Planned Giving Commentary

Pease is gone!! What was that anyway?

The new tax plan eliminates the Pease limitations!  Did you even know it existed? Was it important?

“This provision, named after the late Congressman Donald Pease, reduceD the value of itemized deductions for high income taxpayers. It worked by reducing the value of a taxpayer’s itemized deductions by 3 percent for every dollar of taxable income above a certain threshold ($254,200 single; $305,050 married). The phase-out of the value of itemized deductions is capped at 80 percent of the total value of itemized deductions.”  Click here if you want to see a good blog post on it. (I made the quote in past tense)

Basically, Pease was a surtax on charitable giving for those around $250,000 and up!  (it impacted all deductions but the charitable deduction is the most discretionary of the deductions – the one someone at that income level may think twice about a larger gift (if notified by their accountant of the surtax).

Yes, it is so complex that I can’t remember how it was calculated (why bother figuring it out again now that it is gone!) BUT this change, as well as a bunch of other “goodies” in the new tax bill, may be big opportunities!!!

Want to learn more about opportunities for nonprofits (and some challenges) due to the new law?  THIS MONDAY AT NOON est, I AM GIVING A BRIEFING ON THE NEW LAW!!! CLICK HERE TO REGISTER – WE WILL BE GOING OVER 20 IMPORTANT CHANGES TO THE LAW THAT MAY HELP YOUR ORG RAISE MORE MONEY.





2018 Tax Plan Briefing for Nonprofit Fundraisers

Image result for tax plan hysteria cartoonIn response to the demand for help on this topic, we are offering a webinar briefing this Monday (Jan. 8th at 12 pm) on the new tax bill’s impact on fundraising.


This session will review the relevant points in the new tax plan that may impact nonprofits and fundraising.

Our approach will be for laymen (i.e. not accountants or tax lawyers). We will keep it simple, understandable, and will focus on practical steps you can take to raise more money in 2018 and beyond as a result of the new tax law.

You should also gain in your confort level with some basic financial concepts should any of these tax items come up in discussions with donors.

Fundraisers and nonprofit leaders – yes – this session is designed for you.

Accountants and tax lawyers – no – join the advanced webinars going around – this one is for the regular folks.

Excuses in French: Did I go overboard last time? More on the new tax law

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I probably could have been more tactful in my previous post.

Maybe I was little ornery about other things when I saw that statement?

So, after a strongly worded voice message from the unnamed firm that put out the statement, and some reflection, I want to address the issue again.

Here is the quote that I took issue with (regarding the impact of doubling of the personal exemption in the tax bill):   “Although the legislation maintains the current-law income tax charitable deduction, it will significantly reduce the number of taxpayers who itemize and effectively eliminate the income tax charitable deduction for a vast majority of Americans.”  (I especially disliked the part I bolded as it makes it seem like they just effectively took away the income tax deduction – which is not true!)

Clearly many Americans will no longer need to itemize on their tax returns, and therefore may have less incentive to give to charity. I say “may” because we really have no idea what impact this will have on contributions, particularly looking at the typical profile of those who may no longer itemize.

I can tell you that for those still in the workforce, who pay real estate taxes and mortgage interest, and/or pay for their own medical insurance and/or have dependent children, and for sure those households with significant income (let’s say $150,000+), will surely continue to itemize. In fact, the charitable deduction will be more important to those people as the bill limited some other deductions.  In other words, your major gift prospects will still be incentivized to make charitable gifts!

What about planned giving donors? The other provider I quoted in my last post claimed that “Planned giving donors are still expected to itemize their deductions.”  Now that my bias has been revealed, this statement doesn’t seem to be 100% true either.  For “planned giving donors” who are really major gift donors creating planned gifts like CRTs, yes – they are likely to continue to itemize on their tax returns.

But, the largest group of  planned giving donors are those who make simple bequests (over 80% of planned giving dollars to higher education from FY05 – FY16 came from charitable bequests – see my VSE talk from the summer).  In other words, many typical bequest donors are older and have already moved out of the workforce, may have downsized and no longer own real estate, and may in fact be the precise community in America which will have less incentive to make charitable gifts!

Of course, I have found that donors who average $50 gifts and have made 15 or more gifts to an organization (my own testing from various client situations) seem to be the best profile for a charitable bequest.

Is the $50/multi-year donor going to hold back on gifts because he or she may no longer be required to itemize? I doubt it but time will tell.

Clear take away message – these bequest planned giving donors are perfect for IRA direct rollover giving!!! So, start working on promoting it to compensate those who no longer itemize!  In any case, you may get gifts from those who still itemize.

Lastly, the Washington Post – the reigning anti-Trump champions who drive me crazy with their unabashedly biased reporting – published a piece on this topic (click here to see it) claiming that charities are seriously worried and upset that they will have to focus more on wealthier prospects (kind of ironic since that is already the case!). Of course, I disagree with anything the Washington Post has to say because everything that seems to come out of that paper is biased and agenda driven.

Nevertheless, while I still disagree with their premise, I do see something good coming from this mini-movement claiming that charities are getting hurt by the tax bill.  Maybe the Republicans can be shamed enough to throw nonprofits a tax bone or two?

How about allowing anyone age 59.5 and older the ability to use the IRA charitable rollover provision?

Or, a universal deduction for charitable giving? Change where it shows up on the tax return so it applies whether you itemize or not.

How about allowing IRA rollovers to establish planned gifts like CRTs or CGAs?

If something can be squeezed out of this hysteria, that would make the hysteria worth it.

So, do I apologize? Yes, for the tone and for singling out one provider (even though I didn’t mention their name).  But, I can’t back off on my critique of the substance.

For good summary of the changes in the tax law impacting nonprofits, check out this link from Lowenstein Sandler (NJ law firm):—tax—key-tax-exempt-organization-tax-provisions.pdf


Update on New Tax Plan and Nonprofits

Image result for not so badOk, the details are coming out and as I thought, nonprofits might actually benefit from the tax plan!

  • We still have an estate tax!  Ok, it impacts much less people (exemption doubled to $11.2 million per person) but it didn’t impact many of our donors in recent years anyway.  Just having it on the books is a good thing for the planned giving world – just giving them something to worry about is enough to spur talking to estate planning counsel.
  • Here is my favorite quote from Crescendo Interactive on the new tax bill: “Now that Congress has passed tax reform, one thing is clear – tax reform is good news for gift planners! Planned giving donors are still expected to itemize their deductions. In fact, with the loss of other non-charitable deductions, donors may be increasingly attracted to making a planned gift as a way to increase their overall deductions and reduce their taxes.  I bolded the important ideas – planned giving (and certainly major gift donors!) donors will likely continue to itemize.  I commend for Crescendo for getting this point – see next bullet point for one that I was shocked at how skewed others were looking at this….
  • Here is a quote from another provider who I will not mention as I felt their comments were just wrong:  “Although the legislation maintains the current-law income tax charitable deduction, it will significantly reduce the number of taxpayers who itemize and effectively eliminate the income tax charitable deduction for a vast majority of Americans.”  Please read that last, bolded sentence again – the claim that the new tax law effectively eliminates the deduction for the “vast majority of American” is absurd!!!!  The “vast majority” of those who no longer will itemize are not your typical major or planned giving donors!  (Ok, some older donors on fixed imcome will no longer itemize but that is ok – see next point!)
  • I think the big advantage for planned giving promotion coming out of this bill will be the IRA rollover.  For those donors age 70.5 and up (clearly candidates for no longer itemizing), this will be a great option to heavily promote.  Not itemizing?  Considering a direct IRA rollover gift! It’s that simple.
  • Apparently, the 50% of AGI ceiling for charitable giving deductions per year is going up to 60%.  This may be very helpful for larger gifts!  More to come on this when I finally get to those details.

So, there you have it, for now. Charitable giving will be more valuable to those who are the biggest givers in 2018 and beyond.  And, for the folks who may no longer need to itemize (a good thing for them as it means they save some taxes), the IRS rollover is a great option if they are 70.5+.

One last point! This blog (as well as most in this field) is apolitical – I’ve attacked both sides of the isle on foolish tax laws/proposals.  I was shocked to see a major provider of planned giving services out there buying into a clearly political statement.  The idea that this legislation is bad for charities is utterly ridiculous and to make it seem as though they just eliminated the income tax deduction is plainly foolish.  Don’t get caught up in the politics – just look at what is changing and see where it can help (or hurt).

And, by the way, change is good for planned giving. It gets people thinking and addressing their plan!  That is half the battle (considering less than half of Americans have any estate plans at all)!