Important Opportunity... IRA Giving

Oklahoma City Community Foundation explains the renewed tax provision that expands opportunities for IRA giving

As a reminder (since many seem unaware of it), the tax law that expanded IRA giving was renewed during the recent economic stimulus package.

Thanks to the Oklahoma City Community Foundation for this nice explanation:

Here it is in brief:

For the tax years 2008 and 2009, individuals age 70½ and older can transfer up to $100,000 per year from an individual retirement account (IRA) to a charitable organization without incurring income taxes today or estate tax in the future. If married, each spouse can transfer $100,000 per year from his or her IRA. Prior to this law all lifetime distributions from IRAs were taxed even if the distribution benefited a charitable cause. The provision is time-limited; it applies only to qualified distributions made before January 1, 2010.

Here it is in full, with some examples:

http://www.occf.org/retirement.html

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Case of the Week: Standard Deduction and the IRA Rollover

Case of the Week: Standard Deduction and the IRA Rollover

Thanks to The Dallas Foundation for connecting us to the GiftLaw Case of the Week:

CASE
Judy was a retired nurse and a volunteer for her favorite charity. During her working years Judy had never enjoyed a large salary. Fortunately, a portion of her income was regularly transferred to her retirement plan for almost 40 years. With good investments and tax-free growth, Judy's retirement plan had increased to over $435,000.

QUESTION
Judy is now age 78, owns her home and has more income then she needs. Each year she makes a gift of $1,000 to her favorite charity. Because she does not have home mortgage interest or enough other deductions to itemize, Judy takes the standard deduction. But she has heard about the IRA charitable rollover and wonders if that will be a good option. She asked her best friend, "Do you think that I should give the $1,000 from my IRA?"

SOLUTION
To view the solution to this Case of the Week, Click Here.

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Uh oh... Tax Exemptions of Charities Face New Challenges

The New York Times reports that "Tax Exemptions of Charities Face New Challenges."

Could this be trouble for the sector?

Or is this another positive step towards better stewardship?



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What do you think? Please click the COMMENTS button below.

Important news for your older donors

This is the last year that donors can qualify for special tax advantages through the Pension Protection Act of 2006. Until December 31, 2007, donors over age 70 1/2 can make tax-free distributions of up to $100,000 to 501(c)(3) non-profit organizations directly from their traditional and Roth IRA accounts.

Distributions must be made DIRECTLY to your organization, not to the donor. Otherwise, they will be taxed for this income.

Donors over 59 1/2 can make withdrawals and donate them to an organization without the 10% penalty for early withdrawal (although they must report this as part of their income, they can claim it as a deduction). This is especially advantageous for donors who must make mandatory withdrawals from their IRAs, and those who want to avoid additional taxes on their Social Security benefits.

Thank you to the wonderful work of the Sharpe Group for educating all of us on this issue, and for producing some WONDERFUL brochures that organizations can send to their donors.

You can view these here:
http://www.sharpenet.com/irarollover/

Moves your donors should make before tax season

Here's an interesting piece from a recent Dallas Morning News article... the kind of information that your donors will find helpful.

Moves to make before tax season | Dallas Morning News | News for Dallas, Texas | Personal Finance

Give to charity

The IRS is clamping down on what it sees as abuses in the realm of charitable contributions.

New for this year is a requirement that all monetary donations must be documented with a receipt, a bank record such as a canceled check, or written acknowledgement.

Also new this year is a requirement that donated clothing and household items be in good used condition or better to qualify for a deduction.

If you're planning to clean out your closet and donate old clothes to a charity, you may deduct only the fair market value for the donated goods. That's the amount that someone would pay for such items in a thrift shop.

You also can get a deduction for donating property such as stock, mutual funds, artwork and antiques.

As long as you've owned the property for more than a year, you can deduct the full fair market value of the gift, even if you paid less than that for the property, and avoid capital gains tax on the property's appreciation.

You also can time your contributions to accelerate or delay deductions.

"As long as you date and mail your check by Dec. 31, you can deduct your contribution for 2007, even if the charity doesn't receive it until January 2008," said Jim Smith, chairman of the Texas Society of Certified Public Accountants.

Charitable deductions made by a credit card are deductible if the charges are made this year, even if you don't pay the bill until 2008.

You must fill out the long tax form and itemize in order to deduct your charitable contributions.

Critics Say Bono's Business Practices Belie Africa Efforts - Philanthropy.com

The Chronicle of Philanthropy posts a very interesting article called, "Critics Say Bono's Business Practices Belie Africa Efforts." The article cites the apparent hypocrisy within Bono's efforts to increase tax-provided support to Africa on one hand while working to decrease his personal tax burden on the other.

For another perspective, GOOD Magazine put together this interesting video on U2's Bono, calledBono: A Brief History - From Rock Star to Philanthropist. See below.

Essential Collaboration: Fund Development & Finance

My friend Sharon Bailey, Director of Education for the Center for Nonprofit Management, has invited me to facilitate a panel discussion on August 15, 2007 from 1:00 - 4:00 p.m. The session is entitled "Essential Collaboration: Fund Development & Finance." See below for details -- I encourage you to join us!


The event will feature the following panelists:

• Michelle Monse, President and CEO of the Carl B. and Florence E. King Foundation
  
• Tessie Holloway, President and CEO of the Lupus Foundation of North Texas
  
• Elaine L. Sommerville, CPA
  
• Sheila Marlow, CFRE, Senior Development Officer for TWU (Texas Woman’s University) and past chair of the D/FW Philanthropy Conference

There also may be another surprise guest, as we are awaiting confirmation from one more person.

I encourage you to attend this event, which will discuss the importance of accountability, stewardship and effective financial management within both the development and finance department of a non-profit organization. You can learn more here:

e-Events : Event Details and Registration

Here is the event description:

Enhancing how the finance and development departments work together can benefit the entire organization, freeing time and energy to focus on achieving the agency's mission. Accountability and transparency are no longer idealistic concepts, but rather requirements for nonprofits to continue to attract resources and demonstrate effectiveness. This session provides participants with effective tools and practices that these two critical departments can use to support working together effectively and efficiently. Content includes an overview of the different objectives of the fund development and finance departments; identification of the most common obstacles to interdepartmental coordination and cooperation; best practices to work through roadblocks; structures and routines that smooth the way to a strong collaborative working relationship; and other tips that help ensure consistency of information and the highest possible level of accountability.

Please help me to spread the word about this event. We'd like to have a large group to hear from these guests, and to facilitate a good conversation.

The Changing Philanthropy Scene

I recently discovered the "Inside Philanthropy" blog of the Philanthropy Journal. They seem to have some interesting articles that are not the typical "look at how great it is to be in philanthropy!" articles of other blogs. This one really grabbed me:

Inside Philanthropy: Nonprofits need investment capital

I was also impressed by their blog "Foundations need to get real." Hopefully, they will continue to challenge our sector to think about its funding models and business pracatices.

A similar discussion is going on at the Foundation Center's "Philanthropy News Daily." Here is a recent articke that they wrote about SeaChange Capital Partners, "an organization founded by two former Goldman Sachs partners, is applying Wall Street methods to help charities build their capacity, the New York Times reports." Here is the article:

PND - News - SeaChange Capital Partners Employ Wall Street Methods to Assist Charities


The article includes an interesting presentation on how College Summit and Teach for America both used these tactics to raise significant "growth funds." I wrote about this some last week in a blog, Raising Venture Capital for Philanthropy, about how some NPOs are using IPO-type strategies to raise funds.

One thing is certain: this is a very interesting time to be a fundraiser. Indeed, one of the core aspects of our basic reporting functions is under review:

Proposed Changes to the Form 990

In addition, there are many ongoing discussions about how we hold ourselves accountable to a high level of transparency and stewardship. Check out this blog:

NONPROFIT EYE: DON'T TELL THE DEVELOPMENT DEPARTMENT

In fact, some people are talking about changing the name of the non-profit sector:

Philanthropy.com: What's in a Name?

What else is in the future for non-profits/social enterprises/community-owned organizations/charities/___(insert your favorite alternative here)___?

The Revolution Will Not Be Funded

This is a very challenging article on a topic of great interest to those of us working in the social services side of our sector.... although written on 4-4-2005, it is part of a debate that still rages today:

LiP Magazine's "The Revolution Will Not Be Funded," by Andrea del Moral

This line, in particular, resonates: Foundations and the grants they give are a byproduct of a tax scheme that keeps the rich rich.

The idea is hard to swallow, particularly for fund-raisers. One of the major challenges of my life right now is trying to understand myself as someone who spends his day courting the rich in order to change the lives of the poor. How can I simultaneously solicit funds from foundations while also understanding that they are also involved in deepening the trenches that keep the poor locked into poverty?

Meanwhile, on the other side of the world, the Council on Foundations Announces Philanthropic Partnership Agenda "to grow philanthropy in both rural and urban areas...(by) partnering with government to advance a legislative agenda that promotes the growth of philanthropy.

I am not sure what the answer is. Although we obviously cannot condemn a wealthy person for their desire to donate, we need to realize that the charitable sector only exists to do the work that the government would have to do otherwise (and which most of our wealthy donors would prefer the government not to do).

I do not intend for this blog to become a source of debate on tax policy and government spending. It's purpose is to cite interesting articles related to fundraising ... but we must realize that our work as fundraisers cannot be fully extricated from this debate without losing much of its spirt and soul.

Important Announcement for Small Charities

The Chronicle of Philanthropy points out an important new change from the IRS that will affect small charitable organizations that have not had to previously file IRS documents.

http://www.irs.gov/charities/article/0,,id=169250,00.html

New Electronic Filing Requirement for Small Tax-Exempt Organizations - Annual Electronic Notice — e-Postcard (Form 990-N)

Beginning in 2008, small tax-exempt organizations that previously were not required to file returns may be required to file an annual electronic notice, Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not Required To File Form 990 or 990-EZ. This filing requirement applies to tax periods beginning after December 31, 2006.

Small tax-exempt organizations, whose gross receipts are normally $25,000 or less, are not required to file Form 990, Return of Organization Exempt From Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt from Income Tax. With the enactment of the Pension Protection Act of 2006 (PPA), these small tax-exempt organizations will now be required to file electronically Form 990-N, also known as the e-Postcard, with the IRS annually. Exceptions to this requirement include organizations that are included in a group return, private foundations required to file Form 990-PF, and section 509(a)(3) supporting organizations required to file Form 990 or Form 990-EZ.

The IRS will mail educational letters starting in July 2007 notifying small tax-exempt organizations that they may be required to file the e-Postcard. The IRS is developing an electronic filing system (there will be no paper form) for the e-Postcard and will publicize filing procedures when the system is completed and ready for use.

The PPA requires the IRS to revoke the tax-exempt status of any organization that fails to meet its annual filing requirement for three consecutive years. Therefore, organizations that do not file the e-Postcard (Form 990-N), or an information return Form 990 or 990-EZ for three consecutive years, will have their tax-exempt status revoked as of the filing due date of the third year.

If you would like additional information about this new filing requirement, including notification when the filing system is ready, or information about other new developments, subscribe to Exempt Organization’s EO Update, a regular e-mail newsletter that highlights new information posted on the Charities pages of irs.gov.