Posted November 1st, 2005

2005 May Still Be a Year of Opportunity

A record number of Americans have responded to the natural disasters of 2005 with extra-ordinary generosity. And Congress has responded as well. In order to encourage gifts to all charitable organizations this year-end, Congress enacted the Katrina Emergency Tax Relief Act of 2005 (KETRA). This legislation is designed to avoid a repeat of the 2001 year-end giving season, when the nation’s tax laws placed many wealthy donors in a situation where they felt they must choose between their usual charitable interests and those charities that had an immediate impact on the lives of those affected by the events of 9/11.

How KETRA may help

Given the downturn in charitable giving at many organizations after September 11, Congress now feels that donors who responded generously to the demands of recent natural disasters may need extra relief in order to maintain their traditional charitable giving levels to all nonprofits this fall. By reducing or eliminating some of the restrictions on charitable deductions, KETRA will no doubt encourage charitable gifts between now and the end of the year. And the temporary nature of these opportunities will hold great appeal to a number of potential donors who were afraid they would otherwise have to curtail their giving this fall.

Most fundraisers have heard a donor say, “My accountant tells me I can’t give any more this year.” The change with the most widespread impact is the elimination of the 50% of AGI limit that is normally applied to charitable deductions of cash gifts. For cash gifts made from August 28 to December 31, 2005, donors may deduct up to 100% of AGI. Such a change will be most likely to affect your top donors—those whose gifts may have the greatest impact on your fund-raising totals for 2005. Be certain to get the word out to these donors in time for them to take advantage of this special opportunity this year. The sooner they hear about KETRA, the more likely it is that they will have time to make a substantial gift before the end of the year.

Other high-income donors will be pleased to learn that the usual limit that reduces their charitable deductions by 3% has also been lifted for the remainder of the year. Again, your top donors may not want to miss this special opportunity.

Consider also reminding donors who have reached the age of 59½ that they may want to consider withdrawing funds from retirement accounts that they do not believe they will need in the future and using the cash to complete charitable gifts. Such gifts made before the end of the year may be deducted up to 100% of the donor’s AGI.

Business as usual?

KETRA offers special and temporary opportunities that may appeal to many donors. Re-member, however, that this is in some ways a year-end giving season like any other year. All of your donors need to be reminded of the usual tax benefits associated with gifts at this time of year. Consider sending information on KETRA to your top donors while sharing year-end giving information with the rest of your constituency.

Many charitable gifts come in forms other than cash, such as securities, real estate, and tangible property. Such gifts are unaffected by KETRA but may still hold appeal to many donors this year-end.

Also keep in mind a key component of effective fund raising—thanking your donors for their generosity. Depending on the size of the gift and other factors, donors may be thanked in various ways. But whenever possible all donors should be thanked for their gifts. Remember that some large bequests come from frugal donors who never gave more than $5 or $10 gifts in their lifetimes. Thanking all donors lets them know that you appreciate their thinking of you and will encourage them to think of your charity again when they are drafting their wills.

After the tsunamis, earthquakes, and hurricanes of the past year, many donors may have already given more to charity than they had planned. However, remember that your usual donors choose to give to your charity for a reason—and that reason has not gone away. Remind your donors this fall that you still need their support, and let them know how the provisions of KETRA may help them give more than they had previously thought possible.

For more information about the provisions of KETRA, see www.sharpenet.com/ketra.

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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