Greetings!
Your colleagues at the community foundation strive to increase charitable giving in our region so that your mission continues to thrive as the need grows for your programs and services.
We hope this newsletter finds you well. In this issue, we’ll provide an update on trends in fundraising, as well as tax policy developments that may impact your organization and its donors.
Your colleagues at the community foundation will continue to keep you up to date on information that can help your organization stay afloat and your mission strong.
Bright spots in an era of chaos
With a third of global charities shutting their doors because of pandemic-related, insurmountable obstacles, the situation may seem grim for the nonprofit sector. But there is hope:
The CARES Act includes many provisions that help nonprofit organizations, right alongside small businesses. Too often, though, charities are not aware of the many ways they can benefit from stimulus packages.
Similarly, advocacy groups and educational institutions are ramping up educational resources to help organizations like yours get through the tough times and be prepared for even greater success in better days ahead.
A strong stock market creates lots of opportunity for your organization to educate donors about the benefits of donating highly-appreciated stock.
Legislation is likely to continue to provide a boost. For example, 2020 ended with the extension of tax provisions to encourage charitable giving in the midst of ongoing pandemic-related challenges facing nonprofits. In 2021, we are already hearing about potential tax reform under the Biden administration.
Still, your donors can achieve their charitable giving goals regardless of what happens with tax policy and legislation. For example, because the housing market shows no sign of slowing down in 2021, your donors can seriously consider charitable gifts of real estate, whether a primary residence, vacation home, rental property, or even niche commercial property that’s benefited from a multi-faceted pandemic marketplace.
As is the case with gifts of other long-term capital gains assets, gifts of real estate to a charity can be quite tax-efficient. Whether a donor is giving a second home, rental property, or commercial property, the donor may be eligible for a charitable tax deduction of the fair market value of the property. In the case of gifts to a public charity, when the property is sold, the full amount of the proceeds will remain intact for charitable purposes, without reduction for income taxes.
Gifts of real estate to charity shouldn’t be undertaken lightly, though; certain pitfalls and missteps can have a devastating tax impact. If a donor is considering a gift of real estate to your charity, we invite you to work closely with the community foundation to ensure that the transaction is properly structured.
The team at the community foundation can help you navigate the rules for gifts of real estate. such as how to determine valuation, dealing with any debt on the property, how to substantiate value and properly report the transaction on Form 8283, when and to what extent minority interest discounts may apply, how to avoid “step transaction” treatment due to a sale that's deemed "prearranged," and determining whether unrelated business taxable income (UBTI) will be a problem.
Finally, if a donor would like the gift of real estate to benefit your organization as well as one or more other nonprofits, the community foundation can help facilitate a transfer into a donor-advised fund, from which the donor can recommend grants to your charity and the other charities after the property sale is complete.
Legal update: Will the Supreme Court unravel 50 years of case law on donor privacy?
On January 8, 2021, the United States Supreme Court granted review to Americans for Prosperity Foundation v. Becerra and Thomas More Law Center v. Becerra. Both cases challenged the California attorney general’s requirement that charities disclose major donors’ names and addresses. The United States Court of Appeals for the Ninth Circuit disagreed with advocacy groups’ arguments that the policy runs afoul of the First Amendment.
The Supreme Court’s decision will be significant because the Becerra decisions are inconsistent with case law dating back to 1958, when NAACP v. Alabama ex rel. Patterson granted First Amendment protection to the privacy of a group’s members and supporters via rights of free association. Indeed, the NAACP’s amicus brief is frequently quoted in publications across the political spectrum:
“In an increasingly polarized country, where threats and harassment over the Internet and social media have become commonplace, speaking out on contentious issues creates a very real risk of harassment and intimidation by private citizens and by the government itself….Thus, now, as much as any time in our nation’s history, it is necessary for individuals to be able to express and promote their viewpoints through associational affiliations without personally exposing themselves to a legal, personal, or political firestorm.”
Donor privacy is an important issue for advocacy groups that may be unpopular with the governing majority of a particular state.
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.