As part of our name change from Servant Christian Community Foundation to National Christian Foundation Heartland, we’ve moved the blog to a new location. To read the latest posts and catch news from the generosity movement, visit:
The Supreme Court yesterday handed down a decision (ACSTO v. Winn) that experts consider a win for proponents of parental choice in education. But the case has other significant ramifications for charitable giving, as explained by National Christian Foundation’s President, David Wills:
Tuesday’s ruling on parental choice in education is undoubtedly a significant victory for several states, including my home state of Georgia. However, there is another angle at the heart of this case that is quite important to us all: the nature of dollars deducted as charitable donations. Are charitable gifts government money or private money? The answer over the last several years coming out of DC has clearly been the former. In fact, you may have heard me mention that the the term ‘government subsidy’ is often used by our elected officials and their key staffers – both Republican and Democrat – when describing any funds that generate a charitable income tax deduction.
Whose Dollars Are Your Dollars?
The majority opinion makes the point that there is a distinction between a government appropriation and a personal expenditure that results in a tax benefit. The former is public money. That is to say, when the government collects tax revenue and then determines where those funds are to be spent, that is money over which the government does and should have control.
On the other hand, when a taxpayer makes a charitable gift and receives a deduction for doing so, the reality of the deduction does not change the nature of the funds. The funds retain their status as private, non-governmental dollars. The individuals who have earned and given those funds retains the private right to determine the use of those funds. Simply, a deduction or credit does not cause such funds to become the property of the federal government.
At first blush, one might think, ‘Of course, those are private funds.’ Don’t think so too quickly…and read Justice Kagan’s dissenting opinion. Though I disagree with it, it is well reasoned. We are to be thankful that Justice Kennedy sided with the conservatives on the court and a 5-4 decision was rendered. He essentially said that there was no standing for bringing the suit because the taxpayer (Winn) was not harmed because the funds were not governments funds.
Kennedy wrote: “A dissenter whose tax dollars are ‘extracted and spent’ knows that he has in some small measure been made to contribute to an establishment [of religion] in violation of conscience…” On the other hand, with a tax credit the funds were never collected in the first place. “When the government declines to impose a tax,” Kennedy wrote, “there is no such connection between dissenting taxpayer and alleged establishment.”
Inside The Progressive Mind
Kagan countered by calling the distinction between tax appropriations and credits “arbitrary.” She wrote, “Either way, the government has financed the religious activity. And so either way, taxpayers should be able to challenge the subsidy.”
Here is an excerpt from the NYT regarding Kagan’s dissent:
In her dissent in the case, Arizona Christian School Tuition Organization v. Winn, No. 09-987, Justice Kagan said the majority’s position was an elevation of form over substance. “Taxpayers experience the same injury for standing purposes,” she wrote, “whether government subsidization of religion takes the form of a cash grant or a tax measure.”
She offered examples. “Suppose a state desires to reward Jews — by, say, $500 per year — for their religious devotion,” she wrote. Would it matter to taxpayers offended by the practice whether the reward came in the form of a government stipend or a tax credit?
“Or assume,” she wrote, “a state wishes to subsidize the ownership of crucifixes” in one of three ways. It could purchase them in bulk and distribute them; it could reimburse buyers with a check; or it could pay with a tax credit.
“Now, really — do taxpayers have less reason to complain if the state selects the last of these three options?” Justice Kagan asked. Justice Kagan said the majority’s opinion was particularly surprising because the court had never thought the point even worth arguing over. “To the contrary: We have faced the identical situation five times — including in a prior incarnation of this very case! — and we have five times resolved the suit without questioning the plaintiffs’ standing,” she wrote.
Note where she uses the phrase: ‘government subsidization of religion’. When this belief becomes widespread, the charitable income tax deduction (or in this case a tax credit) for contributions to any religious organizations will eventually end.
A WSJ op-ed with a different slant began, “The Supreme Court’s big school choice decision yesterday is notable mainly for its insight into the progressive mind. To wit, no fewer than four Justices seem to believe that all wealth belongs to the government, and then government allows citizens to keep some of it by declining to tax it.”
Hanging in the Balance
This decision is a good news case for charitable giving, but let us not be lulled into thinking we have won the war. We have only won a battle and are only one vote away from sweeping changes regarding the taxpayer and religious activity of many kinds.
One thing that is needed now are well reasoned law review articles that substantiate the ruling of the majority in this case and help under gird this ruling for future courts. A great deal is hanging in the balance.
David Wills serves as president of the National Christian Foundation in Atlanta, Georgia. He lectures throughout the country on issues involving foundations and nonprofit organizations, the transition of wealth, responsibility from one generation to the next, as well as tax and spiritual issues in charitable giving. Learn more about the National Christian Foundation and our other affiliates at www.servantchristian.com.
A thankless person cannot be a generous giver. Pastors and nonprofit leaders have been wringing their hands that Evangelical Christians typically give only 2.5% of their income. Why? In part, because we do not believe that God loves us deeply, provides for our every need, and has given us an amazing gift of freedom from sin and a right relationship with Him.
Kids are honest; they have not learned the adult behavior of politely disguising unpleasant emotions. My three-year-old recently received a dollar bill in the mail from Grandma. He almost immediately cast it aside and only begrudgingly called Grandma to say thanks. He literally didn’t know the value of $1 because we hadn’t taught him that those dollars have buying power. (We’re now working on that).
Contrast that reaction with the scene when I brought home a box of chocolate for his valentine’s present. He shook with joy and couldn’t wait to offer one to me and one to his dad because he was so excited about his gift.
I have to ask myself: what does my giving—of time, talent, and treasure—say about how thankful I am to God? You?
I’ve seen it many times. A Christian family decides they want to formalize their giving. They go get advice from their lawyers and accountants who often are not Christians. Those advisors have the frame of reference of starting a private foundation, so off they go.
The first few years may be bumpy as they learn the ropes of minimum distributions, excise taxes, the types of organizations they can support and, of course, filing the tax return. But the problem they miss–and their advisors miss–is what happens when the founders pass away.
When the founders pass away, the foundation typically will have a set of bylaws allowing for the appointment of new board members. New board members are appointed, who realize that they are sitting on top of treasure. In other words, they have the opportunity to support organizations. The first generation successors are often kind to the wishes of the founders and tend to generally support the same organizations.
However, as more board members get added and as more generations intervene, the wishes of the founders get muted. Everyone tends to forget why the founders supported a particular organization. Accordingly, the wishes and desires of the foundation fall away, and values shift through generations. The foundation often morphs into something other than Christian.
Certainly, some wise founders associated with Christian council may wisely put in enough road blocks and provisions in the bylaws to keep the foundation Christian. But few do. If they make these protections, then it can be an appropriate vehicle.
One of the best solutions is using a Christian community foundation. A donor advised fund can be set up, which operates much like a private foundation. The tax benefits are higher, and the administration is simpler. But one of the key safeguards stems from the fact that the foundation is organized as Christian: it cannot distribute to anti-Christian organizations. To do so would put its own tax exempt status in jeopardy.
Thus, a Christian family engaged in family giving can rest assured that no matter what beliefs subsequent generations adopt, their original purpose of Christian giving will remain. I find it interesting that of the 100,000 private foundations in the country only 4,500 are Christian foundations which take applications. (See www.christianfoundationgrants.com). It causes one to wonder how the remaining 95,000 started out and then where they ended up.
William F. High is the President/General Counsel of the Servant Christian Community Foundation (www.servantchristian.com). Servant’s mission is to inspire, teach and facilitate revolutionary biblical generosity. He may be reached at whigh@servantchristian.com.
Would you walk into the hospital room of a total stranger and ask them if you could help with fundraising for their medical bills? That’s exactly what a friend of mine (we’ll call him Jim) did Monday afternoon.
The Kansas City Star ran an article last Friday about a girl paralyzed from a recent skiing accident. On the same day her dad lost his job. Jim promptly called me and said, “What I’m about to do is probably a really bad idea. My wife will not want me to get involved, but I have to help this family.” The article mentioned the family was opening a bank account to raise money for the medical bills. Jim knew they’d raise more money if people could donate with tax-deductible dollars. So Jim started making calls.
The calls didn’t get him anywhere so on Monday afternoon, he stopped by the hospital to introduce himself to the family. That’s it–a total stranger walking into a hospital room to offer help. Talk about guts and inconvenience. I’m sure Jim had “more important things to do” with four of his own kids at home and a thriving law practice.
Why would someone do such a thing, even knowing that meddling is a bad idea? Short answer, the Holy Spirit. We all hear those nudgings: “stop and help those people in the snow”, “go talk to that man on the corner with change in his coffee mug.” It’s easy to dismiss such thoughts, especially when we’re busy. The excuses are easy: “I have to pick up the kids,” “he looks scary”. Giving of our time is perhaps harder than giving money. We resent being inconvenienced. But what would happen in our community–in our own hearts–if we headed these “bad ideas” more often?
The past two years—from 2008 to 2010—have been a roller coaster ride. It’s been amazing to witness first hand.
A friend of mine runs a charity and they were within 6 weeks of shutting down when a major gift landed. Here in 2010, they landed 3 major gifts. The year was unremarkable but for those three major gifts.
On the other hand, another friend of mine was riding high in his business. He was printing money and his company was on the swing toward 1,000 employees. But the crash of 2008 occurred. He’s down to less than 20 employees. The spiral downward has been dizzying.
What are the lessons?
First, the major gift is perhaps more important than it has ever been. Receiving it—or not—can make or break a charity. Second, when you have the opportunity to make a major gift, take advantage of it. Just make it. Who knows when times or fortunes will change?
In Luke 12, Jesus chastised the rich landowner for storing up treasure for himself. His words were harsh:
You fool! This very night your life will be demanded back from you, but who will get what you have prepared for yourself?’ So it is with the one who stores up riches for himself, but is not rich toward God.”
Give now, and make impact now!
William F. High is the President/General Counsel of the Servant Christian Community Foundation (www.servantchristian.com). Servant’s mission is to inspire, teach and facilitate revolutionary biblical generosity. He may be reached at whigh@servantchristian.com.
Giving away stock is a great way to give, and positive returns in the markets have caused many donors to start looking at this strategy harder. Here is my stock giving checklist, answering the most common questions I receive for stock giving.
1. Look at stocks that have been held more than one year. In order for you to deduct the fair market value of the stock, the shares need to be considered “long term” (held more than 1 year). For stocks held one year or less, you can only deduct what you paid for them.
2. Look for the most appreciated stocks. When deciding which stocks are the best candidates to give, look for those that have had the highest increase in value since you’ve purchased them. When giving appreciated stock, the full value can usually be deducted (see above point) without recognizing any of the capital gains. Let’s say you would like to give $100, and you have two stocks worth $100: Stock A was purchased at $30 and Stock B at $80. By giving the Stock A, you can still deduct the $100, but you never have to recognize the $70 worth of gain ($100-$30). If you have stocks that have depreciated, most financial planners recommend you sell them first, then give the cash.
Once you’ve selected the stocks, the transaction is really two simple steps. Using a “donor advised fund” — like Servant’s Giving Funds — allows you to give in one transaction, then distribute easily to multiple organizations at a later date.
1. Deliver a “Letter of Authorization” to your broker. Only you can initiate a transfer from your account, so your broker will need to receive instructions from you (usually signed). You will need to include the nonprofit’s account information. For stock gifts to Servant, we’ve created this form to help you get all the needed information to your broker. It is imperative that you give your broker time to complete the transaction in this year. Some offices require several business days to complete transactions.
In order to get a tax deduction in 2010, the stocks have to be received by the nonprofit’s brokerage account no later than December 31.
2. Notify your charity of the gift. Once the gift has been initiated, notify the nonprofit that the stock is coming, noting any recommendations for its use. For gifts to Servant, we prefer you use the form linked above to let us know about the gift. At minimum, we will need to know (a) your name/address for the receipt, (b) number/type of shares gifted, (c) the donor advised fund toward which you’re giving.
1. Receive a receipt from the charity. You will need to retain this for your tax returns. Receipts from the foundation will include the total mean value of the gift on the day it was given. This price is the average of the highest and lowest traded prices for that day. Work with your tax advisor to determine the necessary reporting on your tax return. IRS Form 8283 will be required if your noncash gifts for the year are above $500.
2. Give the proceeds! This is the best part of the entire process, sending the money on to nonprofits! For foundation members, log on to your fund at www.servantchristian.com or call our office at (913) 310-0279 to schedule grants out of your donor advised funds!
There is still time to give a 2010 stock gift! Always make sure you consult your financial planner and tax advisor for advice tailored to your individual situation.
Today, Congress extended the IRA Charitable Rollover Provision to December 31, 2011. This new law gives you another opportunity to make an annual gift of up to $100,000 from your IRA to a public charity(s), if you qualify. Although gifts to donor-advised funds (such as your Servant Giving Fund) are not allowed, we can help you establish a “Designated Fund” that allows you to (a) contribute from your IRA, (b) designate which charity you wish to receive the funds, and (c) advise Servant about the timing of grant checks to the charity – as well as the investment of the funds prior to distribution.
Can I rollover funds from my IRA to charity for the 2010 tax year?
Yes, but only if your gift is made by January 31, 2011. Gifts made from February 1 – December 31, 2011, will qualify as 2011 gifts.
Who qualifies?
During 2010 and 2011, lifetime distributions from Traditional IRAs by plan owners who have attained at least age 70 ½ (on the date of distribution) to charity may distribute up to $100,000 per year from their IRA directly to a charitable organization and exclude the contributed amount from their gross income for tax purposes. This amount can be counted towards the annual mandatory IRA distribution.
Who can receive IRA distributions at Servant?
IRA distributions can be made to field of interest funds, designated funds, scholarships, and restricted/general endowments in which donors or their designees have no advisory rights. IRA distributions cannot go to a donor-advised fund, a supporting organization, or a private foundation. The distribution cannot be made in connection with a Charitable Gift Annuity or Charitable Trust, and the donor may receive no quid pro quo benefits in exchange for their contribution.
So, now that I qualify and my IRA qualifies, how do I do this?
1. Contact your IRA custodian. The custodian will make the check payable directly to Servant Foundation.
2. Establish your Designated Fund(s) with Servant indicating the recipient charity(s).
3. Obtain a written receipt from Servant.
4. Work with your accountant to determine the exclusion on your tax return and any net taxable income amount which will need to be included on your 1040.
5. Servant will distribute the funds in accordance with your Designated Fund Agreement.
To learn more about IRA Charitable Rollovers with Servant, call Jonathan at 913-310-0279.
UPDATE: On December 17, 2010, the President signed this bill into law, extending the IRA Charitable Rollover for 2010 & 2011. Read about doing this through Servant Foundation here.
As part of the ongoing tax debate in Washington, last night the Democrats in the Senate released The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, their version of the bill central to the debate over the extension of the Bush tax cuts. It includes a number of popular extenders that were not included in the House version, including the ability for some taxpayers to make gifts to charity from Individual Retirement Accounts (IRAs).
The provision, which originally expired on Dec. 31, 2009, allows taxpayers over age 70 1/2 to distribute gifts of up to $100,000 to charities from an IRA without paying taxes on the gifted amount. This helps retirees meet their minimum distribution requirements without boosting their incomes. If this new bill passes, this would be available until Dec. 31, 2011. Gifts made in January 2011 could also count towards 2010.
Political pundits expect the bill to meet little resistance in the Senate, but it may face difficulties in the House. Congressional Democrats, disgruntled over the President’s compromise with the Republicans, are expected to cause some delays.
Though donor advised funds do not qualify for IRA charitable distributions, Servant Foundation offers donors the ability to open “designated funds” to receive these gifts. Designated funds are similar to DAFs, but require the donor to name the recipient charity up front. The donor then advises Servant on the timing for sending grants out to the designated charity. Donors can establish multiple designated funds if a number of charities are intended as recipients.
For more information on designated funds or questions on IRA distributions, contact Jonathan at 913-538-7842 or jharrison@servantchristian.com.
With the rebound in the market, you may have some gains in your stock investments. You can rebalance your portfolios and gain more money for charitable giving this season when you give these appreciated securities through Servant Foundation. Any stocks, bonds, or mutual funds that have been held for more than a year and are worth more than the purchase price can be given directly to charity through a Servant Giving Fund… a much wiser solution than liquidating the stock and locking in a capital gains tax.
Clay Carlile had a nice run in the stock market recently and was getting ready to sell some of that stock. But then he thought about the taxes. He says, “I thought it sure would be great not to have to pay the tax on this. I had heard people say that the wisest way to give is not cash, but assets.” So he donated the stock to his Giving Fund, received a tax deduction for the fair market value of it, and avoided the capital gains tax. Now he has a lot more funds available for giving to his church and favorite charities. If you have stocks, bonds, or mutual funds that you’ve held for more than a year and are worth more than you paid for them, consider donating them to your Giving Fund before January 1.
Call us at 913-310-0279 or email Jonathan if you would like to talk with us about gifting appreciated securities.
Live the Generous Life 