Planned giving tips worth repeating

Don’t give up on stock gifts

It’s easy to get discouraged watching the financial news as the stock market swings up and down (and down). Remember, though, not every stock is down! This means you should not give up on talking with your donors about the benefits of donating highly-appreciated stock to support your mission. 

When a donor gives appreciated stock held for more than one year (a long-term capital asset) to your organization or another public charity 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 donor’s overall income tax situation.

Occasionally, though, even when the numbers make sense, a donor may be reluctant to give stock because of an emotional attachment to the shares. This can be overcome! Your donor can donate shares of the highly-appreciated favorite stock and then immediately repurchase the same shares in the donor's personal investment portfolio. This essentially resets the donor’s cost basis to the current price, which could help reduce capital gains taxes on a future sale.

Sometimes a donor will want to give a block of shares to support your organization as well as others. Please give us a call in situations like this. We can help your donor establish a fund at the community foundation to receive the stock gift. The community foundation will sell the stock and the proceeds will flow into the fund. Then, those proceeds can be distributed to your organization and the other organizations according to the donor’s intentions. 

QCD, QCD, QCD--repeat, repeat, repeat

You may have noticed that we mention the Qualified Charitable Distribution (QCD) in nearly every edition of our newsletter. There is a reason for that! The QCD is an elegant and effective planning tool that can work wonders for your organization and for your donors. Your donors who are required to take Required Minimum Distributions (RMDs) from their IRAs and other qualified plans still must do so even if the market is down, so don’t hesitate to raise this idea with a donor even when the stock market is making wild swings. 

As a reminder, we may see even more good news about QCDs before 2022 is over. Proposed provisions of legislation known as SECURE 2.0 would enhance QCDs by indexing the $100,000 annual allowance for inflation and adding a provision for a one-time $50,000 distribution to a charitable remainder trust or other split-interest gift vehicle. SECURE 2.0 could pass through Congress by the end of the year. 

Shell funds and building a bright future

August is national Make a Will Month, creating the perfect opportunity to reach out to donors to invite them to consider making a bequest to your organization. Your donors may be more open to setting up a bequest this year if they are hesitant to give cash or stock because of inflationary (and maybe even recessionary) pressures in the economy.

Be sure to mention a tool called a “shell fund” to donors who support your organization as well as several others. These donors may wish to leave bequests to multiple organizations, including yours. The community foundation can work with you and the donor to establish a special vehicle called a shell fund to receive a bequest after the donor passes away. The money will be distributed to your organization and the others with the help of community foundation's stewardship and oversight to ensure that the donor's intentions are followed. 

Two items of note:

–A bequest to a shell fund by way of a donor's qualified retirement plan beneficiary designation is an especially effective tool to support your organization and others. That’s because funds flowing directly to a shell fund at the community foundation from a retirement plan after the donor’s death will not be subject to income tax or estate tax. 

–Bequests are ideal vehicles to grow your endowment or reserve fund. If you’ve not yet established an endowment or a reserve fund, or if you’d like to explore ways to work with the community foundation to grow your existing endowment or reserve fund, please reach out. Our team not only can help administer and invest your endowment or reserve fund, but can also provide behind-the-scenes assistance to help you grow it. 

We look forward to hearing from you about how we can help you maximize the Make a Will Month opportunity with your donors! 

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

Avoiding planned giving pitfalls

Hello from the community foundation!

Recently, we've heard from nonprofit executives that your conversations with board members and donors have become more challenging, especially related to fundraising and planned giving. That's to be expected, given the market turmoil and ever-increasing needs in our community that you and your team fulfill every single day.

This month, we're focusing our newsletter on tricky topics that you may run across in your conversations, and we're sharing ideas for how the community foundation can help.

We look forward to hearing from you, and we are grateful to be part of a community where your organization and so many other nonprofits are improving the quality of life for so many people. Thank you.  

--Your Community Foundation

Protecting your organization’s future in challenging times

During periods of economic uncertainty, a charitable organization’s board of directors may ask more questions about the most effective ways to grow the organization’s endowment, how to structure and accept gifts of real estate and other hard-to-value assets, and how to follow best practices for establishing and following an investment policy. Sometimes even the most well-planned board meetings wind up as a venue for surprising discussions! 

If conversations about your endowment, gift acceptance standards, or investment policies are bubbling up with your board members, please give us a call. At the very least, we can offer suggestions for addressing board members’ concerns. Our team can also fill you in on the benefits of establishing an agency fund at the community foundation. Here’s why many organizations in our community have done so:

–An agency fund at the community foundation is a powerful step toward securing your organization’s financial future for generations to come. 

–Nonprofit organizations frequently establish agency funds at the community foundation to set aside reserves or rainy day funds.

–The team at the community foundation is adept at navigating the specific accounting standards that are unique to this type of arrangement.

–The community foundation team can help establish investment policies and gift acceptance policies, making it easier for you to engage in fundraising discussions. 

We’d love to help your organization navigate today’s challenging marketplace and help you build a bright future for the people you serve. 

Avoiding pitfalls in complex planned giving

As nonprofit executives, you and your team are well-versed in planned giving basics. Your conversations with donors regularly cover topics such as inviting the donor to include your organization in a will or trust, name your organization as the beneficiary of a life insurance policy or retirement account, and maximize tax benefits through lifetime gifts of highly-appreciated stock instead of cash.

But what happens when conversations with donors take a turn toward complexity? If you feel uneasy when that happens, you are not alone. You’re also not wrong to feel that way. Planned giving can involve plenty of potential pitfalls. One of many examples is that recently the IRS has caught on to a charitable remainder annuity trust technique where the donor’s transferred assets are allegedly eligible for a step-up in basis and then sold by the trust (with no recognition of capital gains). Under this dubious arrangement, with the sale proceeds, the trust purchases an immediate, single-premium annuity inside the trust. The income beneficiary of the charitable remainder annuity trust claims that only a small portion of the annuity payment is taxable income on the grounds that the rest of the payment is a return of investment. Although there likely are very few donors and advisors who would attempt to pull off a sketchy strategy like this, the IRS’s position is a good reminder for every fundraiser that the charitable nature of a transaction does not shield that transaction from IRS scrutiny. 

Indeed, the IRS will strive to unravel even the most complex transactions to discern substance over form. Transactions in which form overshadows substance are consistently frowned upon by the IRS. From time to time, taxpayers attempt to have their cake and eat it too, which was the situation in a Ninth Circuit case, Moore v. Commissioner. Here, the taxpayer’s estate plan included a clause attempting to set the amount passing to charity so that the amount would match the precise amount needed to avoid taxes. The IRS disallowed the charitable estate tax deduction on grounds that the value passing to charity was not ascertainable because of the formulas and contingencies, citing nearly century-old case law holding that transfers to a charity must be “fixed in fact and capable of being stated in definite terms of money.” 

Unfortunately, the list of potential pitfalls goes on and on. We encourage you to call the team at the community foundation anytime you are working on complex charitable planning with a donor. We are happy to serve as a sounding board, and often we can offer a solution to ensure that both your organization and the donor stay on the right side of the IRS. 

Staying tax-savvy on donor giving from IRAs

The charitable giving world is paying close attention to rumblings in the Senate as SECURE 2.0 legislation moves forward. This legislation is interesting in part because of the proposed inflation adjustment of the annual $100,000 Qualified Charitable Distribution (“QCD”), as well as a proposed one-time $50,000 QCD allowance to a charitable remainder trust or other split-interest gift.

Regardless of whether the legislation is enacted into law, the QCD is an extremely powerful planning tool for your donors who have reached the age of 70 1/2.

Not only is the QCD an excellent planning tool to facilitate direct donations to your organization, but the QCD also works well when a donor wants to support your organization and stay involved in the timing and amount of distributions. A designated fund at the community foundation is eligible to receive your donors’ QCDs, and the structure of the fund helps secure your organization’s financial future even in the face of challenges. That’s because the designated fund allows your donor to decide on the timing of the distributions from the fund, such as during your organization’s capital campaign or to support a specific program or initiative.

Please reach out for more details about how your donors can support your organization through a QCD and a designated fund. We’d love to hear from you!

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

Study up on gift acceptance policies to grow your endowment

Greetings from the community foundation!

We hope this email finds you well. With so much turmoil and tragedy in our world today, we are especially grateful for the opportunity to partner with organizations in our community and people like you who are making the world a better place.

As always, we are here for you! Whether you'd like to discuss planned giving ideas, complex gifts, or creative ways to work with your donors, we'd love to talk. We are committed to helping you grow your major gifts, endowments, and reserve funds so that your mission can stay strong for generations to come.

Thank you for your partnership.

--Your Community Foundation

Study up on gift acceptance in a volatile market and beware of “garbage in”

It’s tough out there. Your donors are feeling the impact as they watch their stock portfolios ride a rollercoaster. Unlike the situation in early 2020 when the pandemic was an easily-identifiable primary cause of market turmoil, today’s reality is that the reasons for the market’s ups and downs are multi-faceted and therefore harder to navigate. Rising interest rates, an uptick in COVID cases in some parts of the world, a still-disrupted supply chain and high inflation, Russia’s invasion of Ukraine, and even the stock market itself, which some label as “overbought,” are all contributing to a wild economic ride. 

Furthermore, for donors who’ve invested aggressively in trendy categories, the impact may be even more acute. Some once-hot SPACs, meme stocks, NFTs, cryptocurrency, and speculative technology companies are faring even less well than the mainstream market indexes.

Still, it’s no time to get bogged down in doom and gloom. Here are five bright spots to consider:

–Some real estate has not suffered the declines in valuation common today in other asset classes. This, in turn, creates an opportunity to encourage donors to give real estate assets to your endowment. Frequently, the donor is eligible for a charitable tax deduction of the fair market value of the property for a gift of real estate to a public charity. Then, when the charity sells the property, the full amount of the proceeds will remain intact for charitable purposes without reduction for income taxes. 

–Furthermore, if a donor would like a 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 to the other charities after the property sale is complete. 

–Now is a very good time to review your endowment policy, especially the policy’s guidelines for how your organization handles the acceptance of certain gifts, especially if they fall in the category of “Non-Standard Contributions” as defined by the IRS. Gifts of hard-to-value assets should not be undertaken lightly. We encourage you to reach out to the community foundation to assist in establishing a gift acceptance policy that will protect your organization and empower your fundraisers to engage in successful conversations with donors. 

–What’s more, the community foundation offers nonprofit organizations the opportunity to establish endowments and reserve funds to benefit from the community foundation’s governance and oversight, especially related to accepting complex gifts, as well as relying on the community foundation for all of the policies and administration associated with an endowment or reserve.  

–Finally, an easy way to avoid trouble with SPACs, meme stocks, NFTs, cryptocurrency, and speculative tech stocks is to be aware of potential pitfalls ahead of time so that you can be prepared to say no to a gift. The team at the community foundation is happy to talk with your team about the pros and cons of accepting certain types of property. You may very well wisely decide that speculative and unusual assets like this are more trouble than they are worth. 

Even with legislation up in the air, the QCD is already a planning tool to celebrate

If it feels as though your donors are asking more questions these days about giving to your organization from their retirement plans, you’re likely not imagining it. We know you're getting these questions, and our team is here to help answer them.

Our team will continue to keep you informed of the status of legislation impacting the popular Qualified Charitable Distribution ("QCD") allowance. More and more donors are discovering this powerful tool for supporting their favorite charities.

Here's where things stand:

SECURE 2.0 passed the House of Representatives in March 2022, and companion legislation is now under discussion in the Senate. You might find it helpful to review a brief section-by-section discussion draft released by the Senate on May 26, 2022, especially the introductory paragraphs, to see a snapshot of the legislation. 

We, like you, are watching this legislation with interest. Proposed provisions of SECURE 2.0 would enhance Qualified Charitable Distributions (“QCDs”) by indexing the $100,000 annual allowance for inflation and adding a provision for a one-time $50,000 distribution to a charitable remainder trust or other split-interest gift vehicle. 

The legislation is bipartisan with broad support but still likely will not be signed into law until later this year. That is because the House and Senate versions need to be reconciled and then the bill would need to be signed by President Biden.

Here’s what’s important, though: A QCD under the current law is still an excellent planning tool. When you meet with a donor who is 70 ½ or older, encourage the donor to work with financial advisors and take a careful look at projected retirement income. If the donor does not need to rely on IRA income (which is subject to income tax), the donor may benefit significantly from distributing up to $100,000 annually from that IRA (and thereby avoiding the income tax) directly to a “qualifying” charity, whether that charity is your organization or a designated fund at the community foundation. Indeed, a designated fund gives your donor the freedom to support your charity and other specified charities, which may help you land the gift. Please reach out to our team. We would be pleased to assist.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  

Charitable deduction rules: Hot topics in historical context

Charitable deduction: Hot topics and historical context  

Tax issues related to the charitable deduction are hot topics these days as potential tax reforms are circulating in Congress. Included in the discussions, for example, is proposed SECURE Act 2.0 legislation that passed the House of Representatives in March and is now pending in the Senate. Philanthropy advisors are closely watching this legislation, in part because a version of the proposed SECURE Act 2.0 legislation calls for Qualified Charitable Distributions (“QCDs”) to be indexed for inflation. In addition, proposed legislation would allow a taxpayer to make a one-time QCD of up to $50,000 to a charitable remainder trust or other split-interest entity.

In addition to philanthropy-related tax proposals and the variety of pending budget items that could impact tax laws, the uptick in discussion about the charitable deduction in general might be catching your donors’ attention. 

For example, a report updated last quarter by the Congressional Research Service, The Charitable Deduction for Individuals, provides an excellent overview of the history, policies, and fundamental concepts behind the income tax deduction for contributions made to charities. Just two pages, it’s definitely worth a glance if you are interested in a quick refresher course. You might even find it useful to share with donors.

Notably, the Congressional Research Service’s report estimates annual forgone revenue via the charitable deduction at an estimated $52.4 billion for Fiscal Year 2020, down from an estimated $57 billion for Fiscal Year 2017, just prior to increases to the standard deduction under the Tax Cuts and Jobs Act ("TCJA").

The TCJA significantly reduced the number of taxpayers who itemize deductions, including deductions for charitable gifts. Indeed, for Fiscal Year 2022, over 80 percent of the total charitable deductions are projected to be associated with taxpayers who earn over $200,000.

If you’re interested in deeper reading, the Joint Committee on Taxation recently released a thorough report summarizing the federal tax treatment of charitable contributions in more detail. And of course, please reach out anytime! The team at the community foundation is happy to share perspectives about potential tax law changes and their impact on ways your donors can structure charitable gifts accordingly.

Family legacies: Preserving donor intent

A bequest to a charitable organization is a tried-and-true estate planning technique. Whether a bequest is a specific bequest, a percentage bequest, or a remainder bequest, a donor's decision to include such a provision in an estate plan is a useful and popular way to support an organization like yours for years to come. Indeed, according to Giving USA, individuals gave an estimated $41.19 billion to charities through bequests in 2020, up 10.3% from 2019. 

Increasingly, though, advisors, charities, and families may find themselves in situations where the validity of a will or other estate planning document is subject to challenge. Indeed, a “draft it and forget it” approach to bequest planning is likely not sufficient. It’s wise to help your donor look at all aspects of a future bequest during the planning stages, working hard to cover all the bases.

To help ensure that a bequest goes smoothly from beginning to end, remind your donor that the best time to make philanthropic plans really is right now. By being proactive, your donor has nothing to lose and everything to gain in ensuring that charitable wishes are carried out.

Sometimes a donor wants to leave bequests to multiple organizations and therefore prefers to adopt a holistic planning strategy. In a situation like this, the community foundation frequently works with nonprofits and the donor to establish a “shell fund” to receive bequests after the donor passes away.

A shell fund allows a donor to lay out charitable intentions, including supporting your organization and other charities, to build a broad charitable legacy. A donor can name the fund, and the shell fund agreement can be modified anytime before the donor’s death. 

Please reach out to the community foundation to learn how shell funds and other planning tools can help you and your donors avoid potential future challenges and help protect your donors' philanthropic goals to support your mission.    

Public scrutiny: Capitalizing on objectivity to build donor confidence

While there are certainly aspects of the public nature of the Form 990 that can help your fundraising efforts, one of the major benefits is that the information is objective and subject to review by a third party. Certainly those themes are emerging as data and analysis becomes available concerning the impact of public information available on nonprofit organizations’ tax returns. 

Many nonprofit organizations take advantage of the community foundation’s services for that same reason, meaning that donors often gain confidence in a nonprofit organization if its assets are being managed by an independent, community-focused institution whose purpose it is to exist in perpetuity. 

For instance, a donor may wish to establish a designated fund that allows the donor to direct giving to a specific agency or purpose. Over time, the community foundation's staff manages the distributions from the fund according to the terms established by the donor.

An agency fund is similar to a designated fund, except in the case of an agency fund, the source of the initial contribution is you--the beneficiary nonprofit organization--not a donor or donors as is the case with a designated fund. Nonprofit organizations frequently establish agency funds at the community foundation to set aside reserves or rainy day funds. The team at the community foundation is adept at navigating the specific accounting standards that are unique to this type of arrangement.

In these ways, the community foundation can help you and your team instill confidence in your donors to further boost the power of the Form 990 as an objective source of information and stability. 

Please contact our team to learn more. We’d love to help! 

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  

Helping donors think globally and act locally to support your organization

Hello!

Recently we've been reminded that philanthropy is an amazing tool to improve lives, and that is especially true in times of disaster and tragedy. Whether a hurricane, fires, or a war overseas, generous donors step in. No doubt you've seen that happen over and over in our community; you and other nonprofit organizations are on the front lines and your donors support your efforts in times of need. We'll address that very issue in this month's newsletter.

As your partner in philanthropy, the community foundation is here to help you expand your donor relationships, inspire legacies to support your mission, and build your endowment to pave the way for a brighter future.

We look forward to our ongoing conversations, and we are grateful for the opportunity to work together.

All the best,

--Your Community Foundation Team

Responding to Ukraine: Encouraging donors to think globally and act locally

The war in Ukraine has certainly captured the attention of donors both here in our community and across the globe. What does this mean for your organization? It's actually a great opportunity to expand your dialogue with donors and potentially increase their support of your mission.

When you validate your donors' overall philanthropic efforts, you are signaling that what they are doing--for your organization and for others--is making a difference. This, in turn, leads them to be more open-minded about ways they can support your organization, whether through annual giving or planned giving, or both.

As you meet with donors this spring about supporting your organization, ask them if they're supporting Ukrainian relief efforts and, if they are, ask what's motivating them. According to research reported in the Nonprofit Times, multiple factors are prompting Americans to donate to support war relief efforts. Top areas of concern are medical support, children’s issues, and short-term humanitarian aid. Supporting long-term needs is also a motivator, including focus areas such as rebuilding Ukraine, refugee support, mental health, and democracy. You will learn a lot by listening to your donors describe their own reasons for giving, providing clues for fostering deeper engagement with your work.

Indeed, conversations with donors about their support for Ukrainians opens the door for you to describe the needs you're addressing right here at home. Ensuring access to education, providing social services, preserving important works of arts and culture, researching cures for diseases, or whatever your organization's focus happens to be, there are strong parallels to the needs of humanity across the board. Many Ukrainians lack food, clothing, and shelter, for example, which unfortunately is also the case with some people in our community.

Furthermore, as your donors are making immediate gifts to support Ukrainian relief efforts and perhaps adjusting their annual giving budgets accordingly, it is a perfect time to discuss planned giving options. Your donors will want to ensure that your organization is prepared for whatever the future may bring, right here in our community.

Finally, with so much focus on Ukraine right now, understandably, your donors may have questions about making international gifts. The tax-deductibility of gifts to international organizations has long been the subject of complicated rules. Donors must navigate a web of laws and regulations, especially if a donor decides to venture into making direct grants to organizations in the affected region. For that reason, many donors choose to give to a United States 501(c)(3) organization that is working in the affected region. (Perhaps your organization is one of them!)

Please reach out to the team at the community foundation to help with these conversations. We are happy to work with you and your donors to navigate current and future giving opportunities, including establishing planned gifts and endowment gifts to support your mission for generations to come.

Inflation and appreciation: Balancing donors' income needs with charitable goals  

With inflation on the rise, donors may be viewing their charitable giving budgets with a more critical eye. Certainly the annual inflation rate of 7.9% for February 2022 raised eyebrows! That’s a level of acceleration not seen since 1982. The ripple effect is powerful. On one hand, the price increases of gasoline, food, and housing have placed enormous stress on the budgets of your organization and others whose missions support individuals and families in need. Charitable donations are critical to closing the gap. On the other hand, your donors may feel they have less cash to give and worry that the value of their cash donations is eroding.

Consider encouraging your donors to make gifts of highly-appreciated assets, such as stock that is holding its value even through these turbulent times. Giving highly-appreciated stock remains one of the most effective ways your donors can support your organization. That’s because when a taxpayer gives stock to a public charity, the capital gains tax is avoided. Plus, marketable securities are typically deductible at their fair market value, further helping a donor's overall income tax situation. The team at the community foundation is happy to help you with these gifts.  

Legislative update: Tax law changes are swirling 

This spring, there is certainly no shortage of proposed tax law changes in the works. Recognizing that it is impossible to predict when, or if, any proposed legislation will become law, we are watching developments that could impact your donors' philanthropic plans.

As far as a general direction is concerned, the White House's Fiscal Year 2023 budget proposal lays out several revenue-generating components, some of which are tax provisions similar to those in the stalled Build Back Better legislation. Your donors may be interested in the proposed 20% minimum tax on high-income individuals, slated in the proposal to become effective for tax years beginning in 2023, which is referred to as the “Billionaire Minimum Income Tax.” The tax would be applied to the total income, defined to include unrealized capital gains income, of any taxpayer whose net wealth exceeds $100 million.  

Your donors may also be interested in the Securing a Strong Retirement Act of 2022 (House Bill 2954, known as the SECURE Act 2.0), passed by the House on March 29. Among many other provisions related to retirement plans, SECURE 2.0 allows taxpayers to make a one-time election for a qualified charitable distribution of up to $50,000 from an IRA to a charitable remainder trust or charitable gift annuity. This is another way your donors can support your mission through a planned gift.

As always, the team at the community foundation is happy to help you structure charitable remainder trusts, planned gifts, and endowments. Please reach out!

How the economy affects your donors' support

Greetings!

Certainly we are living in interesting times. The work of nonprofit organizations in our community grows more important with each passing day. As we reflect on global events with gratitude for the strength of our own society, we nevertheless are struck by the significant challenges experienced by the people of our own towns and neighborhoods.

As your partner in philanthropy, the community foundation is here to help you expand your donor relationships, inspire legacies to support your mission, and build your endowment to pave the way for a brighter future.

We hope you'll give us a call with your questions about this month's newsletter topics, and anything else that comes to mind as we work together to grow philanthropy in our region.

All the best,

--Your Community Foundation Team

Is it time to talk with your donors about giving retirement assets to support your mission?

The Covid era is sometimes referred to as the Great Resignation because of the large number of people who have exited the workforce in the last couple of years. Some are referring to this period as the Great Retirement, considering that, as Goldman Sachs estimated, more than half of the people leaving the workforce are over the age of 55.

While certainly the shrinking workforce can present challenges for the economy, there may be a silver lining for charitable giving. More retirement means more money in motion, from 401(k)s rolling over into IRAs, to retirees being motivated to ensure that their financial and estate plans are in good shape, including the ability to fund charitable priorities.

All of this means it’s a great time to review the various ways your donors can gift retirement assets to your organization, even if you are generally familiar with the techniques. Here’s a quick checklist:  

–Cashing out. Of course, a donor can always contribute retirement assets (IRAs, 401(k)s and 403(b)s) by simply cashing them out and paying the income tax, and then donating the rest to your charity. Almost certainly, though, in most cases, this is not a good tax strategy whatsoever. 

–Gifts upon death. When a donor designates your organization as the beneficiary of retirement plans, the donor can potentially reap huge tax rewards in terms of avoiding estate taxes and income taxes attributable to the retirement assets.  

–Lifetime gifts. The Internal Revenue Code contains special provisions for “Qualified Charitable Distributions” that may allow a donor who is over 70 ½ to give up to $100,000 from an IRA directly to your organization and avoid paying income taxes on the distribution.

–Avoid “gotchas.” Remember that some donors may not stay retired. Going back into the workforce presents unique challenges, such as the tax implications of “rehiring” and its impact on Qualified Charitable Distributions.

As always, the team at the community foundation would be happy to work with you and your donors to facilitate these gifts. Frequently, creating a fund at the community foundation to receive, administer, and distribute non-traditional assets is a great way to help your donors unlock the funds they'd like to give to support your mission, sooner rather than later. 

Economic and policy trends may influence your donors’ giving plans

Like you, we’re keeping a close eye on policy and legislative developments, as well as the impact of the economy on charitable giving strategies. Here’s what we’re tracking:

–Taxpayers have been using cryptocurrency to fund their charitable goals. This is certainly a strategy worth exploring for some of your donors. Be aware, though, that the IRS’s commitment to increased enforcement, coupled with the purported widespread underreporting of cryptocurrency-related income and corresponding tax revenue losses, means your donors should proceed with caution, especially now that the IRS has launched Operation Hidden Treasure to combat crypto fraud.

–Your organization, along with other charities, is impacted by inflation. Your donors may wish to take that into account in their charitable giving plans for 2022. Even though your donors may themselves feel less flush with cash, the charities they support are feeling it, too, and a decline in donations might seriously crunch the budgets the organizations require to deliver on their missions to help the people who need it most. 

–Despite somewhat dire predictions that philanthropy might decline due to pandemic forces, that did not happen, according to a recently-released study. Charitable giving grew by nine percent in 2021, driven in no small part by online giving. Average gift amounts were up, although the number of donors giving to charity is still experiencing downward pressure due to the change in the rules for itemizing deductions.

–Certainly, your donor relations team is accustomed to dealing with donor divorces as marriage and divorce rates ebb and flow. The topics of philanthropy and divorce haven’t typically been addressed together, though, at least not until recently when high-profile divorces such as MacKenzie Scott and Melinda French Gates have highlighted the billions of dollars given by these women to charitable causes. Today’s environment of heightened awareness means it’s a good time to brush up on the legal, financial, and tax impact of a marital split on donors' charitable strategies. The team at the community foundation is happy to help you strategize when you are dealing with a donor couple, especially when both partners have been giving to your organization for a long time.   

Tapping the emotional side of giving

Greetings!

The team at the community foundation is honored to help our nonprofit partners grow donors’ legacy giving and build endowments. 

In this month's newsletter, we highlight two issues to watch as 2022 gets into full swing: How to leverage the emotional components of endowment fundraising, and how to navigate increased public scrutiny and IRS enforcement (yikes--but we are here for you!).

As always, the community foundation welcomes the opportunity to be your partner as you grow your donors' gifts. Please reach out anytime.

--Your Community Foundation Team

Maximizing legacy giving’s emotional components  

During annual fundraising campaigns or other initiatives to raise current dollars, many philanthropy professionals rely heavily on the emotional components of their interactions with donors, such as the human needs being served by the nonprofit’s programs and stories of successful outcomes. This focus is wise because research tells us that emotional intelligence is critical to successful fundraising.   

By contrast, philanthropy professionals frequently lean toward approaching charitable gift planning as a mostly rational exercise, probably because of the heavy tax and legal components involved in structuring trusts, bequests, foundations, donor-advised funds, beneficiary designations, and so on. Indeed, it’s critical to nail those tax and legal components to ensure that a donor’s charitable intentions are carried out in a financially-savvy manner.

But the emotional side of charitable gift planning is powerful and should not be overlooked. Any type of giving delivers psychological benefits to the giver. Think about the notion of an endowment gift. Its permanence can create a sense of immortality that is very important to the donor. What’s more, the donor’s values live on through the types of causes they support through legacy and endowment gifts, especially if the gift instrument clearly defines the donor’s intent and the impact the donor is hoping to achieve. Finally, many donors feel that making an endowment gift, especially through a bequest, is a fitting way to culminate–and in some ways make permanent–a long history of annual giving to an organization.   

The key for nonprofit organizations is to balance the emotional and the rational during the legacy fundraising process. Engaging donors’ hearts and minds will lead to more success than cultivating an endowment gift using only one or the other approach. Sometimes it’s hard, though, to balance both parts of the conversation. That’s where the community foundation can help. When your organization has established its endowment or other legacy fund through the community foundation, our team can work alongside your team to cultivate endowment gifts. We’ll bring the tax and legal considerations to the table so that you can focus on tapping into the donor’s emotional desire to make a meaningful gift that lasts well beyond the donor’s lifetime.  

What do increased IRS enforcement and public perception mean for your endowment-building efforts?

Increased IRS enforcement has been included as a major revenue component in various iterations of the proposed (and now stalled) Build Back Better Act. It remains to be seen what this legislation ultimately will include when (and if) it becomes law. Nevertheless, the IRS is already discussing its enforcement focus in what may be an emerging era of renewed energy for tax collection. In particular, the IRS has noted that it will be hiring more enforcement personnel specifically in its Tax Exempt & Government Entities division. At the same time, donors continue to read mainstream media stories about bad actors in the charitable world, and overall public trust in nonprofits continues to be shaky.   

For nonprofit organization leaders who are intent on growing their endowments, the current environment is stressful. Fundraising and building an endowment have never been more important to preserving your organization’s mission, and the last thing you need are IRS enforcement and public trust headwinds! 

The community foundation can help. By working with the community foundation to manage your endowment, you are adding an extra element of credibility to instill even more confidence among your donors. The community foundation is an independently-governed nonprofit organization that is dedicated to philanthropy in our region and committed to helping nonprofits improve the quality of life for the people they serve. Our team can help ensure that the i’s are dotted and the t’s are crossed so that you can fundraise with confidence and build a healthy endowment based solidly in donor trust.  

Securing legacy gifts: Art, science, and always under construction

Messaging to secure legacy gifts: More art than science

As professionals and fundraisers, your team’s communication skills are top notch when you’re talking about your mission, programs, and the funds needed to fill the immediate gaps. But it’s sometimes hard to master the nuances of talking with donors about investing in your organization for the long term.

Whether you’re discussing a charitable remainder trust, bargain sale, designated fund, or endowment gift, securing a legacy gift through a complex charitable transaction requires a multi-step dialogue with the donor. Of course, you can call the community foundation team to help you with legal and tax aspects of the gift while the mission part of the ask thrives in your capable hands. 

Here is a four-step process that can help you land large legacy gifts in 2022.  

Affirm your donor’s choices

Donors want to give to the aspects of your programs that are important to them. Further, they want to be acknowledged for their contributions no matter how big or small. It’s simple to put donors at ease when you start the conversation by thanking them for their gifts to date and then confirm that they’ve made giving choices that are much appreciated by your organization as well as the people your organization serves. This is an ideal conversation to have in January, so pull up records of past gifts and start reaching out to donors to share your organization's positive results. 

Offer your donors opportunities for education

As the year progresses, find creative ways to keep your donors informed about your mission and your team’s accomplishments. Remember also that donors want to stay ahead of the curve on tax law changes and the latest giving trends. The community foundation can help you stay up-to-date on hot topics such as the options available to donors if they have stock or land to give, for example, or the latest news out of Washington that might impact giving. Ongoing education can go a long way to increasing your chances of landing a large legacy or endowment gift when December rolls around.

Inspire your donors

Those late spring and summer months are an ideal time for storytelling. Tax issues are not weighing heavily on donors, nor are donors yet gearing up for year-end gifts. It’s a good time to create and share a few case studies (with donor permission, of course) involving real donors who have made large, complex gifts to your organization and the positive impact of those gifts on real peoples’ lives. Maximize these stories in your social media posts, donor communications, press releases, and event talking points. Donors love learning from each other.   

Motivate your donors

When fall rolls around, you will be ready to motivate your donors by appealing to their desire to pass along the importance of giving to their children and grandchildren. A donor can launch a multi-generation legacy by making an endowment gift, by structuring a designated fund at the community foundation to support your nonprofit, or by creating a charitable remainder trust. The community foundation team can support you as you help your donors make important decisions to ensure that the family’s next generation will stay involved with your nonprofit in the years and decades ahead. 

Always under construction

“The best time to plant a tree was 20 years ago. The second best time is now.”

– Chinese Proverb

No matter how many times we’ve heard that quote, we’re always struck by its wisdom. In that spirit, the team at the community foundation strives to make it easy for you and other nonprofit organizations to establish, maintain, and grow your endowment at a reasonable cost and with the planned giving support you need.

If your organization started its endowment 20 years ago (or less), it’s a good idea to review your gift acceptance policies, investments, planned giving programs, fund accounting policies, and recordkeeping systems. A lot can change in two decades–and even in just a few years. The team at the community foundation would be happy to review your current endowment and suggest ways it might better serve your mission, including exploring whether the community foundation might be a fit for your investment or legal structure. Regardless, we’re always here to help you navigate gifts of real estate, closely-held stock, or other hard-to-value assets. 

If you’ve not yet started building an endowment, don’t worry! The second best time to start one is now. For inspiration, we suggest these resources: 

–Debra Ashton, author of The Complete Guide to Planned Giving, writes about the “quantum leap” nature of an endowment in transforming the ability of a nonprofit to protect its mission.

–The sheer magnitude of the dollars in endowments is hard to comprehend, but the billions are real! It’s a good reminder that there’s donor money out there for endowments, no doubt about it.

–Candid shares great tips on why even small nonprofits should consider setting up an endowment.

We look forward to working together in 2022 and beyond to build your organization's legacy. Whether or not your tree has been planted, we’re here for you! 

An update on QCDs and messages to help raise endowment gifts

A Message to Our Nonprofit Partners

We can hardly believe it is November! No doubt, your donors' interest in year-end giving is on the rise. We're here to help! 

Beginning with this issue of our newsletter, we'll be featuring two important topics: legacy giving and endowment building. We know how important it is to have easy ways at your fingertips to get the word out to your donors about their options for supporting your organization in significant ways. Our aim with this newsletter is to help you do just that.

Thank you for the opportunity to work together! 

All the best,

[name of community foundation]

Legacy giving: How Qualified Charitable Distributions can expand the possibilities for securing your donors' long-term support

As year-end approaches, the team at the community foundation is happy to help structure legacy gifts for your donors who want to take advantage of a planning tool known as the Qualified Charitable Distribution.

Especially as potential changes to the tax code swirl around, your donors who are required to take distributions from their retirement plans should consider taking advantage of the Qualified Charitable Distribution planning tool, enabling a taxpayer to direct up to $100,000 from an IRA to a qualified charity. The distribution is not included in taxable income.

Qualified Charitable Distributions are a great way for your donors to jumpstart legacy giving to your organization. For example, we can work with you and your donor to set up a fund to receive a QCD and make it easy for that donor to support your organization for years to come. We do this by creating a designated fund or a field-of-interest fund.

A field-of-interest fund at the community foundation is established for a charitable purpose described by your donor. For example, a field-of-interest fund can be established to support a specific focus area of your organization's mission, such as research for a particular rare diseases, programs to assist homeless families in getting back on their feet, or acquiring works of art that celebrate the region’s diversity. Your donor selects the name of the fund, whether they wish to use their own name (e.g., Samuels Family Fund or Samuels Family Fund for the Arts), maintain anonymity (e.g., Maryville Fund for the Arts), or something else altogether (e.g., Bettering Our World Fund).    

A designated fund at the community foundation is another good option for a donor who wants to support your organization for multiple years. This type of fund is useful because the funds can be spread out over time to help with your organization's cash flow planning, enable the donor to benefit from a larger charitable tax deduction in the current year when the donor’s tax rates are high rather than spreading it out over future years when tax rate projections are lower, or both. The donor specifies that your organization is to receive distributions according to a spending policy they select, and the donor can choose a name for the fund.

 

Endowment building: Tips for talking with your donors about year-end giving

Don’t let donors miss out on the few provisions of the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act that carried over to 2021, including the ability to deduct up to 100% of adjusted gross income (AGI) for cash gifts made directly to qualifying charities and the “universal” charitable deduction of $300 per taxpayer ($600 for a married couple). Here is a sample message you can use to help get the word out to donors about using this tax perk to build your endowment:

There's never been a better time to start helping us build our endowment. We're so grateful that many donors are electing to direct the CARES Act's "universal charitable deduction" this year to our endowment. And of course, gifts of highly-appreciated stock make perfect endowment gifts and are much appreciated by our staff and by the people we serve. Finally, we encourage you to share your passion for our organization this year by letting your friends and family know they can easily make an endowment gift to ensure that our staff is here for the long haul. Our endowment makes it possible for us to be ready to serve people who need us when our community is faced with the next pandemic or another crisis that creates hardship for the people who rely on our support.

Unlocking gifts of life insurance and S corporation stock

A Message to Our Nonprofit Partners

September is upon us! With the fourth quarter and giving season just around the corner, we know that fundraising is very much on your minds, and it is on our minds on your behalf.

Charitable organizations of all sizes are reporting increasing concerns among their staff members about donor fatigue. “We’re beginning to feel the pinch,” reported one nonprofit CEO. “Our development team hears frequently from small and large donors alike that they and their families are struggling to prioritize so many needs--weather disasters, fires, the Delta variant--and also juggle the need to help keep things going at the organizations they’ve supported for decades. Our organization needs new ideas to keep our donors financially engaged and supporting our mission.”

We can help! The team at the community foundation is by your side, helping you facilitate complex gifts and making it easier for you to stay on top of key trends in planned giving. In turn, you are better able to keep new ideas flowing in your donor communications.

In this issue of our nonprofit newsletter, we’re focusing on two types of gifts--life insurance policies and S Corporation stock--that are frequently overlooked. 

As always, give us a call if we can be of assistance! 

All the best,

Your community foundation

Five pointers for accepting gifts of life insurance

Gifts of life insurance can be a powerful tool for engaging donors and securing current gifts as well as legacy gifts. Before you accept a donor’s gift of life insurance, though, consider these five pointers:

• Check your state’s laws first. Most states--but not all--allow transfers of life insurance policies to a charity. 

• Ensure that your donor requests both change of ownership and change of beneficiary forms from the insurance company, and make sure they actually receive, complete, and file the correct forms. The paperwork is not always user-friendly. There are instances where a donor has completed the wrong set of forms and therefore the gift failed to materialize. You, as the charity, will need to be the policy owner and, unless you intend to surrender the policy, your organization also will be the named beneficiary.

• You’ll need to follow the tax rules for sending the gift acknowledgement letter to the donor. From the donor’s perspective, the gift is eligible for an income tax deduction equal to the lesser of the policy's value or the donor’s basis (usually the total amount of premiums paid). The “value” of the policy is computed using the replacement cost or the “interpolated terminal reserve” plus unearned premiums. In other words, this is complex, so reach out for assistance! 

• Ask the donor whether there are outstanding loans against the policy. If there are, your organization will receive less money. Plus, loans can trigger an income tax event for the donor. Be aware! 

• Finally, do not run afoul of the “insurable interest” rules, which can come into play if your organization pays the premium on a life insurance policy transferred to you or secured by you on a donor’s life.

Unlock gifts of S Corporation stock

S Corporation, or limited liability company? That’s a question many family businesses grapple with in their formative stages. For years, S Corporations were frequently preferred for small businesses that wanted the protection of a corporate structure versus a traditional partnership. In the 1990s, limited liability companies, or LLCs, rose in popularity because they offered both favorable tax treatment and corporation-like protections. In recent years, lower tax rates have contributed to the resurgence of traditional C Corporations as a viable structure for a business.

Since the adoption of laws and regulations decades ago making them advantageous, many S Corporations and LLCs have grown into thriving, highly-valuable businesses that are owned by your donors and are therefore now excellent candidates for planned giving. 

Donating S Corp stock to your organization is an important option that business-owner donors and their families may want to consider, and understanding the complexities is critical. Notably, this idea must be addressed early in the process of business succession planning, especially prior to any formal discussions about a sale. Indeed, the IRS is known for its keen eye in spotting transactions that could be construed as resulting in “anticipatory assignment of income,” especially where a charitable deduction is involved. At the same time, many charitable organizations prefer not to hold hard-to-value assets like S Corp stock for more than a few years. Balancing these factors requires thoughtful planning and timing. Our team is happy to discuss what might be the best position for your organization vis-a-vis a particular proposed gift. 

Finally, public charities have been eligible S Corp shareholders since 1998. That seems like old news (23 years old!), but you’d be surprised at how many advisors and donors are not aware that the rule changed. Large gifts could be lost because your donors are still under the impression that they can’t use their S Corp stock to fulfill their giving goals.  

Fundraising in challenging times: Getting big fish to bite

Smaller pool, bigger fish

According to 2020 statistics released in June 2021 as part of the Giving USA report, Americans’ bequests to charity totaled nearly $42 billion last year. That’s a tremendous amount of charitable giving flowing to community organizations from donors after they die. Moreover, it is a fraction of the $324 billion Giving USA reports was given to charities in 2020 by living individuals. 

So, while planned giving strategies remain a “must have,” they can’t be pursued at the expense of your organization’s annual giving efforts that keep the lights on and allow you to expand your programs to meet increasing needs. Your organization needs both strategies to work in tandem, placing the donor solidly at the center of your efforts.

Coordinated cultivation is particularly important in light of the reality that although dollars flowing into charitable organizations are high, they are coming from a smaller number of donors. In a just-released study conducted by Indiana University’s Lilly Family School of Philanthropy, researchers reported that only half of households in the United States give to charity at all--and those are 2018 figures likely to dip further when the every-other-year study is published again. For reference, in 2000, this study found that 66% of households gave to at least one charity. That's a big drop.

Bigger giving starts now: Tips for encouraging lifetime charitable gifts

Indeed, despite the smaller pool of donors, the numbers are getting bigger. Even the financial services sector is taking note.

As you work with your donors, not only should you encourage donors to build philanthropic components into their estate plans for distribution to your organization after death, but you should also consider helping your donors make meaningful gifts to support your mission during their lifetimes. 

Here are three selling points for encouraging your donors to consider “giving while living” as part of their plans for supporting your mission:

• Donors get to see the results of their gifts and have an opportunity to get involved, whether as a volunteer, board member, or simply an observer at a site visit to your organization. 

• Donors can involve their children and grandchildren in making gifts to your organization.

• Donors are eligible for an income tax deduction for lifetime charitable gifts, and the gifted assets are no longer subject to future estate taxes. 

Please contact the team at the community foundation to explore ways we can help you increase your donors' financial support through a designated fund or other collaborative vehicle available through the foundation.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  

Building your endowment with gifts of hard-to-value assets and specialty donor funds

The community foundation stands by your side in assisting your donors as they incorporate your organization into their philanthropy and estate plans. 

More and more, giving is on your donors’ minds, especially as donors become increasingly tuned in to our community’s needs in the wake of the pandemic and the roller coaster ride of the last year and a half. 

Indeed, according to 2020 statistics released in June 2021 as part of the Giving USA report, individuals in America alone gave $324 billion to charitable organizations last year. In addition, bequests to charity totaled nearly $42 billion. And when gifts from foundations and corporations are included, 2020 giving totaled $471.44 billion. That’s a tremendous amount of charitable giving.

Increase your donors’ support by embracing a broad range of assets

With charitable giving reaching record levels, how can you spot a situation where the community foundation could help you work with a donor to secure a meaningful gift to support your mission?

Start with a keen awareness of the types of assets a donor could give to your organization. Don’t underestimate the range of property you can receive, especially when you collaborate with the community foundation to accept a gift, administer a sale, and disburse charitable dollars toward your mission according to a donor’s wishes.

Cash

For taxpayers who itemize, dollars are deductible up to 60% of adjusted gross income and excess deductions can be carried over and deducted in five future tax years. On the flip side, a donor-advised fund at the community foundation can help a donor maximize an up-front charitable tax deduction, with the dollars flowing to your organization and other charities over a period of years. 

Highly-appreciated stocks and other investments

Publicly-traded stocks and bonds are tax-effective gifts to your organization, especially because capital gains tax can be avoided. 

Qualified plans

Whether via a Qualified Charitable Distribution by a donor who is over 72 years old, or through a bequest, a qualified retirement plan can be an effective asset for charitable giving. 

Alternative assets

Real estate, closely-held business interests, collectibles, and other nontraditional assets can frequently come with strong tax benefits when given to a public charity such as your organization or a fund at the community foundation. The proceeds from the sale can support your nonprofit, or, when the donor uses a fund at the community foundation, the proceeds can even support several organizations, including yours, if that’s what the donor intends.

Understanding the types of funds at the community foundation

The community foundation offers a variety of funds to help its donors. There are ways your organization can benefit from all of them. When a donor asks you to help structure a complex gift, please contact the team at the community foundation to review the types of funds that could help you secure benefits from the gift while also meeting the donor’s wishes.  

Donor-advised Fund

A donor-advised fund enables a donor to establish a specific account for charitable giving. A donor makes a tax-deductible contribution of cash or other assets to the fund, and then recommends grants to favorite charities, including your organization. 

Donor-advised funds have been in the news quite a bit lately, and it’s important to understand the benefits they provide to your organization and other charities serving our community.  

Unrestricted Fund

The community foundation has its finger on the pulse of the community’s most pressing issues. An unrestricted fund provides a donor with the 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. 

Please reach out to the team at the community foundation to learn more about how we administer unrestricted funds and whether there may be opportunities now or in the future for your organization to apply for grants from these funds. 

Field of Interest Fund

To target charitable giving to specific areas of community need (such as education, health, environment, or the arts), a donor 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. 

This is why the team at the community foundation makes it a priority to stay in touch with you and other organizations. We want to understand whom you are serving and how so that we can channel resources to your mission when and if the opportunity arises.  

Designated Fund

A designated fund allows a donor to focus charitable giving on a specific agency or purpose. A donor can establish a designated fund for your organization, for example. Over time, the community foundation's staff manages the distributions from the fund according to the terms the donor establishes. 

Contact us when a donor approaches you about making a gift to your organization over time or with certain parameters around milestones and achievements. Designated funds often can “save” a gift to your organization in cases where the donor is not comfortable transferring a lump sum.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  

Do your reserves need a check up?

Endowments and reserves: Time for a check up

As your organization emerges from the aftermath of pandemic shut downs, you and your board of directors may look back and realize that 2020 was a wake up call. Nearly out of the blue, you were faced with figuring out how to ensure that your mission can survive ups and downs in the economy and shifting donor priorities. 

At the very least, COVID-19 opened the door for an opportunity to revisit important questions that every charitable organization needs to be prepared to address. For instance:

• How clear are our endowment and reserve fund spending policies? 

• Do these policies enable us to use the resources in an emergency? If so, what constitutes an emergency? 

• Are there limits on how our organization can use its reserves and how much we can withdraw?

• Who has the authority to make decisions about dipping into reserves? 

• What evidence and documentation are required to do so? 

Yet another set of questions gets to the heart of donor intent:

• Have we properly accounted for various donor gifts? 

• Did any donors themselves use the term “endowment” in their gift agreements or instructions, and if so, what were the donors’ expectations for our organization’s use of the funds? 

• Would donors’ expectations and intentions cover emergencies? 

• Whether or not a donor explicitly used the word “endowment,” how should our staff and board honor donor intent if our team knows that the donor intended the funds to be available as emergency reserves? 

• For any funds received where a donor expressed certain wishes, have we properly documented our investment and spending decisions such that donors and their families would be comfortable if we were ever asked to produce written materials supporting our actions? 

Whoa! We know that’s a lot to take in, but our team is here to help.

In addition to brushing up on the rules and expectations surrounding “endowment” gifts, we suggest that you lean on the community foundation to help you evaluate and organize your various endowment funds and reserve accounts. In many instances, the community foundation can offer structures and accounting services to help you avoid tricky situations in which donor intent and emergency needs of your organization appear to be at cross purposes. 

Gifts of cryptocurrency: What you need to know

Just when you thought you had a handle on how to accept gifts of “alternative assets” such as real estate, closely-held securities, and collectibles, there’s a new gift in town, and it’s called cryptocurrency (or virtual currency). For some charitable organizations, this phenomenon became more real a few weeks ago when the University of Pennsylvania announced a landmark $5 million gift of bitcoin to support the Wharton School’s Stevens Center for Innovation in Finance.

Complex? Yes. Totally unprecedented? No. Your organization’s approach to accepting charitable gifts of cryptocurrency ought to run parallel to the strategies you routinely use to accept gifts of any highly-appreciated asset. 

For example, cryptocurrency gifts require documentation similar to what’s necessary to substantiate gifts of real estate, closely-held stock, and collectibles. And, in the case of cryptocurrency held by a donor as an investment for more than one year, the rules for gifts of long-term capital gains assets apply. In that situation, the donor’s gift of cryptocurrency is valued at its fair market value at the time of the donation. 

To receive a gift of cryptocurrency, your organization will need to establish an account with Bitpay, Coinbase, or other third-party processor. And remember, your organization will need to sign the donor’s IRS Form 8283 for the donor to be eligible for the charitable deduction (unless the value of the gift is less than $500). The donor should provide you with a qualified appraisal for any cryptocurrency gift having a value greater than $5,000. If you sell the cryptocurrency within three years of receiving it (which you most likely will do in order to adhere to your investment policy’s diversification requirements), you’ll need to file IRS Form 8282. Your organization won’t pay tax on the gains from the cryptocurrency’s sale, though, just as no tax is paid on the gains from other gifts of appreciated assets. 

For more information, you can check out the IRS’s guidance for charitable gifts of cryptocurrency, including confirmation that the usual rules apply for a “contemporaneous written acknowledgment,” even though cryptocurrency is treated and reported by your charity as a non-cash gift. 

Most importantly, call us! The team at the community foundation is ready to assist your organization with accepting and investing gifts of all alternative assets, including cryptocurrency. It is easy for your donor to contribute property such as cryptocurrency to a fund at the community foundation, and the proceeds from the sale of the property in turn can be used to support your organization. The community foundation is here to ensure that you maximize benefits from your donors’ generosity while avoiding pitfalls and hassle. 

The pandemic and your organization: Tips for donor support

COVID-19: How philanthropy supports community nonprofits

Like cities and towns across the country, our community has been affected by COVID-19 in many different ways. Every day, the team at the community foundation helps organizations address the pandemic’s ripple effects across every part of our community’s nonprofit sector, especially social services, healthcare, and education.

Philanthropy has stepped up to the plate, according to a study conducted by Candid indicating that U.S. foundations, corporations, and individuals have granted more than $10.7 billion since the pandemic began to address COVID 19-related challenges. “There is no doubt that philanthropy has responded to COVID-19 on a scale not seen before,” notes the study’s authors. 

As your partner in improving the quality of life in our region, the community foundation is committed to its role in educating donors and connecting donors to the causes they care about. Our team continues to stay up-to-date on your organization’s efforts to help the people who need it most. Every day, we field dozens of donors’ questions about how they can structure and support philanthropic vehicles to address the gaps.

If your staff and board would like to activate your organization’s donors around pandemic-specific fundraising efforts, we encourage you to reach out to our team. The community foundation can help you:

1. Create a designated fund so that donors easily can earmark gifts to your organization to go toward relief efforts for COVID-19.

2. Establish an endowment in a donor’s name, dedicated to ensuring that your organization has the funds to keep operating during future pandemics and other crises.

3. Help you structure and receive gifts of closely-held companies and other hard-to-value assets from donors who’ve experienced valuation increases despite the pandemic. 

Through the pandemic and beyond, the community foundation is your partner in giving.  

Refresher course: Qualified Charitable Distributions 

Given the critical needs facing our community, our team invites you to contact us if you have any questions about how the Qualified Charitable Distribution technique can enable your donors to unlock assets and deploy them toward your mission.

Taxpayers who have reached 72 years of age (or who reached 70 ½ prior to January 2020) can take advantage of the Qualified Charitable Distribution, enabling the taxpayer to direct up to $100,000 from an IRA to one or more qualified charities instead of taking the tax hit on the income from a retirement plan Required Minimum Distribution. 

Keep an eye out for clients who are retired and who are actively supporting your organization. Especially useful is the feature that QCDs are not limited to taxpayers who itemize. So, even your donors who fall under the recently-increased standard deduction can reduce their taxable income dollar-for-dollar, up to $100,000, and support your efforts in a meaningful way.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

Giving trends to help cultivate your donors this spring

Growing donor engagement as spring gets into full swing

It’s been a tough year for nonprofits! Increased demand for services, paired with economic uncertainty, created budget challenges for many charitable organizations as donor support became unpredictable precisely when program expenses were reaching peak levels during the pandemic. 

But things are looking up. The team at the community foundation is keeping an eye on key statistics and trends as we counsel the many charitable organizations in our region who count on support from the foundation’s donors to keep their missions going strong. Contact us anytime to learn how the community foundation can offer infrastructure and support for your endowments, donor-directed legacy funds, and gifts of alternative assets such as real estate and closely-held business interests.

In this month’s newsletter, we’re providing marketplace context for you and other community organizations who'd love to reboot fundraising efforts as the pandemic eases. 

People and businesses are stepping up

Hopeful news is emerging from Indiana University’s Lilly School of Philanthropy, where scholars are predicting an uptick in giving for this year and next year, especially by individuals. Notably: 

• Americans’ household giving could rise by as much as 6% in 2021 and by almost 4% in 2022.

• Bequests and other estate gifts are expected to increase by just over 1% in 2021 but by a whopping 11.9% in 2022 due to anticipated large bequests. 

• Corporations will likely increase giving, as well, by over 4% in 2021 and by over 6% in 2022.

• Grants from foundations may decline by a percentage point in 2021 before bouncing back to an increase of nearly 9% in 2022.  

If you’re not taking the opportunity in 2021 to double down on your efforts to engage your individual donors and your corporate partners, you may be missing an opportunity, especially given that foundations’ grantmaking may temporarily level out.

“Universal charitable deduction” bears fruit

Four Republican Senators, four Republican Democrats, a House Democrat, and a House Republican have introduced legislation to expand the increased charitable deduction cap for non-itemizers to up to one-third of the standard deduction. The Universal Giving Pandemic Response and Recovery Act (S.618/H.R.1704) also extends this temporary $300 deduction, which was included in the original CARES Act, through 2022 and enhances the provision to include gifts to donor-advised funds.  

Preliminary reports suggest that the so-called “universal charitable deduction” is already showing signs of success in encouraging more people to give to charitable organizations. For example, AFP’s Fundraising Effectiveness Project reports a 28% increase of $300 gifts on December 31, 2020. Considering that $300 is the precise amount of the maximum a non-itemizer can deduct, this does not seem to be a coincidence! AFP also reports that gifts of $250 or less increased by more than 15% in 2020 compared with 2019. 

The inclusion of donor-advised funds as qualified recipients appears to acknowledge that donor-advised funds can be powerful tools to increase effective charitable giving. The team at the community foundation frequently assists families, individuals, and businesses with structuring a charitable giving plan using a donor-advised fund to unlock otherwise unavailable resources and turn them into assets that can more easily be deployed to support the charities the donor loves. 

Timelines for giving may shift

For donors who typically activate their annual charitable giving plans immediately after tax season, 2021 will likely result in delay, thereby potentially impacting the timing of gift flow into your organization. This is because the Internal Revenue Service and the Treasury Department have extended the federal income tax filing and payment deadline for the 2020 tax year from April 15, 2021 to May 17, 2021. (Individuals still must comply with state filing deadlines, to which an extension may or may not apply.) Note, however, that the extension does not apply to nonprofits and business entities, so it’s business as usual on April 15 for you and your organization’s Form 990!


This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

Happy birthday, UPMIFA (for all you endowment fans out there)

UPMIFA turns 15: Happy birthday, maybe? 

It’s been 15 years since the Uniform Prudent Management of Institutional Funds Act, or UPMIFA, was first enacted to replace the Uniform Management of Institutional Funds Act, or UMIFA. Today, even though nearly every state in the U.S. follows UPMIFA, the law’s complexity still poses challenges and questions for nonprofit organizations who administer so-called “donor-permanently-restricted gifts” to which the law applies. 

Notably, the law does not apply to charitable trusts (which are governed by their own provisions), nor does it apply to donor-advised funds. UPMIFA also does not apply to endowments established by a charity using its own dollars which the charity either has earned or which originated from donors’ unrestricted gifts. 

Following the thread of donors’ permanently-restricted gifts is an accounting imperative, and it’s easier said than done. Naming conventions within that accounting are very important to clearly distinguish between an “endowment” that was created by the charity with its own dollars and therefore not subject to UPMIFA on one hand, and “endowments” funded with gifts from donors with the intent that they be “permanently-restricted” on the other hand.

What's more, the term “endowment” takes on different meanings depending on the source of the underlying assets, adding yet another wrinkle. Indeed, some argue that charities should not refer to a fund as an “endowment” if the charity isn’t following UPMIFA because of the presumptions that may be attached to the term "endowment" in the minds of donors and the public.

UPMIFA requires that charities invest endowment assets to maximize total return. This is a departure from UMIFA, which was based on preserving “historical value,” a concept that became highly problematic following the 2008 economic downturn, when charities were prohibited from using endowment funds for the very purposes for which donors had originally given them--to keep the charity’s mission afloat during tough times to avoid interruption in service.

But “maximizing total return” under UPMIFA carries with it its own challenges. For example, as a charity holding the funds, you must pay close attention to diversification and also ensure that the endowment is in fact providing annual financial support to your organization according to a spending policy.

The long and short of it? The team at the community foundation strongly encourages you to contact us with your endowment questions. Our staff’s deep experience and familiarity with UPMIFA and other laws will help you sleep better at night, especially if you select the community foundation as the investment home and administrative back office for your endowment. The community foundation is dedicated to honoring your donors' intent, complying rigorously with the laws, and doing everything it can to help your mission stay strong for the people who count on your organization. 

Space to grow: Advantages of the bargain sale

Whether your mission calls for office space, warehouse facilities, shared space, or all of the above, like most charitable enterprises, you need a physical location to serve your constituents. Unfortunately, you and other nonprofit organizations are frequently left empty handed after searching for competitively-priced commercial property to house operations.  

Enter the charitable bargain sale, a giving vehicle that allows a donor to facilitate the transfer of much-needed real estate to your charity at a price you can afford, while at the same time earning the donor a tax deduction. 

The bargain sale, frequently heralded as the earliest charitable giving vehicle, results in the real estate owner serving in both the role of a seller for the cash portion of the sale to your organization, and also in the role of a donor to your organization for the donated portion of the property. 

As is the case with many types of charitable gifts, establishing fair market value of the subject real estate is critical and requires a qualified appraisal that complies with IRS regulations. Establishing the fair market value in turn determines the charitable donation portion, which is the difference between the fair market value and the lower cash amount paid by the charity to the donor/seller.  

A post-pandemic world may create new opportunities for your donors to consider bargain sales of property to your organization. Indeed, nearly $430 billion in commercial and multifamily real estate debt is set to mature this year, opening up conversations about what property is really worth and how owners can most efficiently unlock its value. And of course, bargain sales are not limited to commercial property. The U.S. housing market is estimated to have gained more than $2.5 trillion in value in 2020 alone, bringing the total value of housing in the U.S. to over $36 trillion. 

Contact the community foundation to learn how our team can help you find creative solutions to your real estate needs.

A footnote: Keeping up with tax law

If you’re having trouble keeping up with changes to the tax laws, you are not alone! If you are a subscriber to the Wall Street Journal, we highly recommend its recently-released tax guide. For a guide that does not require a subscription, Kiplinger offers a helpful summary of the changes effective for tax year 2020. 

Bright spots amid chaos and an update on donor privacy

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.  

Messages to your donors to kick off a new year

Welcome to 2021! 

We know how hard our community’s nonprofit organizations are working to keep our community afloat as the pandemic and economic crisis continues into a new calendar year. While the vaccine illuminates hope on the horizon, we know that you, your staff, and the people you serve are not out of the woods yet. 

During this time--and at all times--the community foundation is here for you. Consider our team as a behind-the-scenes extension of your fundraising arm. We’re at the ready to help you with the legal, tax, and administration side of key functions, such as:

• accepting complex gifts; 

• establishing or grow your endowment and rainy day reserves;

• facilitating donation opportunities where a single donor wishes to support your organization as well as others;

• creating a vehicle for a donor to give to your organization over time;

• and much, much more.

This month, our newsletter keeps you up to date on changes in the law and draws your attention to emerging research that can help set in motion a successful legacy fundraising plan, even in the midst of COVID-19 and its fall out.  

Maintaining year-end momentum: New tax laws create opportunities to communicate with donors

Post-giving season donor fatigue might not be as large a factor this year as it has been in prior Januarys. Thanks to the passage of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, known as the Coronavirus Stimulus 2.0 bill, you’ve got a great reason to inspire donors through your newsletters and social media posts.

Here are a couple of suggestions for blurbs you can include in your communications: 

Even if you don’t itemize, it is still a good idea to plan to make at least $300 in cash contributions to qualifying charities (and now $600 for non-itemizing joint filers) this year. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, known as the Coronavirus Stimulus 2.0 bill, was passed by Congress on December 21, 2020 and signed by President Trump on December 28. The legislation extends the CARES Act’s temporary, above-the-line charitable deduction for contributions to qualifying public charities for tax year 2021. 

The Coronavirus Stimulus 2.0 bill also includes a one-year extension of the CARES Act’s provision increasing charitable deduction limits to 100 percent of AGI for contributions by individuals to qualifying charities. This creates an opportunity to work on a charitable giving budget for 2021 early in the year, especially because you’ll want to run calculations to determine whether you can benefit from this incentive, or whether you would be better off carrying forward charitable contribution deductions into future years. 

Legacy giving: Encouraging signs of donor commitment

Bequests, beneficiary designations, remainder trusts, and other charitable planning vehicles are an important part of every charitable organization’s fundraising strategy.

Although gift planning staffs have been under pressure over the last several months due to their organizations’ overall financial stress, that pressure does not appear to be reducing the level of donor interest in leaving a legacy. According to a study conducted by Marts & Lundy on the impact of COVID-19 on gift planning, donors are actually more interested in gift planning than they were pre-pandemic. 

That’s good news! It means that the donors who know and love your mission are not likely to step away. To the contrary, your loyal donors are likely more open than ever to considering a bequest or other planned gift to support your organization for years to come. 

The team at the community foundation would be pleased to talk with you about how our administrative capabilities and infrastructure can help streamline your fundraising efforts as you step up to these very timely gift planning opportunities.

We look forward to hearing from you!

Year-end giving and looking ahead to a new year

Supporting Your Mission as a New Year Approaches

In the wake of 2020’s many obstacles, your mission has never been more important. At the same time, your organization is experiencing one of the most challenging fundraising environments in decades.

The community foundation is by your side. Our mission is to keep the power of philanthropy strong in our community so that your organization can thrive and continue to serve the people who count on you.

Here are two ways the community foundation can help ease the pressure as 2020 draws to a close.

We can assist you as you help your donors plan for year-end giving. 

Encouraging your donors to make charitable donations during the holiday season has traditionally been made easier by the looming December 31 tax deadline. This year, encouragement is a bit tricker because so many elements of tax law seem up in the air. 

The elections may very well have left your high-net worth donors with a dilemma as they consider whether to make large gifts to your organization: Should your donors assume that laws will change such that charitable gifts will be even more tax efficient in 2021 and beyond? Or should your donors bet on the tax laws becoming less favorable to charitable giving in the future? Either scenario could play out, depending on the extent and nature of tax reform. 

Here’s what’s in play:  

• Under Joe Biden’s proposed tax plan, taxpayers making more than $400,000 per year would be taxed at a top income tax rate of 39.6%, an increase from 37% under current law. For some of your donors, this would mean gifts to your organization would become even more tax efficient under the new law.

• However, a separate provision in Biden’s proposed plan would impose a 28% limit on charitable deductions for taxpayers who make more than $400,000 per year. This would mean that instead of avoiding income tax on charitable gifts at the rate of 39.6% as described above, these taxpayers would escape income tax only at a rate of 28%. (A similar provision was proposed, but never enacted, during the Obama Administration.) 

• Biden’s tax proposal also calls for increasing--from a maximum rate of 20% to 39.6%--the capital gains and dividend tax rates for taxpayers whose annual earnings exceed $1 million. For affected taxpayers, this change would create opportunities to avoid significantly more tax than is possible under current law for gifts of appreciated assets. An increase like this would create a huge incentive for donors to give to your organization.

• Biden’s proposal calls for a 3% reduction of itemized deductions for taxpayers making more than $400,000 per year. This is reminiscent of the so-called “Pease Amendment” that was repealed in 2018. Although the reinstatement of this rule could potentially discourage your donors from making gifts, the rule’s impact would be blunted for donors for whom the reduction is absorbed by other types of itemized deductions (mortgage interest payments, for instance).

• Your ultra-wealthy philanthropists are surely keeping an eye on Biden’s stated intention to raise estate taxes and change the way capital assets are taxed after death. Currently, the gift and estate tax exemption per person is $11.58 million and $23.16 million for a married couple. These amounts are effectively double what they were before the Tax Cuts and Jobs Act of 2017 (TCJA). The TCJA calls for an automatic sunset of these increases on December 31, 2025, at which point the exemption will drop back down to $5 million per person, as adjusted for inflation. Under Biden’s proposed tax plan, though, the estate and gift tax exemption and rates would be restored to the lower levels of more than a decade ago. This would create a major incentive for the ultra affluent to give even more of their wealth to support your mission. 

• Finally, Biden’s proposal calls for substantial elimination of the step up in basis from the taxpayer’s cost to fair market value at the time of death, further incentivizing testamentary gifts by donors to your organization.

As the saying goes, there are a lot of moving parts! The team at the community foundation is always happy to discuss scenarios, share insights about what might happen under tax reform, and assist you as you help your donors fulfill their desire to support your important mission. 

We can serve as an extension of your team to answer questions as they pop up.

With this year’s job losses in the nonprofit sector topping 900,000 since February, we know your teams are short staffed. This can make even small projects, such as researching and responding to donors’ inquiries, seem monumental.

Consider the team at the community foundation to be on call. We’ve got answers to your year-end giving questions. We don’t want you to miss out on the few perks that 2020 has to offer your donors as they support your good work, including:

• A reduction in adjusted gross income (even for donors who take the standard deduction) for charitable contributions up to $300 per taxpayer. 

• An increase in allowable itemized deductions for charitable donations up to 100% of a donor’s 2020 adjusted gross income, instead the usual 60% cap. 

• The waiver of the Required Minimum Distribution for 2020, which may free up cash for your donors to increase their charitable gifts to your organization.

• The favorable rules that are still in effect for Qualified Charitable Distributions, which permit both itemizers and non-itemizers to direct up to $100,000 from an IRA to qualifying charities without triggering a taxable event.

Your team at the community foundation is always happy to help. We look forward to hearing from you and wish you all the best for the season.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.