Nonprofit Best Practices: Implement an Endowment Policy Handbook

people brainstorming at table

If your nonprofit has an endowment, I recommend adopting and implementing an endowment policy handbook. The benefits of this handbook are numerous. For one, it can best prepare the nonprofit’s leaders to manage and put to use bequests of all sizes. Furthermore, a pre-established set of policies can help your organization avoid legal missteps and other conflicts.

Reasons to Enlist an Attorney to Write your Nonprofit’s Policies

Answer the Important Questions

Endowed funds bring special responsibilities: legal, financial, and ethical. There are many important questions which can only be resolved by:

  1. a full discussion and informed decisions by board members;
  2. the members adopting written and specific policies in clear, plain language; and
  3. putting those policies in a coherent, consistent, and accessible handbook.

In this way, all the many and varied responsibilities of endowed funds will be met. Once legal, financial, and ethical duties are met, the nonprofit can use the endowed fund to effectively grow the organization’s programs, support the mission, and aid the organization’s longitudinal viability.

Be a Better Board: Training on 10 Basic Responsibilities of Nonprofit Boards

Recommended Content for the Endowment Policy Handbook

Just like your employee handbook, the set of policies related to the organization’s endowment should be specific to your operations, intentions, and goals. There is no one-size-fits-all document, as what may make sense for a large nonprofit would not apply at all to a small one. (This is a good reason to not steal a template from the internet as it likely won’t serve its purpose and could potentially make things even more confusing.) In general, however, there are some recommended provisions that should be in all handbooks, like the following:

Definition of Terms

Basic terms, like the word “endowment” itself, need to be defined. The same goes for restricted versus unrestricted funds, donor intent (to contribute to the endowment rather than other funds), and others.

Types of Gifts

What types of gifts will be accepted for endowment contributions, and under what circumstances?

Donor Recognition for Endowments

Will there be a different or special procedure for donor recognition when a donor gives to the endowment?

Confidentiality

Confidentiality of private information of donors and potential donors to endowment must be maintained. What’s the specific process for doing so?

 Uniform Prudent Management of Institutional Funds Act

Rules which ensure the requirements of the law UPMIFA are fully meet, if not exceeded.

Accounting of Endowment Funds

How will financial standards be applied to endowment funds? Who specifically will ensure the appropriate and proper accounting of endowment funds?

Management of Endowment Funds

The management of endowment funds is to provide consistent sources of income for which programs or activities?

Investment of Endowment Funds

Is the investment of the endowment directed toward maximizing the return of principal while maintaining prudent fiscal guidelines? A basic question for both the management and investment of endowed funds is: what institution shall hold the funds?

Restrictions of/on Endowment Funds

Endowment funds can NOT be spent on certain categories or items. What are they?

Revision or Amendment

In the future, how can the endowment policies handbook be revised or amended, under what circumstances, and for what reasons?

It’s also a smart idea to include a copy of the Endowed Fund Gift Agreement you have donors sign when making a gift to the endowment.

Nonprofit Policy Special: 10 for Form 990

Drafting Your Endowment Policy Handbook

I would be happy to discuss the particulars of your organization to ensure your endowment policy handbook is tailor-made to set the organization and its fundraising efforts up for success. Contact me with your questions and thoughts! One thing is for certain–you shouldn’t be managing an endowment fund without having a clear blueprint for how it should run.

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Nonprofit Events & Opportunities in January and February 2020

agenda on table

Martin Luther King Jr. Day and Valentine’s Day aren’t the only days worth recognizing in January and February. I like to help spread the word about all the awesome events, awards, and grants available in Iowa. There are so many great opportunities for nonprofit pros, board members, volunteers, and donors, that range from seminars to galas. But, life is busy, and it can be hard to keep track of what you should register for or put on your calendar. That’s why I compiled a list for your convenience!

Learning Seminars, Trainings, & Workshops

  • 1/9/20; 1/23/20; 2/6/20; 2/20/20; 3/5/20 – Hosted by Volunteer Iowa: “The online Volunteer Management series will enhance best practices training and provide a consistent curriculum to be used within your organization. The webinar series is live, interactive, and the online classes are presented by leading experts across the state. Registration fee to attend all six sessions: $125.”
  • 1/15/20 – Head to Cedar Rapids for “Nonprofit Know-How: Grants at the Community Foundation in 2020.” A taco bar followed by a panel discussion to offer insights about the grantmaking process at the Greater Cedar Rapids Community Foundation. Panelists include a former grant committee member, a former grant writer, and Community Foundation Program Officers. The event will also include a review 2020 grant opportunities at the Community Foundation for local charitable nonprofits that provide services in Linn County.
  • 1/21/20- At the Des Moines Fundraising Institute’s “Capital Campaigns I” class, participants will develop a framework for building a successful campaign that includes planning, timelines, and resources. This session will explore feasibility studies, hiring outside counsel, and creating a case statement for the campaign.
  • 1/22/20- Nonprofit staff and volunteers who have social media and digital marketing duties or those who are interested in exploring social media may want to register for “How to Succeed in Social Media in 2020 and Beyond” at Junior Achievement in Des Moines.
  • 1/28/20- Nonprofit professionals (executive directors, program staff and others) that train adult learners may want to register for “Train the Trainer” session covering everything that goes into planning a successful training session. Attendees will receive all the slides, handouts and a Train the Trainers toolkit. Morning coffee, snacks and lunch will be provided.
  • 2/17/19- At the Des Moines Fundraising Institute’s “Capital Campaigns II” class, attendees will focus on the implementation of the plan including the private and public phases of the campaign, unrestricted and restricted giving (purpose and time), pledge payments, and complex gift vehicles including blended gifts.
  • 2/29/20 – “Equity by Design: Using Equity-Centered Community Design to Co-Create Community-Engaged Projects” workshop will be hosted at Grinnell College by Iowa Campus Connect. The workshop is open to faculty, staff, community members/organizations, and students interested in beginning to develop a framework for their own collaborative community projects.

Events

Grants/Scholarships

  • 1/24/20 – Iowa & Minnesota Campus Compact is seeking host sites for next year’s VISTA Community Corps program, which strives to eliminate poverty through community-campus partnerships by placing full-time capacity-building support in nonprofit organizations and higher education institutions. Deadline for applications is January 24.
  • 1/31/20- Applications are due at the end of January for the Bank of America Student Leaders Program, which connects community-minded high school juniors and seniors with paid summer internships with local nonprofits and a national leadership summit in Washington, D.C.
  • 1/31/20- Each year, dsmHack holds a 48-hour hackathon to help a local nonprofit organization solve their technology problems. This flagship event connects technology enthusiasts including developers, designers, and project managers and partners them with nonprofits selected through an application process. Nonprofit applications are open through January 31.
  • 2/28/20 – Prairie Meadows Community Betterment Grants fund small-to-medium-sized projects with grants ranging from $100 to $99,999. These grants support qualified organizations seeking to improve the lives of those in their communities. Submissions are due by February 28.

There are so many great events and opportunities for nonprofits and the people that advance them that there is no doubt I missed some in the list above. Don’t hesitate to email me at gordon@gordonfischerlawfirm.com to notify GFLF of any upcoming nonprofit-focused events and opportunities in the coming months.

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Good Governance: Tax-Exempt Organizations to File Forms Electronically

sign here on phone

From online donations to individually-tailored policies and procedures there’s a lot for nonprofit professionals to stay on top of. One of the ways I like to serve my mission of promoting and maximizing charitable giving in Iowa is to help nonprofits leaders in the state understand the ever-changing regulatory landscape to be the most successful they can.

In December 2019 the Internal Revenue Service (IRS) announced that tax-exempt organizations are now required to electronically file certain documents. This comes after the passage of the Taxpayer First Act in July 2019, which affected tax-exempt organizations in tax years beginning after July 1, 2019. This is a change from the previous option where organizations had the option to mail in paper forms. Organizations that have previously filed paper forms should receive a notice from the IRS telling them of the change.

The following IRS forms should now be filed electronically:

• Form 990, Return of Organization Exempt from Income Tax
• Form 990-PF, Return of Private Foundation (or Section 4947(a)(1) Trust Treated as Private Foundation)
• Form 8872, Political Organization Report of Contributions and Expenditures
• Form 1065, U.S. Return of Partnership Income (if filed by a Section 501(d) apostolic organization)

I’ve written about Form 990 in-depth before. While nonprofits don’t generally file annual tax returns (hence the tax-exempt status) most nonprofits need to file an important annual information return (a version of Form 990). If you want to learn more, I recommend giving these posts a read:

Interested in other aspects of successful nonprofit operations and great governance? Confused about any other regulatory changes? Don’t hesitate to contact me for a consult at gordon@gordonfischerlawfirm.com and 515-371-6077.

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New Year’s Resolutions: Tips for Setting Charitable Goals

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man with fireworks - charitable giving

With ringing in the new year comes the inevitable resolutions to be happier, healthier, more productive…all good intentions. But, what if this year you make a different kind of resolution—an actionable goal that could make a difference in the causes you care about? How about a goal that goes beyond yourself and could also have a positive impact on your community? This year I implore you to make at least one charitable giving goal. A giving goal can be a “resolution” you actually keep after the snow melts. How? With the right plan in place!

woman looking at fireworks

Similarly, I encourage my clients to determine their estate planning goals. These goals help guide me in drafting a personalized estate plan and determining which documents and provisions are needed. After all, every Iowan, family, and business is unique. Charitable giving goals can work the same way as a guiding blueprint for the who, what, when, and why of giving.

Use the following information to set your charitable giving goals for the new year!  

tips for setting charitable giving goals

Set a budget.

Of course, to begin, you’ll need to examine your entire budget including income, committed expenses (such as rent/mortgage payments, all bills, healthcare costs, etc.), to determine your discretionary income—this is the money you have left over after your committed expenses.

Along with your budget you should also consider whether larger one-time donations or recurring (perhaps monthly) donations work better for your budget, personality, and spending habits. A one-time donation may help prevent money from being spent on other discretionary choices. On the other hand, a repeated, monthly donation may help divide the total amount up into manageable sums. And, monthly donations can often be configured to automatically be made from your account which makes it easy to set the figure at the beginning of the year and make it a regular expenditure. Nonprofit organizations are grateful for all charitable contributions, but recurring, monthly gifts make their budgeting easier.

Look at the big picture.

big picture giving

Step back from the accounting weeds for a moment and sit down with a plain piece of paper. Write down the causes and organizations you care about. If you feel passionate about a certain issue, but don’t know of a specific charity off the top of your head that is addressing the issue, make a note of it. Your list doesn’t have to be long, just true to you.

Then, commit to research to determine which organizations are going to invest your money toward a mission that aligns with your own ethos. Some things to consider about a charity:

  • Financial health. Tax-exempt organizations have to file Form 990 (officially, the “Return of Organization Exempt From Income Tax”)  with the IRS. This form details the organization’s financial information and is available to the public. Do a search on a database such as the Foundation Center, for a charity you’re considering donating to, and review the financial data.
  • What’s the charity’s commitment to transparency? How about accountability?
  • What’s the organization’s Charity Navigator rating, if any? Charity Navigator’s rating system examines a charity’s performance in the areas of financial health and accountability/transparency, and presents it in an easily discernible way.
  • Is the organization a public charity or private foundation? This will have an impact on your federal income tax charitable deductions.
  • Is the organization based in the U.S. or is it a foreign charity? (Generally, if the donee is a foreign charitable organization, an income tax deduction is unavailable.)

Of course, if you’re personally involved with an organization through volunteering, fundraising, or the like, that’s a good way to “know” the charities as well. Research will empower and embolden your charitable goals if you know your donation is going to an upstanding, trustworthy operation.

Seek advice.

If you made a goal to increase muscle mass, you would likely seek the services of a personal trainer. If your goal is to eat healthier? Maybe a nutritionist. When the goal is to be committed to smart charitable donations, you’ll want to enlist the likes of your lawyer, accountant, and/or financial advisor. Seek out a professional who has experience working with nonprofits, the tax code, and strategies for intelligent giving. This pro can and should be able to help you put your plan into action.

(This tip also applies to practicing charitable giving through your estate plan—something you should definitely hire an estate planning lawyer to make sure the estate plan is properly, legally executed.)

9 Reasons You Need a Lawyer to Write your Estate Plan

Focus efforts / limit charitable targets.

Smart charitable giving means a vested commitment toward a cause or organization’s advancement, as well as financially beneficial tax deductions for you. Unlike investments where the general advice is to diversify to reduce risk, in the realm of charitable giving the opposite may well be true. You may well receive the greatest “return” by concentrating your giving on a fewer, rather than more, organizations. Consider giving to two or three nonprofits to magnify your impact.

If you’re ready to commit to charitable giving goals you can actually keep I’m happy to offer advice and strategy. Don’t hesitate to reach out via email (gordon@gordonfischerlawfirm.com) or by phone (515-371-6077).

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25 Days of Giving: Charitable Remainder Trusts

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We’re now well into the 25 Days of Giving Series and it’s my intent to provide different aspects and strategies of charitable giving. Given that it’s the season of joy, sharing, and love it’s a great time to be thinking about smart giving (the kind that doesn’t involve gift wrappings, stockings, or bows). Read on to learn how the charitable remainder trust could be a valuable giving tool. 

Charitable Remainder Trust, defined

A charitable remainder trust (CRT) is a split interest trust that pays out income to one or more non-charitable beneficiaries for life (or lives) or a term of years not to exceed twenty. The selected payout rate may not be less than 5%, and no more than 50%, of fair market value (FMV) of assets originally placed in trust. At the end of the trust term, the remaining trust assets (the remainder interest) is distributed to charity selected by the donor; the actuarial value of the charity’s remainder interest must be at least 10% at the time of the trust’s creation.

Benefits of a CRT

  1. Note that a useful attribute of a CRT is flexibility. Although Donor’s transfer of property to the trust is irrevocable, a CRT provides for Donor the right to change charitable beneficiaries.
  2. Note also the tax benefits of a CRT. Donor may receive a federal income tax charitable deduction for the value of the remainder interest in the year of the transfer, Donor may transfer assets without recognition of capital gain tax, and there is no estate tax on the property passing to Charity.

Two forms: CRAT and CRUT

CRTs take one of two forms: a charitable remainder annuity trust (CRAT) or a charitable remainder unitrust (CRUT). There are important differences:

A CRAT pays an annuity to the income beneficiary at a selected payout rate that is a percentage of the assets valued at the time of the trust creation. Additional contributions to the trust are not permitted.

A CRUT pays a percentage of the annual value of the trust assets, a unitrust amount, to the income beneficiary. Additional contributions to the trust are permitted.

Variations of CRUTs

Several variations of the CRUT are permitted under the Internal Revenue Code:

  1. A Net-Income CRUT (NICRUT) permits the trustee to distribute an annual payment that is the lesser of the specified percentage of value in that year, or the net income actually earned by the trust in that year.
  2. A NIMCRUT is a CRUT with a net-income limitation subject to a make-up provision. Like a NICRUT, the terms of a NIMCRUT direct the Trustee to pay the lesser of the specified percentage of the value of the trust assets in that year or the net income actually earned by the trust in that year. However, if the payout is less than the specified percentage is paid out in one or more years, the accumulated “income deficits” will be made up in a subsequent year from the excess income above what is the specified percentage of the value of the trust assets in that year.
  3. A Flip CRUT permits the trust to begin its existence as a NICRUT or NIMCRUT, then “flip” into a standard CRUT on the occurrence of a specific triggering event, as provided in the trust document. The flip option is attractive when Donor wishes to donate to the CRUT illiquid or hard-to-market assets, such as real estate or closely held stock.

 

butterfly on finger

​Knowing if the CRT is a best choice for your charitable giving can be difficult, so I advise speaking with your trusted professional advisors to evaluate your situation. This concept can be confusing, so don’t hesitate to reach out for more information and explore how a charitable remainder trust could be beneficial to you. Feel free to contact me at any time at Gordon@gordonfischerlawfirm.com or by phone at 515-371-6077.

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25 Days of Giving: The Deal with Quid Pro Quo Donations

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woman holding ornament

Thanks for reading the 25 Days of Giving series. Each day through December 25, I’m covering different aspects of charitable giving for both donors and nonprofit leaders. Have a topic you want to be covered or questions you want to be answered regarding charitable giving? Contact me.

I’ve covered the term quid pro quo in a previous legal word-of-the-day blog post and much of that applies to understanding quid pro quo donations. In short, quid pro quo (now you know Latin!) translates to “something for something” and means an exchange of goods or services, where one transfer is contingent upon the other. In the case of nonprofit organizations, sometimes a good or service is offered in exchange for a donation. When the donor makes a charitable donation more than $75 and the nonprofit offers a good or service in exchange for said donation, the tax-exempt charity must provide a written statement to the donor disclosing the following:

  • Statement of the good(s) or service(s) received in exchange for the donation.
  • A fair market value (FMV) of the good(s) or service(s) received.
  • Information for the donor that only a portion of the total contribution (the portion that exceeds the FMV) is eligible for a federal income tax charitable contribution deduction.

What Nonprofits Need to Know

merry christmas event menu

As a nonprofit organization offering a quid pro quo donation situation, there’s a penalty for not making the required disclosure of contributions greater than $75. The penalty is $10 per contribution up to $5,000 per fundraising mailer or event. If your nonprofit fails to disclose, but can prove the failure was due to a reasonable cause, the penalty may be avoided.

Offering a good or service as an incentive for a donation can be a great way to spark donor interest, but you’ll definitely want to determine the FMV and have a reasonable method, applied in good faith, for doing so. This can be easier said than done for goods and services that are not generally or commercially available. If that’s the case it’s recommended to estimate the FMV off of similar/comparable products and services that are available. Let’s consider a couple examples:

Example 1. For a contribution of $20,000 a history museum allows a donor to hold a private event in a ballroom of the museum. The museum doesn’t typically rent out this room, so how can a FMV be determined if there’s no standard rate? Looking at other similarly sized and quality ballrooms in the surrounding, general area cost $3,000 a night to rent. So, even though the museum’s ballroom has unique artifacts, a good faith estimate of the FMV of the museum’s ballroom is $3,000. The donor would then have a charitable contribution deduction total of $17,000.

Example 2. Your charity offers a one-hour golf lesson with a golf pro at the local country club to anyone who donates $500 or more. Usually the golf pro can be hired for a one-hour lesson for $100. An estimate made in good faith of the lessons’s FMV is $100.

Example 3. What if the service offered is unique, but is typically free? A state park foundation fundraiser advertises that a donation of $200 or more entitles you a spot on one of four different guided nature hikes with a volunteer park ranger. Typically the foundation doesn’t offer guided hikes to the general public, but hiking in the state parks is otherwise free. So, the FMV made in good faith for the hike is $0 and the charitable contribution eligible for deductions would be the full amount.

The only time you wouldn’t need to disclose the quid pro quo donation is when the good(s) or service(s) are of insubstantial value. The IRS also says disclosure is not required when the donor makes a payment of $75 or less (per year) and the exchange is only membership benefits that equate to, “Any rights or privileges (other than the right to purchase tickets for college athletic events) that the taxpayer can exercise often during the membership period, such as free or discounted admissions or parking or preferred access to goods or services.” The contribution can also stay undisclosed if the good/service is, “Admission to events that are open only to members and the cost per person of which is within the limits for low-cost.”

Basics of What Donors Need to Know

woman in winter with scarf

As a donor, if you’re making a contribution to an organization and receive something in exchange, know that it’s almost like you’re paying for the good/service you receive, but then can deduct the rest of the contribution.

Let’s say you make a charitable contribution of $100 to a 501(c)(3) organization that helps mistreated farm animals. To celebrate their anniversary, the organization is offering donors that gift $80 or more a large coffee table book filled with stories, poems, and photographs of the animals the organization has helped over the years. The book’s fair market value is $30. This FMV is based on the price if you were to buy it outright from the organization’s online shop. In this situation you as a donor would need to receive a written disclosure detailing your contribution amount ($100), FMV of the good (the book) received ($30), and the portion that is considered a tax-deductible charitable contribution amount ($70).

Even though the tax-deductible charitable contribution amount is $70 (less than the $75 threshold), the total donation was $100, so the charity is still required to provide a written disclosure.

Whether you’re a donor or a nonprofit leader, I’m here to help promote and maximize charitable giving in Iowa. Questions about written disclosure compliance or FMV calculation? Don’t hesitate to contact me.

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25 Days of Giving: Basics of the Endow Iowa Tax Credit Program

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red ornaments Endow Iowa Tax Credit

 Thank you for reading the 25 Days of Giving series! In the spirit of the holiday season, I’m covering different aspects of charitable giving…perfect to get you thinking about your end-of-year giving.

There are many, many reasons Iowa is a great place to live and work. One reason is the Endow Iowa Tax Credit Program—a smart way to stretch your charitable dollars. Iowa community foundations provide exclusive access to the Endow Iowa Tax Credit program. Giving through the Endow Iowa program allows Iowa taxpayers to receive a 25% Iowa tax credit, in addition to the federal charitable income tax deduction, for qualifying charitable gifts.

The Endow Iowa Tax Credit Program provides unique opportunities to meet philanthropic goals while receiving maximum tax benefits. Highlights of this program include:

  • A variety of gifts qualify for Endow Iowa Tax Credits including cash, real estate, grain, appreciated securities, and outright gifts of retirement assets. In fact, appreciated assets, like stocks or real estate, can provide even better value because the donor may avoid capital gains taxes.
  • To be eligible, Endowed Tax Iowa Credit gifts must be placed in a permanent endowment fund of a qualifying organization. The endowment funds are intended to exist in perpetuity (continual), and the spend rate from the fund may not exceed 5% annually.
  • Tax credits of 25% of the gifted amount are limited to $300,000 in tax credits per individual for a gift of $1.2 million, or $600,000 in tax credits per couple for a gift of $2.4 million, assuming both are Iowa taxpayers.
  • Eligible gifts will qualify for credits on a first-come/first-serve basis until the yearly appropriated limit is reached. If the current available Endow Iowa Tax Credits have been awarded, qualified donors will be eligible for the next year’s Endow Iowa Tax Credits. Donors should be encouraged to act as early in the year as possible to ensure receipt of credits as soon as possible.
  • All qualified donors can carry forward the tax credit for up to five years after the year the donation was made.

It should also be noted that the Endow Iowa Tax Credits are capped. The Iowa Legislature sets aside a pool of money for Endow Iowa, and it’s available on a first-come, first-serve basis. Submitting an application at the beginning of the tax year is advised, as tax credits often run out toward year’s end. In fact, this year approximately $6 million in tax credits were awarded and there are no more available credits to be granted. However, you can submit your application to be placed on the waitlist for 2020 tax credits.

Give More & Pay Less in Taxes: 5 Pro Tips for Iowans

In exchange for 25% Iowa tax credit and the opportunity to have an even greater impact on their philanthropic interests in the state of Iowa, now and into the future, the Endow Iowa Tax Credit Program should be seriously considered by all. The impact is immense: in 2018, donors received tax credits for more than 3,434 separate donations to 76 different community foundations and affiliate organizations through Endow Iowa. And, since 2003, more than $263 million has been invested through the program to improve residents’ lives.

Any questions or thoughts on how the Endow Iowa Tax Credit Program could mean big benefits for your finances and your state? Don’t hesitate to contact me.

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25 Days of Giving: Donate More to Your Place of Worship & Pay Less in Taxes

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Thanks for reading the 25 Days of Giving series; this is the “gift” for day 17! Plan on coming back to the blog every day from now through Christmas Day.

Might this be a good season to consider being more generous to your place of worship? Generally, churches are considered to be public charities. This means they are typically exempt from local, state, federal, and property taxes. This also means donations can be deducted if you itemize your federal income taxes.

Allow me to offer up four tips which could allow you to give more to your church and pay less in taxes. It’s a win-win situation: make a financially wise contribution AND a difference in an organization you care about.

Tip 1: Consider All Your Assets

You need to consider ALL your assets for smart giving. Don’t just consider cash, but look at your entire basket. Here are three real-world examples:

  1. I know a farmer who doesn’t have a lot of cash on hand—we’ve all heard the phrase, “land rich, cash poor.” But, farmland itself can be a very tax-savvy gift. So are gifts of grain.
  2. I know a young person who’s self-employed. Again, not lots of cash on hand. But, this person inherited an IRA from a relative, and must make annual required minimum distributions [RMDs]. IRA RMDs can be a tax-wise gift.
  3. I also know a couple who recently retired. The couple has three life insurance policies, which made lots of sense when their kids were younger. Their kids are now grown and independently successful. A paid-up life insurance policy could be signed over to their favorite charity.

Your individual facts and circumstances are unique. Consider seeking a qualified attorney or financial advisor to look at your whole basket of assets.

25 Days of Giving: Help a Charity With Your Retirement Assets

Tip 2: Consider Long-Term Capital Gains Property

Gifts of long-term capital assets, such as publicly-traded stock and real estate, may receive a double federal tax benefit. Donors can receive an immediate charitable deduction off federal income tax, equal to the fair market value of the stock or real estate.

Records are required to obtain a federal income tax charitable deduction. The more the charitable deduction, the more detailed the recording requirements. For example, to receive a charitable deduction for gifts of more than $5,000, you need a “qualified appraisal” by a “qualified appraiser,” two terms with very specific meanings to the IRS. You need to engage the right professionals to be sure all requirements are met.

Case Study for St. Patrick’s Day: Save Some Green on Gifts of Long-Term Capital Assets

Second, assuming the donor owned the asset for more than one year, when the asset is donated, the donor can avoid long-term capital gain taxes which would have been owed if the asset was sold.

Let’s look at an example to make this clearer. Sara Donor owns stock with a fair market value of $1,000. Donor wants to use the farmland to help her favorite causes. Which would be better for Sara? To sell the stock and donate the cash? Or, gift the stock directly to her church? Assume the stock was originally purchased at $200 (basis), Sara’s income tax rate is 37%, and her capital gains tax rate is 20%. 

Donating cash versus donating long-term capital gain assets, such as publicly-traded stock Donating cash proceeds after sale of stock Donating stock directly
Value of gift $1,000 $1,000
Federal income tax charitable deduction ($370) ($370)
Federal capital gains tax savings $0 ($160)
Out-of-pocket cost of gift $630 $470

NOTE: ABOVE TABLE IS FOR ILLUSTRATIVE PURPOSES ONLY. ONLY YOUR OWN FINANCIAL OR TAX ADVISOR CAN ADVISE IN THESE MATTERS.

Again, a gift of long-term capital assets made during lifetime, such as stocks or real estate, can be doubly beneficial. The donor can receive a federal income tax charitable deduction equal to the fair market value of the asset. The donor can also avoid capital gains tax.

Tip 3: Consider Endow Iowa Tax Credit Program

Under the Endow Iowa Tax Credit program, gifts made during lifetime can be eligible for a 25% tax credit. There are three requirements to qualify:

  1. The gift must be given to, or receipted by, a qualified Iowa community foundation (there’s a local community foundation near you).
  2. The gift must be made to an Iowa charity.
  3. The gift must be endowed (i.e., a permanent gift). Under Endow Iowa, no more than 5% of the gift can be granted each year – the rest is held by, and invested by, your local community foundation. This final requirement is a restriction, but still, in exchange for a 25% state tax credit, it must be seriously considered by Iowa lawyers and donors.

25 Days of Giving: Basics of the Endow Iowa Tax Credit Program

Tip 4: Combine the First Three Tips!

Let’s look again at the case of Sarah, who is donating stock per the table above. If Sarah makes an Endow Iowa qualifying gift, the tax savings are dramatic:

Tax benefits of donating long-term capital gain asset with Endow Iowa
Value of gift $1,000
Federal income tax charitable deduction ($370)
Federal capital gains tax savings ($160)
Endow Iowa Tax Credit ($250)
Out-of-pocket cost of gift $220

NOTE: ABOVE TABLE IS FOR ILLUSTRATIVE PURPOSES ONLY. ONLY YOUR OWN FINANCIAL OR TAX ADVISOR CAN ADVISE IN THESE MATTERS.

Note Sara’s significant tax savings! In this scenario, Sara receives $370 as a federal charitable deduction, avoids $160 of capital gains taxes, and gains a state tax credit for $250, for a total tax savings of $780. Put another way, Sara made a gift of $1,000 to her favorite charity, but the out of pocket cost of the gift to her was less than than a quarter of it.

giving package with green spruce

Each donor’s financial situation and tax scenario is unique; consult your own professional advisor for personal advice. I’m happy to offer you a free consult to discuss your charitable giving options. I can be reached by phone at 515-371-6077 or by email.

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25 Days of Giving: Last Minute Year-End Fundraising Tips

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For better or worse, for most nonprofits in the U.S., end-of-year giving comprises a significant portion of the charitable donation pie. In fact, between October and December nonprofits receive half of all annual donations! Yes, you read that right.

The last quarter of the year accounts for donations equal to those raised the other nine months out of the year. Even more intriguing? 33 percent of donations made in December occur on the 31st of the month and 12 percent of all giving happens in the last three days of the year….talk about last-minute donors!

snow-globe-christmas

Why is this the case? There are multiple reasons. First, time is of the essence for donors to make a tax-deductible charitable gift before January 1 of the new year. Nonprofits are also racing to meet annual fundraising goals and typically spend a significant portion of resources in order to exceed fundraising levels of the previous year. Additionally, the holiday season is synonymous with the actions of gifting, love, peace, joy, and a time to be generous. This means donors can be extra receptive to a charity’s marketing campaign that extolls these feelings that now is the best time for giving.

This is all to say, last-minute fundraising efforts can and should be used to target prospective last-minute donors. It’s a busy time of year for all, but the return for a strong end of year fundraising push can be well worth the time and energy. Consider these quick tips:

What are you Doing New Year’s Eve?

new year sparkler

Because New Year’s Eve day is such an important day for charitable donations, do not hesitate to keep fundraising through the very end of the year. Make those calls and get out the digital media campaigns. Reinforce to donors that December 31 is not too late and they’ll qualify for the charitable deduction federal income tax benefits on 2017 taxes.

Make Your Homepage Your Home Base

Your website should be the home base for year end giving. If you don’t have one yet, publish a dedicated page (or site) specifically for end-of-year giving information and brand it with your associated year end campaign. It doesn’t have to be complex, just consolidate the basics of who you are, what your mission is, and how donations help solve an issue or advance a cause on one campaign page.

homepage Mac fundraising

To that point, also take a review of your online donation page. If you can, brand it to fit with your end-of-year campaign…branded donation forms can mean up to seven times more than a non-branded, generic donation portal. Also, make sure the online donation portal is easily accessible no matter “where” the donor is coming from. Also, ensure all giving and donations portals are optimized for mobile access. (18 percent of all digital-made donations come from mobile devices.)

Ready, Set, Action

If you haven’t already, make a 60-second (or shorter) video explaining how donations to your charity can make an impact. A video can be an incredibly powerful tool for cutting through the end-of-year giving noise; videos can leave a lasting impact of imagery and tell an emotional story often better than just words or photographs can. According to a Google survey on online donation patterns, 57 percent of online donors make a charitable donations after watching a fundraising video that tells an inspiring story. This is exemplified through the ever-growing crowdfunding platforms; crowdfunding pages that have a video promo component raise four times as many donations as those that don’t. Just like your website and online donation pages need to be optimized for mobile, more than half of all videos happen on mobile.

video on iphone

Video content creation can sound scary at first if you don’t have a marketing team in place to facilitate, but it doesn’t have to be. Consider these tips, bust out your iPhone, acquire a tripod if possible, and use your laptop’s basic editing software. If you don’t have enough “last minute” time for that, shoot a video like you would for your own personal Instagram story or Facebook page.

Communicate, Communicate, Communicate

Remind your prospective donors what you stand for and what benefits they stand to gain with at least one weekly email each week before the end of year. Also, send out a special dedicated email early on both December 30 and December 31. As most year-end donors know they will in fact donate, they’re just undecided about how much they will actually give. Make it ridiculously easy for donors to “see” what their donation could do.

In terms of timing, for example, on December 31  send out follow-up emails to only those donors who didn’t open the first iteration of the communication. Stay on message with all social media postings and branded links back to your donation page.  

Celebrate!

After the year-end fundraising push, don’t forget to reward your nonprofit’s hardworking staff and volunteers! Refresh, refocus, and get ready to tackle your next year’s fundraising goals.

Happy new year headband

What year-end fundraising tactics have worked well for your charity? If you’d like to discuss any aspect of nonprofit fundraising, don’t hesitate to reach out via email (gordon@gordonfischerlawfirm.com) or phone (515-371-6077).

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25 Days of Giving: 9 Quotes to Inspire Charitable Gifts

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christmas words giving

Thanks for the reading the 25 Days of Giving series…almost as good as this whiskey advent calendar, am I right? Each day through Christmas, I’m covering different aspects of charitable giving for both donors and nonprofit leaders. Have a topic you want covered or question you want answered  regarding charitable giving? Contact me.

Sure, info on tax incentives is important and details on donating stock are interesting, but sometimes just a good quote has the power to spark giving. According to this study, 31% of ALL online charitable giving in the U.S. happens in the month of December! If you’re a nonprofit looking to increase end-of-year donations or even a donor seeking to inspire your friends and family to give charitably, these quotes could come in handy.

The true meaning of Christmas? Giving.

giving snowflake quote

Giving makes you happy.

Happiest giving quote

Not giving is not an option for the causes you care about.

Doing nothing giving quote

Giving while you’re living means making a difference in the future.

Real generosity

Giving can be complex, but it doesn’t have to be. Enlist an expert to help you meet your giving goals.

Aristotle giving quoteGiving is a privilege

Rockfeller giving quote

Giving “costs nothing.”

giving quote free

What you give is what you get.

get out of this world giving

Giving means a lasting legacy.giving immortal quote

If you want to share one of these quotes, don’t hesitate to tag Gordon Fischer Law Firm on Facebook, Twitter, and Instagram.

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