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Planned Giving in 2017?

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I refuse to jump to any conclusions regarding this year in planned giving (or any year!).

Will Congress/President somehow waterdown or eliminate the charitable deduction?

Possibly but it’s possible that the charitable deduction will be more valuable to your donors than ever before if they limit other deductions but not the charitable one.  (Treasury Secretary Mnuchin already said there will be no tampering with the charitable deduction contrary to Trump’s campaign “tax plan”)

Will there be anything new and exciting for fundraisers to bring to donors?

This doesn’t look like a great year for creative charitable legislation. Let’s see if they really “fix” Obamacare or the tax code.

But, there are a few things I can guarantee will happen: the oldest baby-boomers start turning age 71 this year, the age when required minimum distributions (RMDs) from IRAs and other qualified retirement accounts start.  There are a lot more boomers than their predecessors, with a lot more IRA funds – IRA charitable rollovers and beneficiary designations should be high on every fundraiser’s wish list.

Bottom line: Planned Giving is turning a corner, Boomers are finally and officially Planned Giving Prospects. Maybe it’s time you and/or your organization realized that it is “now or never” for the Boomers? Train up the staff, invest in the Planned Giving program.

Oh, and check out our 3-part Planned Giving Boot Camp for Major Gift Officers! Next sessions start March 15, 2017 – click here to see how affordable it is to train up to 15 staff members in planned giving!

Fiscal Cliff compromise in works? Not great news for charitable givers leaking out…

I saw it – and then it disappeared.  Early this morning, the Yahoo front page news story about a potential Fiscal Cliff compromise had it and then when I went back later, it was gone.

The piece I read around 6:30 am on Yahoo mentioned that the compromise would likely include a 28% cap on deductions and a $3.5 million estate tax exemption with a 45% top estate tax rate.  Ouch on the 28% deduction cap; o.k. on the estate tax compromise. (Note: it mysteriously disappeared and can’t be found in any web posting – maybe it was revealing too much, maybe not factually correct)

I have been predicting on this blog that a deduction cap will be slipped in any Fiscal Cliff compromise.  It’s an easy target.  Who is going to complain? Maybe your donors won’t notice that they just created a surtax of $.05 to $.10 per charitable dollar given for itemizers?  On a $1,000 charitable gift, that is about $50 to $100 more tax dollars your donor will be paying.  On $10,000, that is $500 to $1,000 more in tax.  On a charitable gift of $100,000, that is a $5,000 to $10,000 penalty.  On the $1 million dollar giver, that is a whopping $50,000 to $100,000 surcharge on their charitable giving.  We are talking a lot of money for the biggest donors.

No one can really tell what this may do to charitable giving (besides boosting 2012 Donor Advised Funding giving and gift acceleration in general).  But, it is still bad news for philanthropy.

Top 10 Reasons Why Capping Deductions is a Bad Idea

With the Fiscal Cliff possibly being averted as we speak, it is very easy to see some tampering with deductions – an easy target because they represent easy numbers.  By “easy numbers”, I mean that Congress always has to make their numbers add up – with as little political capital being used  as possible.

And, by lowering the value of deductions or capping deductions, Congress would essentially be reducing the value of charitable income tax deductions for those in higher income tax brackets (among other areas formerly favored/encouraged like mortgage interest). While it looks like easy money to politicians, there are so many reasons why this idea stinks.

Here are my top ten reasons why Congress should not tamper with deductions (particularly charitable deductions):

  1. Lowering the value of charitable deductions is basically a new tax on charitable givers – if you are going to raise taxes, why not raise taxes on non-charitable givers?  At least charitable givers are putting their money to good use feeding hungry people, educating the young, saving the environment….
  2. On that vain, why not at least raise taxes equally for charitable and non-charitable givers – again, why penalize those who are trying to do good with their money!
  3. People who give to charity (and itemize) are supporting the public good – things that the government would have to provide if not for their charitable contributions!  Ok Congress, you might save a few dollars but by messing with charitable deductions, who knows the new costs you might incur (in jobs and service losses) if your plan really causes a drop in charitable giving.
  4. The idea of offering incentives for charitable giving is to encourage and reward people to support the public good – again, stuff that the government might have to offer if nonprofits weren’t providing it.  By reducing the value of the charitable deduction, aren’t you discouraging people from giving to charity?  Sure you want to do that?
  5. America is by far the most charitable nation in the world – hands down.  You want us to be like Europe?
  6. Nonprofit fundraising is a $300 billion a year industry (according to Giving U.S.A.) – that is about the amount raised each year ($200 million+ from individuals).  That money is not only going to support lot’s of good causes that the government now doesn’t need to provide; that money actually supports thousands upon thousands of jobs in the nonprofit sector – many of which will be lost if your tampering significantly reduced those revenue figures.
  7. Be honest – don’t raise taxes by reducing the value of formerly encouraged behavior because people won’t notice until next April or ever.  Come on, be straight with us and treat us fairly.
  8. Bean-counting – the way accountants find ways to “raise” revenue by cutting expenses – is the antithesis of growth.  You don’t grow by cutting corners – you just make your numbers look good in the short term (something corporate America loves to do).  Cutting the value of  the charitable deduction is bean-counting. Yes, in the short term, your numbers might look  better.  In the long run, you might do significant damage to the nonprofit sector and cause the government to have provide more services.
  9. Do you want to encourage positive behavior through the tax code or not?  Do you want encourage home ownership or not (mortgage deduction gets hit with the deduction cap, too)?  Clearly, the government has had an interest in promoting various things through tax benefits – now you are going to stealth-fully pull them out to make your numbers look good.
  10. Readers – please write in your own comments!

Fiscal Cliff Causing Donors To Accelerate Their Giving?

I don’t believe it.

Donors accelerating their giving in 2012 ahead of fiscal cliff?  Check out this Wall Street Journal article:  WSJ click here.

Please readers – comment on this one.  If you read the linked article, you will notice that the three big investment firm Donor Advised Funds were interviewed.  Sure, their donations are up but are yours?

Yes, there has been talk about capping deductions – which primarily hurts the value of charitable deductions for higher income earners. I even wrote about that possibility less than two weeks ago.  And, yes, if a fiscal cliff compromise ends up being this back-door tax raise of capping deductions, then advisors will certainly advise their wealthier clients to accelerate their giving (particularly to donor advised funds which allow donors to time the distributions in future years).

But, capping deductions is just talk and not intelligent policy (at least if you ask me).  Honestly, not likely to happen.  What is likely to happen is income tax rates returning to Clinton era rates – it is happening automatically come January 1, if Congress can’t find a compromise.  Do you think there is going to be compromise over the next few weeks?  I don’t.

I actually suspect that advisors may advise clients to hold off on their year-end giving so that they can use their charitable deductions in 2013 when they may really need it.  I also suspect that there is so much uncertainly (tax rates, investments, well-being of the country, etc..), people may just stay put with their giving and investments.

Back to that article – you have wonder.  Only the donor advised funds interviewed actually stated their increased giving.  Others interviewed did not.  I agree that individuals may like the certainty of parking money at a donor advised fund – just in case the charitable deduction is tampered with.  But, a big increase in year-end giving in 2012?  Hard to believe.