Tuesday, January 27, 2015

Charitable Giving Tax Incentives At Risk

United_States_CapitolWe live in a generous country. Americans gave over $335 billion to charity last year, and the nonprofit sector had more than $3 trillion in assets. Generous people love to get involved, volunteer, and support good causes. Federal tax laws encourage individuals and families to give to charitable organizations, but these incentives are at risk.

The Council on Foundation anticipates the 2015 Congress will continue to focus on reducing the federal budget deficit through spending cuts, entitlement reforms, and changes to the tax code. The president, senators, representatives, bipartisan commissions, and think tanks have all put forward plans to address these issues, and many propose changing the charitable giving incentive one way or another.

No one knows the true impact that any of these proposals will have on the ability of organizations to raise the resources needed to provide the programs and services that fulfill their missions and often times do what government can’t or won’t do.

A recent Barron’s article details Congressional attention on commercial donor advised fund gifts which confirms, “Contributions have grown nearly 200% since 2009. No other part of the philanthropic world is expanding so rapidly.”

The argument is made that commercial giving accounts should be subject to at least the same 5% minimum payouts that private foundations are required to distribute each year. One proposal calls for all money contributed to a donor advised fund to be paid out within five years.

Our community foundation peers across the country reacted swiftly, saying that the proposal would “potentially reduce overall giving sustainability,” would “drive many wealthy donors to start private foundations,” and would “add administrative burdens to community foundations and other donor advised fund sponsors.”

Donor advised funds help increase the impact of charitable giving and build access to long-term philanthropic resources in our communities, allowing assets to be used to address immediate needs or support future development. During the Great Recession, these funds allowed Adirondack Foundation to sustain charitable giving region-wide. That has been important to the community service organizations that rely heavily on voluntary contributions.

Community foundations typically offer both flexible and endowed donor advised funds. Endowed, or permanent, funds play a unique role in rural America, especially the Adirondacks, because of the limited donors, corporations, foundations and other charitable sources. That is not likely to change. Individuals and families are the primary donors here. Adirondack Foundation is working hard to build a permanent pool of assets that will be here working in our communities for generations. We understand the charitable needs and opportunities of our community and provide long-term stewardship of our donor’s gifts.

Adirondack Foundation will be closely tracking any proposals related to charitable giving, especially through donor advised funds. As the politics around tax reform unfold, we will keep you informed. We believe it is essential that our communities become more networked, linking individual donors, nonprofit organizations, businesses, religious institutions, and local and state government officials together. Adirondack Foundation is uniquely positioned to create these linkages, to leverage impact and create a nuanced understanding of how to position local concerns in a world that will look, feel, and operate very differently.

Adirondack Foundation excels at creating networks, linking donors, nonprofits, religious organizations, municipalities, businesses, and more. We are miles apart from commercial gift funds, working as we do on a personal level to support Adirondack communities.

Local vs. Commercial

There are significant differences between commercial donor advised funds and donor advised funds offered by organization like Adirondack Foundation.

Adirondack Foundation is one of over 750 community foundations in the U.S. with a cumulative $66 billion in assets. We are a public charitable foundation that receives gifts from a broad base of sources, and manages them as a family of funds under community oversight primarily for the benefit of the Adirondack region, although grants are made across the country. Adirondack Foundation has a reputation of working with individuals and families to bring their mission to life and ensure their wishes are followed, even after they are gone. All supporting fees go directly to sustain a local organization that hires local people investing in the Adirondack community.

Assets at commercial gift funds, such as Fidelity and Vanguard, swelled to $54 billion last year. Many Adirondack residents have a commercial gift fund, which are characterized by a low cost and efficient transactional process without offering other philanthropic services. The administrative and investment fees go directly to large corporate entities.

 

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Cali Brooks

Cali Brooks is president & CEO of Adirondack Foundation. After working with nonprofit organizations in Southeast Asia, Central America, and the United States, Cali returned home to the Adirondacks and worked for the HKH Foundation where she conducted a survey to assess the economic, social, cultural, and environmental strengths of the Adirondack region. She then joined the Public Affairs office of the New York State Department of Environmental Conservation and co-founded the Wildlife Conservation Society's Adirondack Communities and Conservation Program. She and her family live in and love the Adirondacks.




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