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Based on recent reports on charitable
giving in America in 2009, many veteran
fund-raising professionals are now
scheduling appeals and solicitations for the critical
fall giving season. Many are wondering how
charitable giving will fare during the remainder
of 2010, as about one quarter of all charitable
gifts are typically received in the final weeks of
the year. In spite of an uncertain economy and a
potentially confusing tax picture, many believe
this fall could bring the best year-end giving
season since 2007.
Is the worst over?
As we all know, the “Great Recession” has created
a challenging fund-raising environment since 2008.
People traditionally give from discretionary income and
wealth, both of which have been affected negatively
by the current recession. High unemployment and
static salaries along with falling real estate and stock
prices have resulted in a difficult fund-raising climate.
In spite of the recent positive growth of the economy
and rebound of personal wealth (see page 2), questions
remain about the overall health and direction of the
economy.
This spring, the National Bureau of Economic
Research, which monitors business cycles of recession
and recovery, met to discuss the status of the economy.
The Business Cycle Dating Committee found that
though most economic indicators were turning in a positive
direction, it would be prudent to wait until more
accurate revised figures are available before deciding
the recession has ended.
On the positive side, unemployment has dropped
in recent months and household net worth has seen a
substantial positive rebound over the past 12 months.
Also, in spite of the worst economic recession since the
Great Depression, most individuals have continued to
give, and charitable giving continues to be relatively
resilient in the face of difficult economic conditions.
Taking charge
It is especially important that those responsible
for fund raising take charge of those efforts this year
and make sure solicitation plans are fine-tuned for the
remainder of the year. Ask other members of the fund-raising
team to decide how to improve their efforts this
fall. Cross-train staff members and make sure that
those in contact with donors understand major and
planned gift strategies or techniques that are most
likely to work in today’s challenging environment.
Increase the level of personal contact with donors and
prospects who have the capacity to make larger gifts.
Ask existing donors to consider additional gifts this
fall. Supply prospective donors with further information
to assist them with philanthropic gift decisions
this year. Pay special attention to thanking and recognizing
donors. Personal visits, notes, and telephone
calls will be particularly important. Remind and inform
donors again and again about the programs that their
gifts make possible.
Special challenges in 2010
In addition to making sure the basics are covered,
recognize that there are special challenges and
opportunities to consider in 2010. Are you prepared to
respond to donors who tell you that their advisors are suggesting they put off this year’s gift until 2011
to “take advantage of greater tax savings” then?
A variety of tax cuts enacted by President
Bush are scheduled to expire after 2010. Financial
planners may be advising clients who are anticipating
a hike in income tax rates to accelerate
income now and hold off on charitable giving until
2011 when higher tax rates may make their deductions
“more valuable.”
You may wish to remind your donors that any
income they do not deduct in 2010 will be subject
to this year’s income tax rates, as well as other
taxes and fees that may or may not come into play
in 2011. For example, suppose a donor is considering
giving $10,000 this year. If he makes the gift
in 2010, he will save up to $3,500 in income taxes
on this year’s tax bill. If he defers the gift to 2011,
he will have to pay the $3,500 in taxes, which will
have the effect of reducing the $10,000 he had
planned to give to just $6,500.
Other less obvious variables may come into
play. The donor may find he is subject to the
alternative minimum tax (AMT) in 2011, or the
administration’s proposal to cap charitable deductions
at 28% may be adopted. In either case, the
donor may potentially save more by making a gift
in 2010 rather than waiting until 2011.
Additionally, high-income donors are scheduled
to once again be subject to a 3% reduction rule for
itemized deductions in 2011. In this situation, if
the donor decides to give $10,000 worth of income
next year, the 3% reduction rule could result in the
elimination of all or a portion of the “extra savings”
he expected to enjoy by delaying the gift.
The determination to delay a deduction must
also take into consideration other factors, such
as unforeseen changes to the tax system, income
level, desire to complete a pledge, urgency of mission,
and the time value of savings.
In today’s uncertain world, the ability to make
a gift this year and to claim an offsetting deduction
for its full value may be “worth” more to a
donor than the conventional wisdom of deferring
deductions to a year with higher tax rates would
indicate.
Portions of this article are based on the Sharpe webinar “How to Win in 2010.”
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