s tax proposal also preserves the charitable giving deduction.

When attempting to evaluate which tax proposals will be best for the nonprofit sector, we need to consider a number of factors:

  • Does the proposal preserve the tax deduction for charitable giving?
  • Will the proposal increase personal income?
  • Will the proposal help grow the economy?

The calculus is certainly complex. However, we do know that charitable giving incentives work, that people give more when their personal income is greater, and that charitable giving correlates closely to the growth (or decline) of Gross Domestic Product.

August 10, 2015

Special Report: Hillary Clinton Wants to Limit Charitable Deduction, Could Cost Charities Billions

[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. New subscribers will also receive a free e-book from researcher Dr. Russell James.]

 

Hillary Clinton, the current frontrunner for the Democratic Party nomination for President of the USA, put forward a plan that could cost the nonprofit sector billions of dollars in voluntary donations.

Hillary Clinton

Hillary Clinton

Like President Barack Obama, Clinton announced that she would seek to impose a cap on tax deductions, including the deduction for charitable giving.

On the campaign trail, Clinton proposed the “new college compact.” At a town hall meeting in New Hampshire on Monday, August 10, Clinton announced a plan to reduce the cost of four-year public schools, make two-year community colleges tuition-free, and cut student loan interest rates.

To pay for the $350 billion plan, Clinton would seek to impose the same 28 percent cap on itemized deductions that we have seen in Obama’s proposed budgets. Charitable deductions are not exempt from this plan. Currently, taxpayers may claim up to a 35 percent charitable deduction.

When Obama proposed a similar tax policy, the Charitable Giving Coalition issued the following statement:

Any caps or limits on charitable giving will have a devastating impact on charities and nonprofits. If donors have less incentive to give to charities — donations will decline, impeding the important work nonprofits do for the millions of Americans who rely on them. For example, up to $5.6 billion in charitable giving would be lost each year if the President’s proposal to cut the charitable deduction were enacted.”

Like the Obama plan, the Clinton proposal would also negatively affect charitable giving. Nevertheless, “Clinton aides believe their plan will help build enthusiasm for her candidacy with younger voters,” according to an Associated Press report.

The cynical effort of the Clinton campaign to buy the youth vote reminds me of two quotes from Alexis de Tocqueville, the 19th century philosopher and historian:

July 23, 2015

IRA Rollover Poised to Make a Comeback

I have some good news.

The US Congress has begun the process to revive the Charitable IRA Rollover which expired at the end of 2014. Now, it’s time for you to take action.

On Tuesday, July 21, 2015, the Senate Finance Committee approved a number of tax extender provisions including the IRA Rollover. While the Committee considered making the IRA Rollover provision permanent, it ultimately settled on a two-year extension.

US CapitolFinance Committee Chairman Orrin Hatch (R-UT) said, “This markup [of the bill] will give the Committee a timely opportunity to act on extending a number of expired provisions in the tax code that help families, individuals and small businesses. This is the first time in 20 years where a new Congress has started with extenders legislation having already expired, and given that these provisions are meant to be incentives, we need to advance a package as soon as possible.”

Ranking Committee Member Ron Wyden (D-OR) said, “The tax code should work for, not against, Americans. We need to extend these tax provisions now in order to provide greater certainty and predictability for middle class families and businesses alike. However, as we look beyond next week, it’s critical we all recognize and take action to end this stop and go approach to tax policy through extenders.”

The House of Representatives has yet to take action though Rep. Paul Ryan (R-WI), Chairman of the Ways and Means Committee, remains interested in legislation that would make the IRA Rollover permanent. However, ultimately, the House might bring its thinking into alignment with the Senate Finance Committee. The House is expected to take up the issue as early as September.

When Democrats controlled the Congress, the IRA Rollover extensions were done a year at a time and often very late in the year. This made it challenging for both donors and nonprofit organizations to plan and to take full advantage of the provision.

With Republicans in full control of Congress, the House and Senate are considering the IRA Rollover provision earlier in the year and are considering a longer extension term. These are both good things for donors and charities.

It remains to be seen when final action will be taken and what that action will look like. It’s also unclear whether the Obama Administration will support the measure.

The Charitable Giving Coalition has long advocated for the IRA Rollover and other provisions that provide incentives for charitable giving. In addition to encouraging Congress to take action, the Coalition has sent the following letter to all Presidential candidates:

March 26, 2015

Benefit from the AFP Conference, Even If You Don’t Go

The AFP International Fundraising Conference (Baltimore, March 29-31, 2015) will provide plenty of fresh, powerful ideas to help you enhance your fundraising efforts. There are five ways you can benefit from the Conference:AFP Logo

  1. Attend, either for one day or the entire Conference;
  2. Purchase session recordings following the Conference;
  3. Follow the hashtag #AFPFC;
  4. Read my AFP Conference preview articles, listed below;
  5. Tell me what sessions interest you the most, and I’ll try to report on them.

You can find a complete list of sessions here. Take a few moments to read the list and seminar descriptions. Then, comment below and tell me which sessions interest you the most.

I’ll be at the Conference and will report on the sessions I attend. I’ll plan on attending those sessions of greatest interest to my readers. That way, you’ll be able to benefit for the AFP Conference even if you can’t attend.

Over the past few weeks, I’ve written several AFP Conference preview articles. In case you’ve missed any, here is a complete list:

February 13, 2015

Special Report: House of Representatives Approves IRA Rollover…Again

[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.]

 

The US House of Representatives has passed a bill to renew and make permanent the IRA Rollover, a measure long-supported by the nonprofit sector. Congress approved the bill by a vote of 279-137. Of note, 39 Democrats joined with the Republican majority to ensure passage by a wide margin. The bill now moves to the Senate.

Like a similar measure passed last year, H.R. 644 — Fighting Hunger Incentive Act of 2015 includes the following components:

  • The IRA Rollover provision,
  • Extension and expansion of the charitable deduction for contributions of food inventory,
  • Enhanced deduction for gifts of qualified conservation easements,
  • Modification of the excise tax on the investment income of private foundations.

Unfortunately, President Barack Obama has once again vowed to veto the bill if it reaches his desk in its present form. The House would need 290 votes to override a veto.

Making Sausages 4 by Erich Ferdinand via FlickrThe White House opposition to the bill might be because the bill does not contain any provision that would pay for the tax breaks it would provide. The Congressional Budget Office has concluded that the bill would add to the Federal deficit.

Last year, the Democrat-controlled Senate failed to take any action on the comprehensive charitable giving incentive measure passed by the House. Now that Republicans control the Senate, there is a greater expectation of action this year. However, it remains to be seen if the bill can be modified to garner presidential support.

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