QCDs, NIMCRUTs. and other reminders for advisors

Hello, and Happy May!

This month, our newsletter is heavily focused on tax and legal matters. As you and other advisors emerge from a busy tax season, we know that legislative changes, charitable giving vehicles, and even cautionary tales are topics that are likely to capture your interest.

As always, the community foundation is here to help you and your clients navigate the various options for charitable giving. We’ll help give you the insights and confidence you need to develop plans that enable your clients to provide the charitable support they intend while also keeping the clients’ activities well within the boundaries of the law.    

It is our honor and pleasure to work with you and your clients. We look forward to talking with you soon!

–Your Community Foundation

QCDs: Good news and important reminders

Qualified Charitable Distributions, or “QCDs,” have been in the news a lot lately, especially in light of proposed SECURE Act 2.0 legislation that passed the House of Representatives in March and is now pending in the Senate.

Through a QCD, starting at age 70½, your client can instruct the administrator of an IRA to direct up to $100,000 per year to a qualified charity. This helps your client’s tax situation because the client does not need to report the amount of the QCD as taxable income.

Here are four important reminders about QCDs:

–Even though the SECURE Act changed the Required Minimum Distribution (RMD) age to 72 from 70 ½, the QCD age is still 70 ½. 

–QCDs cannot be made to donor-advised funds, but your client can set up a field-of-interest or unrestricted fund at the community foundation to receive a QCD.

–Under a version of the proposed SECURE Act 2.0 legislation, QCDs would be indexed for inflation. In addition, proposed legislation would allow a client to make a one-time QCD of up to $50,000 to a charitable remainder trust or other split-interest entity.

–Finally, be sure to help your clients coordinate their QCDs with their Required Minimum Distributions. Proper planning will help avoid troublesome tax pitfalls. 

Please reach out to the team at the community foundation to learn more about QCDs and how your client can establish a fund to support financial and tax goals as well as charitable giving goals.

Income timing: A NIMCRUT could hold the key

Clients who own closely-held businesses, real estate, or even cryptocurrency may be good candidates for a particular type of charitable remainder trust known as a NIMCRUT, which is short for “Net Income with Makeup Charitable Remainder Unitrust.” 

The way it works is that your client transfers a highly-appreciated asset to a trust. The trust terms provide for the payment of a fixed percentage (at least 5%) of the trust’s value, revalued annually, to your client or another beneficiary. 

Here’s the key with the NIMCRUT: The terms of this type of trust also provide that if the trust’s income is less than the designated fixed percentage, the trust will only distribute the actual income. Later, upon the liquidation of the highly-appreciated asset, for example, the income distributions will be made up. 

In this way, not only does the NIMCRUT keep the highly-appreciated asset growing under favorable tax conditions inside the trust until it is sold, but it also allows your client to receive the higher income in later years, such as retirement, when the client’s tax bracket is likely to be lower. As with other types of charitable remainder trusts, when the term of the NIMCRUT expires, the remainder passes to charity. 

Some NIMCRUTs deploy a “FlipCRUT” feature which removes the net income limitation upon a triggering event (such as the sale of an asset or a date). This creates even more flexibility in timing income for your client.

Note that it’s wise to consider naming a public charity, such as a donor-advised fund at the community foundation, versus a private foundation, as the charitable remainder beneficiary of a NIMCRUT or other charitable remainder trust. This optimizes the amount of your client’s up-front charitable deduction when the trust is funded.

Social consciousness: Today's expectations of advisors

Especially over the last few years as social consciousness has increased, many of your clients have no doubt become more interested in how they can make a difference through their philanthropic activities, whether those activities include giving to favorite charities, volunteering, serving on boards of directors, purchasing products that support a cause, and respecting a sustainable environment.

As clients grow more in tune with social impact, they are expecting their advisors to be ready to help them structure and plan their charitable giving. What’s more, clients who receive charitable planning advice from their advisors tend to be more loyal and more willing to recommend their advisor to others, especially when that advisor is proactive in bringing up options for incorporating philanthropy into financial and estate plans. 

With that in mind, the community foundation is here to help you stay up to date with philanthropy topics so you can, in turn, have the conversations and deliver the services your clients are seeking. To that end, for an insightful look into the inner workings and current state of the philanthropy industry, we suggest skimming the written testimony that the Council on Foundations recently provided to the Senate Finance Committee. The Council, a major voice and advocate for philanthropy in the United States, notes that the current economic and legislative environment has created a “pivotal moment for nonprofits and their philanthropic partners.” 

The community foundation is also here to help you avoid treacherous situations as you create philanthropic plans for your clients.

High-income earners, highly-appreciated assets, and cash crunches

As we enter 2022's second quarter, we’re struck by how much–and how little–has changed already this year in the world of charitable giving. Where big changes are concerned, the war in Ukraine and inflation are topping the charts in the minds of many philanthropic Americans. At the same time, questions about tax reform still are never far from our thoughts. We suspect the same is true for you and your clients. 

In this issue, we’re covering topics related to philanthropy today–right now–as charitable priorities shift in the geopolitical and economic landscape and more light is shed on what we might expect in terms of changes to the tax laws impacting charitable giving. 

Before we dive in, we’d like to draw your attention to a report updated last month by the Congressional Research Service. The Charitable Deduction for Individuals. Overall, this two-pager is an excellent primer for your clients who want to learn more about the history, policies, and fundamental concepts behind the income tax deduction for contributions made to charities. You might even find it useful for your own review purposes, as our team certainly did. 

Thank you for the opportunity to work with you and your philanthropic clients. It is our honor and pleasure. 

Wishing you all the best for the spring,

Your Community Foundation

Thumbs up: SECURE Act 2.0

Across the board, individuals, employers, and charitable organizations are celebrating the recent passage of the Securing a Strong Retirement Act of 2022 (House Bill 2954, known as the "SECURE Act 2.0") in the House of Representatives on March 29, 2022 by an overwhelming vote of 414 to 5. The legislation is headed to the Senate (which has its own, similar version of the legislation) before it becomes law.

Building on 2019 legislation known as the Setting Every Community Up for Retirement Enhancement (SECURE) Act, among SECURE 2.0's many components is a provision that would allow taxpayers to make a one-time qualified charitable distribution of up to $50,000 from an IRA to a charitable remainder trust or charitable gift annuity. In addition, the new provision would apply inflation indexing after 2022 not only to the $50,000 limit on this new split-interest distribution, but also to the qualified charitable distribution (“QCD”) limit (currently $100,000) for direct gifts to qualified charities. 

A mixed bag: Budget legislation

With President Biden’s Build Back Better 2022 budget reconciliation bill still pending, the White House just released its Fiscal Year 2023 budget proposal laying out several revenue-generating components and including a “deficit-neutral reserve fund” to buffer the impact of Build Back Better provisions that may or may not pass the Senate.

Here are a few of the tax proposals in play that could most significantly impact the way your clients plan for their charitable giving priorities:

High-income earners + highly-appreciated assets = high alert

A proposed 20% minimum tax on high-income individuals, slated in the proposal to become effective for tax years beginning in 2023, is referred to as the “Billionaire Minimum Income Tax.” The tax would be applied to the "total income," defined to include unrealized capital gains, of any taxpayer whose net wealth exceeds $100 million. Simplistically speaking, the mechanism of the tax roughly mirrors a pre-payment of capital gains tax. This is similar to the so-called “wealth tax” proposals in Build Back Better. 

Politics aside, a tax such as the one proposed in the Fiscal Year 2023 budget could mean daunting recordkeeping requirements for those impacted. Taxpayers would report their assets to the IRS annually, including closely-held assets which would be subject to a statutory valuation method. Taxpayers who qualify as “illiquid,” however, would be permitted to defer tax payments until a sale of certain illiquid assets, perhaps creating an incentive for taxpayers to increase their investments in real estate, closely-held companies, and other non-marketable assets. 

If some form of tax on unrealized capital gains becomes law, it could prompt the need for your clients to adopt even more proactive strategies to donate highly-appreciated assets to charitable organizations. In other words, giving highly-appreciated assets to charitable organizations is already a tax-savvy strategy and may become even more beneficial, depending on whether a “wealth tax” goes into effect and how the regulations interpret the law’s impact on the current charitable giving rules. 

Private foundations + donor-advised funds, take note 

Families who conduct their philanthropy using both a private foundation and a donor-advised fund will want to plan carefully if a particular item in the Fiscal Year 2023 budget package becomes law. Proposed changes to the private foundation rules seek to “clarify” that contributions to donor-advised funds do not meet the definition of "qualifying distributions" for purposes the five percent annual distribution requirement for a private non-operating foundation. These distributions still would be permissible, though, if the private foundation can show that the funds transferred to the donor-advised fund were distributed by the end of the following tax year. 

Even if the proposed change becomes law, combining a private foundation with a donor-advised fund at a community foundation is still an effective charitable giving technique. At the very least, the donor-advised fund can hold the distribution for a year to give a family time to create a grant-making strategy and set goals for the impact the family wishes to make in the community through its support of nonprofit organizations. 

Donor-advised funds–no longer on the hot seat?

Donor-advised fund reforms proposed in the Accelerating Charitable Efforts (ACE) Act, introduced in June 2021 via Senate Bill 1981 and again in February 2022 in the form of House Bill 6595, have been prominently featured in the media and subject to a range of opinions. Notably, though, the just-released Fiscal Year 2023 budget proposal appears to meaningfully address donor-advised funds only in relation to receiving private foundation qualifying distributions. We’ll be watching this carefully, but for now, it appears that sweeping reform of donor-advised fund rules is not imminent.   

Of course, as with any budget proposal or pending legislation, it's impossible to predict which, if any, provisions will ultimately become law.

Cash crunch: Gifting non-income producing assets

For clients who rely on fixed-income assets, such as bonds, as well as wages, to cover their living expenses, the inflation pinch indeed may mean fewer dollars available for charitable giving. Still, for clients who own property, stocks, and other assets that tend to go up in value in an inflationary environment, now may be a good time to take advantage of tax-savvy giving of highly-appreciated assets–especially stocks that pay low–or no–dividends and therefore are not critical to maintaining a client's income levels. 

Giving highly-appreciated stock remains one of the most effective ways your clients can support their favorite charities. That’s because when a taxpayer gives stock to a public charity, such as a donor-advised fund at the community foundation, instead of selling it outright, the capital gains tax is avoided. Plus, marketable securities are typically deductible at their fair market value, further helping your client’s overall income tax situation.

As you counsel a client who is emotionally attached to a particular stock, don’t let that attachment prevent a client from making a smart tax move. Your client can donate shares of the highly-appreciated favorite stock and then immediately repurchase the same number of shares. This essentially resets the client’s cost basis to the current price, which could help reduce capital gains taxes on a future sale.

Finally, remind your clients that there are significant differences in the tax treatment of donating cash versus securities. Currently, the deductibility of gifts of cash to a public charity is limited to 60% of adjusted gross income, versus gifts of non-cash assets to a public charity which are deductible up to only 30% of adjusted gross income. Also remind your clients that the maximum benefits associated with giving appreciated assets to a public charity are realized only with long-term capital gains property, in which case the deduction is set at the fair market value of the property on the date of the gift; gifts of short-term capital gains property are valued at cost basis for purposes of calculating the deduction. 

it's time TO CELEBRATE TAX PLANNING

What a year! (Or should we say deja vu?)

Last December, we heard from our advisor friends that clients were hoping to maximize the charitable giving tax breaks included in the coronavirus legislation. You also reported that clients had expressed curiosity about how tax laws might change in the coming months, and at the same time clients were increasingly interested in involving their extended families in charitable giving.

Here we are, twelve months later, and we’re hearing from you that these three topics are still top of mind--but with a couple of twists, which we’ll be covering in this newsletter.

With some of the mystery now eliminated regarding potential tax reforms, we know your clients are now looking at how to move forward creatively with specific charitable planning techniques, especially donor-advised funds as these vehicles are increasingly in the news.

Family philanthropy conducted from multiple locations is no longer daunting to many of your clients. Video conferencing has revolutionized the opportunities for families to connect about charitable priorities. Now, the conversation is turning toward how to make family philanthropy fun and rewarding for everyone, especially during the holiday season.  

Thanks so much for the opportunity to work together! The team at the community foundation is honored to help you serve your clients.

The ever-popular, handy-dandy, year-end charitable giving checklist

We’ve heard that many of you appreciate a quick checklist for charitable giving reminders each December. We know you receive this type of information from many sources, and frequently in great detail. It is our goal to break things down into a few simple points (below are three). To dive deeper, we encourage you to reach out to our team. We’ll jump in to help! 

First, in the midst of recent flurry surrounding the Build Back Better legislation, clients won’t want to forget about the charitable giving provisions from 2020 COVID-19 relief legislation that carried over to 2021, notably the $300 “universal deduction” even for non-itemizers. Helpful to itemizers is the allowance for cash contributions to charities to be deducted up to 100% of adjusted gross income. This allowance creates an ideal opportunity for your clients to “bundle” or “bunch” their charitable gifts this year, taking full advantage of the limited-time ability to offset significant levels of income. Donor-advised funds are not eligible recipients of these cash contributions; however, designated funds and field-of-interest funds at the community foundation can qualify and are very useful philanthropy planning tools. 

Second, never assume that your clients will remember the benefits of donating highly-appreciated securities to a charitable organization or fund at the community foundation. It seems obvious to those of us in the business, so to speak, but clients do not live and breathe the tax laws like we do. Remind clients that frequently the best way to fund their charitable giving is through highly-appreciated assets. 

Third, let your clients know that charitable giving is still an important priority and that most people who give to charity still plan to do so, even this year after the wild ride of the pandemic. Indeed, clients might appreciate seeing the data, including a study recently released by Classy showing that 84% of donors planned to give to charities at the same or higher level this year as they gave in 2020. 

And (not so) suddenly, it’s a thing: What’s up with donor-advised funds?

For nearly 90 years, charitably-minded individuals and families have established donor-advised funds to help carry out their philanthropic wishes. Popularity of the donor-advised fund steadily grew, especially beginning in the 1990s, eventually resulting in official recognition in the Internal Revenue Code under 2006 tax law updates. Today, over one million donor-advised fund accounts hold nearly $160 billion in charitable assets, according to the latest numbers.

The growth of the donor-advised fund as a useful charitable giving tool has made this vehicle something of a celebrity. You and your clients no doubt have begun to see articles about donor-advised funds pop up in mainstream financial publications, as well as in academic journals. And yes! We read those articles, too! A top priority for our team is keeping up with proposed legislation and commentary about charitable giving, including particular vehicles such as donor-advised funds.

As you talk with your clients about options for their charitable giving plans, please reach out. We would be happy to share perspectives and ideas that take into consideration current trends and legislative developments. 

To that end, you and your clients may find it helpful to review the types of funds available through the community foundation, which include donor-advised funds and much more.

First, as you’re likely aware, a “donor-advised fund” enables a client to establish a specific account for charitable giving. Your client makes a tax-deductible contribution of cash or other assets to the fund, and then recommends grants to favorite charities during the current year and in future years depending on the client’s goals and plans.

Second, the community foundation has its finger on the pulse of the community’s most pressing issues. An “unrestricted fund” provides your client with an opportunity to support community needs that can’t be identified until the future. One of the biggest benefits of a community foundation is its perpetual structure that allows support to nonprofits to evolve over time as priorities in the region shift. 

Third, to target charitable giving to specific areas of community need (such as education, health, environment, or the arts), your client can set up a “field-of-interest fund” to establish parameters for grant making under the ongoing guidance and expertise of the community foundation’s staff. Plus, field-of-interest funds can be a wonderful alternative to a scholarship fund and accomplish a client’s charitable goals even more efficiently and effectively.

Fourth, a “designated fund” allows a client to focus charitable giving on a specific agency or purpose. Over time, the community foundation's staff manages the distributions from the fund according to the terms the client establishes. 

Helping families stay connected across the miles and generations: There’s a gift for that! 

Your philanthropic clients will thank you for suggesting they consider giving the gift of giving (say that three times fast!) in the form of a charitable fund instead of the more typical “I made a gift to my favorite charity in your honor.” 

More and more parents and grandparents (and friends and colleagues) are giving a child, grandchild, friend, or co-worker a charitable fund, pre-established and pre-funded, in the name of the recipient. Frequently taking the form of a donor-advised fund, this gift allows the recipient to experience the benefits of working with the community foundation to support important causes. 

The team at the community foundation can help your client create a gift fund from soup to nuts, including granting the recipient online access. Your client can literally put a bow on the carefully rolled up fund document, sign a card listing the URL and login credentials to view the fund online, and present the package to the child, grandchild, friend or colleague as a gift. Both giver and receiver will love the experience.

Educational opportunities are a natural follow up to this type of gift. For example, your client can work with the community foundation to find resources on the community foundation’s website and structure a family giving session over Zoom where participants learn the basics of charitable giving and are introduced to key issues facing communities in our region and across the country. This type of experience helps the family’s values stay intact across generations. 

Finally, never underestimate the power of philanthropy to help you build relationships with multiple client generations. The team at the community foundation has the tools you need to inspire Baby Boomers, Gen X, Millennials, and Gen Z by creating meaningful and lasting connections to our community, charities, and causes. Although useful in some cases, a GoFundMe or Facebook fundraiser simply cannot deliver the engagement and loyalty that have long been hallmarks of our dedication to helping your clients of all ages make a lasting impact that is as meaningful to them as it is to the causes they support.

Election season: Factors to consider in charitable giving

Elections and giving: Tips for advising your clients

Individuals who are passionate about community causes are frequently also passionate advocates for candidates running for public office. Indeed, according to the Pew Research Center, the percentage of Americans making political contributions has doubled in recent decades, from 6% in 1992 to 12% in 2016. By contrast, the percentage of Americans giving money to charity stands at a new low of 73% in 2020, according to a Gallup poll, down from a previous low of 79% in 2009.

Still, the number of Americans giving to charity each year remains significantly higher than the number of Americans making political contributions. Charitable giving is still going strong, relatively speaking, even in the midst of political frenzy. Indeed, historically, charitable giving is influenced, but not negatively affected, in election years.  

With elections top of mind for your clients, how can you best advise them about their charitable priorities? Consider the following:

1. Share the statistics with your clients. Many clients may not realize that the number of people giving to charity each year is going down, and that community organizations are an important component of the social fabric that helps improve quality of life for citizens.

1. Remind clients that in the face of uncertainty about potential tax law changes, it is generally a reasonable approach for clients to continue with charitable giving plans as they normally would. Most clients probably don’t “give away a dollar to save 50 cents,” and community needs are as urgent as ever in 2020.

1. Encourage clients to reach out to the organizations they support to learn about unique needs this year due to economic hardship and the ramifications of the pandemic.

As always, our team is happy to be a resource and sounding board. 

Corporate giving programs: Opportunity in the COVID era

According to the just-released 2020 Porter Novelli Executive Purpose Study, more than 80% of large company executives believe for-profit companies have a responsibility to play a role in resolving social issues. The study also found that most executives believe a social impact strategy improves customer loyalty (93%) and helps motivate a buying decision (91%).

How should you approach advising your corporate clients about the structure for their social impact programs, especially now that those programs play an increasingly important role in philanthropy? 

Encourage corporate clients to consider the component parts of a well-rounded corporate social responsibility program, such as:

Mission

Embrace and follow an overarching mission statement, consistent with the purpose of the business and integrated into the company’s objectives for success to reinforce the company’s values in the community. 

Structure

Typically, a corporate foundation serves as the hub--or at least a key part--of the overall corporate social responsibility program. Companies are wise to evaluate what type of corporate foundation structure would be most effective. For example, a corporate donor-advised fund at the community foundation can be established as a tax-advantageous “ABC Corporation Foundation,” allowing the company and its team to stay in the forefront as the face of the corporate foundation while utilizing the behind-the-scenes capabilities of the community foundation to process grants, handle accounting, receive and process gift transactions, and maintain records. 

Alignment

A strong program includes a mechanism for ongoing cause identification and research to stay current with employee, customer, and community trends. It also helps when a company can make a case for why corporate causes are aligned with the business’s purpose and the needs of the overall population of its industry or marketplace. 

Engagement

Employee engagement and participation in a company’s community relations and investment program will drive employee loyalty and retention and, in turn, consumer brand engagement. Companies should harness the enthusiasm of employee-led volunteer and fundraising activities. 

Communications & Sales

Celebrate the company’s program in a manner that is integrated with, and complementary to, the company’s overall brand image and public relations strategies. This occurs in the media, through events, on the website, in printed materials, and social media. 

Evaluation & Reporting

Best practices suggest ongoing monitoring of the results of the program against one or more indicators of success, including employee engagement, employee loyalty, operating efficiency, community impact of money invested, customer perception, and marketplace reputation.   

An eye toward year-end tax planning

Appreciated stock, anyone?

Yes, 2020’s stock market has been a rollercoaster, but as you guide your clients into year-end, don’t forget the powerful benefits of giving appreciated securities to a donor-advised fund at the community foundation. Now is the time to start helping your clients with tax planning. Remember, not all stock is down! For many clients, 2020 is an excellent year for year-end giving.

Closely-held business exits

Clients who are preparing to sell a business should start thinking ahead about charitable planning. Before any deal is struck, or any binding commitments discussed, encourage your client to consider the benefits of making a gift of their closely-held stock to a charitable entity, such as a donor-advised fund at the community foundation. Remember, though, that the “step transaction” doctrine is still very much alive and well. The IRS could argue that the transfer of stock to a charity should be treated as “combined” with the sale of the stock, thereby eliminating the tax benefits of the charitable transaction. The IRS could win this argument if the facts indicate that the multiple “steps” in the process were really just a single-step transaction when considering the intent and economic reality of the taxpayer’s actions. 

Back door Roth IRA conversions

Last but not least, consider the step transaction doctrine when you are advising your high income-earning clients on whether to pursue the so-called “back door” Roth IRA planning strategy. When a client’s modified adjusted gross income crosses the IRS’s designated phase-out thresholds, contributions to a Roth are no longer permitted. Contributions to a traditional IRA, however, are not subject to income limitations. In addition, there are no income limits on who can convert from a traditional IRA to a Roth. So, with the “back door” strategy, your client makes a contribution to a traditional IRA using after-tax dollars and then executes a tax-free Roth conversion. Consider carefully researching these issues and even advising clients to wait several months between the contribution and the conversion, just in case.

Recipe for success: A bit of caution and all the right tools

Avoiding landmines in charitable planning

A cautionary tale

Donor-advised funds are popular because they allow an individual, family, or business to make a tax-deductible transfer that qualifies as a charitable contribution, and then later recommend gifts to favorite charities from the fund when the time is right. A donor-advised fund operates a lot like a checking account just for charity, except it’s established according to the IRS guidelines that create the tax advantages.

Through a donor-advised fund at the community foundation, your clients not only receive the tax benefits and ease of administration common across all donor-advised fund programs, but they also have access to the deep resources, philanthropy expertise, and community-specific knowledge that only community foundations can deliver. 

Indeed, not all experiences with donor-advised funds are created equal. If you’ve not been keeping up with what’s going on in the legal world of donor-advised funds, you can get up to speed by reading the petition in a case filed in 2018 in the United States District Court for the Northern District of California. 
 

HOW WE CAN HELP
A community foundation’s sole responsibility is to serve as a steward of philanthropic assets and honor donor intent to achieve positive community change. We welcome the opportunity to talk with you and your clients about our policies, procedures, and safeguards that align with your responsibility to serve your clients.   
 

Don’t let this gotcha get you

Making a gift of alternative assets such as real estate and closely-held business interests is a tax-savvy way for your clients to give to charitable organizations. Highly-appreciated assets can be sold by the charity for 100 cents on the dollar—no capital gains tax applies. That means the charity ends up with more money to work with than your client would have received if the client had sold that same asset on their own.

When it comes time to file the client’s income tax return, though, don’t overlook the importance of filing IRS Form 8283, “Noncash Charitable Contributions.” This is the form that documents the tax basis for the donated assets. Even though the value of the donation for income tax deduction purposes is based on fair market value, not basis, the IRS nevertheless wants to see a paper trail documenting just how highly appreciated the asset really is.   

Failure to file Form 8283 can have devastating tax consequences for the donor. This spring, the United States Court of Appeals for the District of Columbia affirmed the Tax Court’s 2017 decision in RERI Holdings I, LLC, denying the entire charitable income tax deduction--a whopping $33,019,000--because of a missing Form 8283. You’ll note in its decision that the Court of Appeals refused to apply the “substantial compliance” doctrine, which historically has excused taxpayers from failure to comply with formal filing requirements. (Like we said, “gotcha!”) 
 

HOW WE CAN HELP

Our team at the community foundation thinks about charitable giving 24/7. This means we are highly tuned in to filing requirements and other rules that can make or break your clients’ tax planning strategies. We are honored to work alongside you as you structure your clients’ plans to support favorite causes, dotting every “i” and crossing every “t.”
 

Tax reform’s ripple effects

We’ll continue to keep you posted on what’s trending in philanthropy and charitable planning as a result of the Tax Cuts and Jobs Act of 2017. 

Last month, Connecticut, New Jersey, and New York filed a lawsuit against Treasury and the Internal Revenue Service to challenge the new final regulations that place limits on the tax benefits of giving to entities (including some community foundations) in cases where the donors are entitled to local or state tax credits for making the contribution. The regulations are the latest step in a saga that includes workaround legislation enacted in many states to avoid the $10,000 SALT deductions cap. The argument is that the new regulation flies in the face of prior tax policy and “undermines state and local programs designed to promote charitable giving through the use of state and local credits.” The case was filed in the Southern District of New York.
 

Tools in your back pocket

The team at the community foundation understands that it sometimes can be hard to know where to start a conversation with a client about charitable planning. As you ask questions about the causes your clients love and how your clients intend to support the community in their estate plans, you’ll need quick access to a few go-to planning tools to inspire the dialogue. To help you do just that, we’ve assembled this list of a few of our favorite planning tools. 

Qualified Charitable Distributions

Under the now permanent IRA charitable rollover laws, your 70 ½+ clients can direct up to $100,000 annually of required minimum distributions to charitable organizations, avoiding inclusion in taxable income. These distributions are called Qualified Charitable Distributions (QCDs). Although donor-advised funds can’t receive QCDs, there are still plenty of ways our team at the community foundation can help your clients take advantage of this tool for lifetime gifts. Also, your clients can name their donor-advised fund as the beneficiary of a qualified plan, which is still a tax-savvy bequest strategy.  

Charitable Remainder Trusts and Charitable Gift Annuities

They’re back! Tax reform’s elimination of the Pease provision, which limited charitable deductions for high income taxpayers, means your clients can better leverage a single, up front gift to a charitable remainder trust or a charitable gift annuity. 

Bundling . . . or Is It Bunching?

Whether you call it “bundling” or “bunching,” clients who want to maximize their charitable deductions under the new tax laws can benefit from making two or more years’ worth of charitable contributions in a single year. This helps push taxpayers over the itemizing threshold, where they can reap the benefit of deducting the full value of their donations. (Quick stat: Because of tax reform, just 10 percent of taxpayers itemized deductions in 2018, compared with 30% in 2017.) 
 

Reflections on the impact of a do good, feel good moment

Remember the Ice Bucket Challenge, when 17 million people dumped icy water over their heads to raise money for the ALS Association? It may seem like yesterday, but it was actually five years ago this summer that the viral sensation helped raise $115 million in eight weeks for research and patient services. The five-year results are captured in an infographic, which the ALS Association has made available for everyone to share.

HOW WE CAN HELP

When nonprofit organizations launch online fundraisers, they capture a lot of attention. Your clients may ask questions about impact, such as “How do I know the dollars are used wisely?” or “What should I watch out for when I am donating online?” or “Is the expense of viral fundraising campaigns worth the ultimate benefit achieved for the people being served?” The team at the community foundation is your partner. We are here to help you provide thoughtful, helpful answers to your clients' questions. Think of our experts as extensions of your team to help you fulfill your client service role.