Year End Giving

Charitable Extension Proposal – Good, Bad or Indifferent?

Here are the results from the poll this week on the Charitable Extension Proposal (that passed the House) which will give donors until April 15 to get their tax deductible gifts in for the previous year.

And, the positives win!

Click the image for a closer look at the results!

Results for poll 7.25.14

Seeing the responses (20 on the positive side and 9 on the negative side), I am thinking that everyone is right. Will help some donors, for sure.  Will cause confusion and possibly dilute the power of 12/31 (actually, it’s not likely people will change their patterns of giving, it’s too ingrained).

But, overall, I think the positives outweigh negative. Here is a quote from my Linkedin group postings that opened my eyes to the opportunity:

“It gives the not-for-profit an extra opportunity during the months of January, February, and March to appeal to donors with multi-channel fundraising campaigns rather than relying on end of year giving appeals.”  Margot Steinberg, Associate Vice President, Major Gifts at Win

I am not sure about multi-channel fundraising but I am sure that new options from a tax standpoint are almost always helpful.  Gives us something to alert donors to, engage in conversations and you never know, maybe people seeing how much they may owe in taxes will do some retroactive giving before they file their taxes!

Thank you to all who participated!

Year End Tax Planning – Here We Go….

Year end holiday shopping is already happening – what about year end tax planning?  And, what are the opportunities (and pitfalls) for fundraisers?

Click here for a link to a recent Forbes piece.  In short, they are recommending selling capital gains property while the 15% bracket still exists.  Not a great message for charitable giving which usually says “avoid capital gains by giving your appreciated property.”  So, we might see advisors not steering clients toward charitable gifts to avoid capital gains but rather cashing in on gains at current low tax rates.

The bonus will be in 2013 when capital gains will almost certainly jump back to 20% (and 23.8% for higher earners from the Obamacare tax on investment income).  Capital gains avoidance will hopefully be more relevant for major gifts and planned giving in 2013 and beyond.

I love this one from the Washington Post:  EARN MORE, PAY MORE (click here to see it) – just reminding investors who have been enjoying paying only 15% on dividends – they may see their taxes on those same dividends almost triple!  Max rate on that same dividend will be 43.4%!  Hey, trade in that dividend stock for a CGA!  Run the numbers and it is impressive what a CGA offers when dividends are so highly taxed.

Actually, the article mentions that companies may speed up dividends to be distributed before year end (and let their shareholders get one last taste of 15% taxes). Maybe your donors will have some windfalls to play with (i.e. give to your charity)?

Lastly, a client just asked where we are standing on the IRA rollover (included in the tax extenders).  Click here on the latest on this issue.  In short, no tax extender until fiscal cliff talks are finished.  Who thinks the fiscal cliff is getting resolved before the end of the year?   This means that fundraisers have to wait a few more weeks before giving up hope (or not) on year-end IRA gifts.


Closer Look At Year-End Credit Card Giving

Based on my previous year-end potpourri post, several readers questioned the point made about credit card gifts technically not completing until the date the charge shows up on the donor’s credit card statement (I heard this from a top planned giving attorney).

Interestingly enough, the IRS previously ruled that credit card gifts were not complete until donors paid their credit card bills!! (that was back in the 1970s so don’t worry if you never heard that doozy)

In a later IRS revenue ruling, though, the IRS backed of that one and ruled that the year of the charge was the appropriate date for a credit card gift to charity.    Here is a quote from a recent IRS statement that you might find helpful:

“Rev. Rul. 78-38, 1978-1 C.B. 67, provides that when a contribution is made to a qualified charity by credit card, it is deductible in the year the charge is made, regardless of when the creditor is paid.”  Taxpayer inquiry – 3/24/2010

Settled!  So why was I quoting a lawyer (a very good one, mind you) saying that it’s the date of the credit card statement itself – not necessarily the charge date?

I am thinking that maybe our lawyer friend is taking an extreme view on the phrase “when a charge is made.”  This might just be a case where an attorney is out-thinking the IRS on a purely intellectual level.  In theory, the legal obligation doesn’t really happen until the credit card company sends you the statement showing the obligation.

But, the IRS has said repeatedly that the year of the charge is determinative! Let’s go with it and you can quote this blog!

Ok, maybe I didn’t hear the attorney correctly or maybe this is the time to hit the real issue on the nail.

Read this carefully: the gift is complete in the year of the charge.

That means that you (the charity) better have processed that charge in that year.    Maybe that was what the attorney was saying.  The donor doesn’t know the real date of his gift until he sees the date it was processed on his credit card statement.

Beware fundraisers: process year-end credit card gifts before the end of the year!

Have a great end of year!

Year-End Giving Quandaries

The year is winding down and with two weeks left, if you are a planned giving officer or fundraiser that deals with out of the box gifts, it is time to remind ourselves of some of the interesting challenges we might experience.

Here is a potpourri of new and old ideas/rules to consider:

  1. Mail box rule – interesting rule since it means that the date of gift is the day the donor puts the check in the mailbox, not necessarily the date stamped by the post office on the envelope.  My approach – for checks received in early January that are dated with a December date on the check – I would give the donors the benefit of doubt, regardless of the postmark.  By the second or third week of January, I might not be as easy going.
  2. Credit card gifts – I just heard an attorney mention that technically, a credit card gift is not completed for charitable income tax purposes until the date of the donor’s next statement.  Yikes – that means that year end credit card giving is problematic?  My advice is to ignore you read this paragraph.  We are usually talking about small gifts?  (ok – remember my rule – bigger the gift, bigger the precautions – so think twice on this one for gifts in the thousands and above).
  3. Last second of the year gift annuities – I just heard the smartest, toughest attorney in the Planned Giving world actually say that he could see the last second – “hey stock is on the way for a new CGA just before new year’s eve” (even WITHOUT a written contract yet) – actually work.  His reason – if the donor had done CGAs previously, a donor’s verbal announcement and transfer, coupled with the donor’s knowledge of these gifts, sounded like a “meeting of the minds.”  My advice: I would take whatever steps possible to make the donor happy and give them their 2011 CGA.  If a stock transfer is initiated in 2011, I would probably figure it out to make it a 2011 gift.  We are not talking about serious crimes here.  Just my approach.
  4. Last second CRTs – To me, there is a limit to what can be done quickly and unless the donor’s attorney is making this happen, I would recommend not guaranteeing anything to your donor.
  5. Last second Real Estate gifts – Ok, these are really hard.  What about two weeks notice?  Get the donor’s attorney involved.  I just heard that the IRS is generally fine with Single Member LLCs, charity being the single member, receiving a risky gift and limiting liability (until  you can figure out what to do with it).  LCCs are easy and quick to set up.  I would only recommend this last second approach on a clear good deal, from a clearly good/friendly donor – who has counsel taking care of it.
  6. Last second Lead Trusts – not possible.
  7. Last second direct IRA gifts – this is a tough one.  If the transfer doesn’t happen until early January, your donor might be facing income tax on the gift (with an offsetting charitable deduction as long as you give him a proper gift acknowledgement).  That result isn’t so horrible but your donor better be informed of the possibility.  Try to find out from the IRA custodian how the transfer will appear in the account of the donor.  If it can show up as a 2011 transfer, even if charity gets it in 2012, I wouldn’t be so concerned.

Please comment and ask your end of year questions!