Hello, and thank you for being part of the community foundation!
We are hearing from many of you that philanthropy and charitable giving have been topics of your conversations this summer with family and friends. That’s music to our ears!
As you gather around the dock, patio, or barbecue, we encourage you to think about ways you’d like to finish the year strong to further your charitable goals. Big or small, your goals are important to us. Some of you may be setting a goal to establish your donor-advised or other type of fund with the community foundation before 2023 wraps up. Others who already have a fund at the community foundation may have set a goal to learn more about how to involve your children and grandchildren in your charitable giving plans. Some of you may be exploring making a planned gift to your fund at the community foundation to further your legacy for generations to come.
Whatever your charitable giving goals, the community foundation is here to help. In that spirit, this newsletter features topics that we hope will help you refine your goals and celebrate your successes in your support of your favorite causes.
Here’s what we’re covering:
- How regrets can actually help you grow your charitable giving
- What’s really going on at the intersection of NIL money, college sports, and tax benefits
- What you might consider reading and reviewing as you evaluate your 2023 charitable giving plans
Thanks so much for being part of the community foundation.
Wishing you all the best,
Your community foundation
Unlock the unexpected power of regret to grow your charitable giving
Not surprisingly, financial regrets are common, with those related to personal finances among the most frequent. Of recently surveyed American retirees, 75% wish they’d started saving earlier, and 62% wished they’d saved more money for their golden years.
On the personal side of the equation, people frequently also regret failing to show kindness when someone was in need. These types of regrets can be uncovered in the flipside of the well-documented motivations for giving in the first place. In short, people want to help others and, upon reflection, they often regret not doing so.
The topic of regret is getting a lot of play. In his 2022 book, The Power of Regret: How Looking Backward Moves Us Forward, Daniel Pink describes the results of his years of research on human regret. Pink identifies different types of regret and offers readers the perspective that not all regrets need to act as negative forces if they inspire you to behave differently moving forward.
The experienced team at the community foundation can help you avoid charitable giving regrets, especially by making it easy for you to activate your charitable intentions in the most tax-effective ways possible to make an even bigger difference in the causes you care about.
Get organized with a donor-advised fund.
If you’ve already established a donor-advised fund at the community foundation (or if you are considering doing so!), you know that the community foundation handles all of the logistics, including providing 501(c)(3) status for your fund so that your contributions are tax deductible, facilitating your contributions to the fund in the form of cash or stock, processing disbursements to your favorite charities, and handling all of the necessary tax documentation. A donor-advised fund makes it so much easier to organize and maximize your charitable giving.
Grow your philanthropy through planned giving.
In many cases, the community foundation can help identify ways you can support your favorite charities at even higher levels than you thought possible by deploying planned giving techniques such as bequests and charitable remainder trusts. Designating your fund at the community foundation as the beneficiary of your IRA, for example, is especially powerful.
Rally other fund holders and donors.
If you’ve established a field-of-interest or designated fund at the community foundation, don’t forget that you can rally friends and family to join you in growing that fund. Philanthropic individuals and families are often open to new ideas about where to invest their charitable dollars. Many people look to the community foundation as a point of validation that the IRS’s boxes have been checked and for peace of mind knowing that the fund is benefiting from both the oversight and advocacy of a dedicated community institution. What’s more, it’s rewarding as a fund holder to get to know other fund holders and donors who are involved with the community foundation and who also want to explore ways they can support the various funds featured in the community foundation’s marketing materials and on its website.
If you’re wishing you’d been able to do more for your favorite causes earlier in your life, there’s no need to hold onto those regrets! The community foundation can help you build a charitable giving plan to reflect a lifetime of strong commitment to the organizations in our community. We look forward to working with you!
NIL collectives: A cautionary tale about private benefit rules
In recent years, universities and their donors have organized what are known as “NIL collectives” to develop revenue opportunities for college student athletes’ “name, image and likeness.” The NCAA approved its NIL policy on June 1, 2021, and during the first year of the policy alone, college athletes collectively earned more than $900 million from NIL payments.
Donors to higher education athletics have rallied around these opportunities to make what many thought would be tax-deductible contributions to fundraising entities established by universities to grow college NIL programs. Not so fast, said the IRS in a May 23, 2023 memo: many NIL collectives are not tax-exempt organizations after all.
The problem with NIL collectives, according to the IRS, is that they are organized for a “substantial nonexempt purpose.” In other words, these collectives serve the private interests of student athletes in ways that are more than simply “incidental” to any charitable purpose or public benefit.
Although the IRS issued its recent commentary in a “general legal advice memorandum,” which is non-binding, this development is nevertheless still important in sorting through the tax issues surrounding NIL-related activities. What’s more, the IRS’s May 23, 2023 memo appears to reflect a change of opinion from guidance issued previously. To be sure, the discussion is not over yet.
Regardless of where the law ultimately lands on its treatment of NIL collectives, the IRS’s advice memo is a terrific reminder that public versus private benefit is at the core of an organization’s ability to achieve and maintain exempt status. A long-standing IRS doctrine for ensuring that 501(c)(3) organizations truly serve the public good, the concept of “private inurement” pops up occasionally to remind those involved with charitable giving that the IRS takes this seriously. Simply put, tax-deductible dollars cannot be used for private benefit. The whole point of the charitable tax deduction in the first place is to incentivize taxpayers to use their own money to help others. Organizations that attempt to benefit from tax-exempt status while also providing non-charitable benefits to individuals or businesses stand to lose their exemption altogether. You can’t have your cake and eat it too!
As always, that community foundation is here to help you navigate charitable giving in all of its forms, whether you are supporting your alma mater, local social services organizations, the arts, or other causes near and dear to your heart.
Summer reading picks
A recently-released report identified the primary tenets of generosity according to Americans: how they define it; what it means to them; where their generosity comes from; its importance to society and their expectations. The report also identifies different donor types and how generosity is reported on in traditional media and social media channels.
More big donors
The most recent “Who’s Who” additions to the Giving Pledge, where wealthy donors pledge the majority of their assets to charity, was released in June. Many of the additions to the list are from the tech sector, including the twin sister of a donor who took the pledge in 2022. In a rare reversal, another recent group member was removed from the illustrious list.
Qualified Charitable Distributions
Remember, if you have reached age 70 1/2, you may be eligible to make annual distributions from your IRAs up to $100,000 per spouse directly to a designated, unrestricted, or field-of-interest fund at the community foundation or other qualifying public charity. Called Qualified Charitable Distributions, or “QCDs,” these transfers count toward your Required Minimum Distributions (if you are subject to those rules) and avoid the income tax on those funds. Plus, those assets are no longer part of your estate at death, which avoids estate taxes, too.
Keep in mind the benefits of deploying a “bunching” strategy to activate your present and future charitable intentions. By making gifts to your donor-advised fund, you can combine, or “bunch,” years of contributions up front into one giving year for contribution-year tax deductibility purposes, and then activate gifts year by year in the future to your favorite charities. This can be especially advantageous in high-income years and to exceed standard deduction thresholds.
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.