Charitable IRA Extension Has Passed the Senate

12/18/15, 11:53am CST

The Senate has passed the bill that extends the charitable IRA rollover. Since it is widely expected that the President will sign in the next few days, we sent out an eblast with language you can use in donor communications. If you did not receive that and would like that information, please email with “ira donor language” in the subject line and we’ll forward the eblast to you.


Keep checking back here for updates. More details on the websites below.

The House Has Passed Bill Extending Charitable IRA Rollover

12/17/15, 4:21pm CST

Earlier this afternoon, the House passed the “tax extenders” bill which includes a provision extending the charitable IRA rollover. The bill is expected to be voted on by the Senate on Friday, December 18. Currently, the bill is expected to pass the Senate and be signed into law by the President. More updates as they come.

What’s Going on with the Charitable IRA Rollover?

Updated 12/18/15, 9:58am CST

The IRA Rollover provision, which allows individuals over 70½ to make direct distributions from their IRAs to a qualified charity on a tax-free basis, is part of a larger bill that includes a number of popular provisions that are widely expected to be passed before the end of the year.

In the past, the charitable IRA provision has been extended so late in the year that many donors had already taken their minimum required distributions. Nonprofits often found it impractical at that point to communicate with prospective IRA contributors in time for them to act before a December 31 deadline.

Keep in mind that in every year the IRA gift legislation has been extended the benefits have been retroactive to the beginning of that year. Under these circumstances, some have suggested that potential donors adopt the Nike slogan and “Just Do It.” If the provision is passed, the gifts are covered; if the provision is not passed, the amount directed to charity will be reportable as income but will also count as a charitable deduction, resulting in a wash for tax purposes for those who itemize and can fully deduct the gift amount.

Here are a few updates we’ve seen this week:

12/15/15, 6pm ET:

12/16/15, 9:43am ET: Looking like Friday before the House votes on this.

12/16/15, 12:21pm ET: The White House weighs in:

12/16/15, 12:17pm ET: What is in the proposed tax deal?

12/16/15, 9:24pm ET: changes to proposed tax bill rejected, bill still expected to go to vote on Friday. 

12/17/15, 1:03pm ET: More progress on the tax bill in the House.

12/17/15, 1:30pm ET: Senate leadership saying there will be no delays on the tax bill vote.

12/18/15, 10:54am ET: Senate agrees to move spending bill to a final vote, which should take place soon.

Keep checking back here for updated information on the Charitable IRA Rollover. We’ll also be sending out an email to everyone with some suggested donor language you can send to your supporters as soon as the law has passed and been signed.

When Is a Gift Complete for Tax Purposes? Pt 1

Money Tied With A Ribbon On The Computer Keyboard On The Rough Wood Background

Another way to ask the question is, what is the date of gift? This question is important for two reasons. First, the date of gift is the valuation date for federal income tax purposes. Second, the date of gift is the date on which the gift is made for tax purposes. In year-end giving, the date of gift can be crucial; it can mean the gift is made in December rather than in January, or vice versa.

Checks – A gift made by check is complete for tax purposes [a] when the check is hand-delivered to someone authorized to accept the check as a donation or [b] if the check is mailed by USPS, on the date of mailing (which may or may not be the postmark date), assuming the check clears the donor’s bank in due course.

Stock certificate accompanied by stock power – Same basic rules here as for checks.

Stock that is wired DTC – The tax law is unclear here. The gift may be complete for tax purposes on the date the stock is wired out of the donor’s account (DATE 1), or it may be complete on the date the stock lands in the donee organization’s account (DATE 2). No one can say for sure whether it’s Date 1 or Date 2. The donor, not the donee, must decide whether to use Date 1 or Date 2 for purpose of claiming a charitable deduction.

PART II will explore the date-of-gift rules for real estate, personal property, gift annuities and charitable remainder trusts.

PART III will explore a critically important related matter: gift receipts.

Stay tuned and contact a Sharpe Group representative if you have questions pertaining to a date of gift.

by Jon Tidd

A Helping of Gratitude, Please

Gratitude has always been said to be good for the soul. A recent NPR report on a study of health benefits of gratitude suggests that it’s good for the heart too.

Every day, charitable organizations express gratitude for their donors. One of the most important things fundraisers do is thanking those supporters. Over the years, we’ve published stories in Give & Take on the importance of gift acknowledgement and tips for thanking your donors. Here is a short list.

The Importance of Saying Thank You
Boost Relationships and Funding with Thanks
Dos and Don’ts of Thanking Donors

Taking a look at your donor acknowledgement practices is worth doing from time to time. And this season is a time to consider those things for which we, as individuals and organizations, are grateful.

Happy Thanksgiving!

Just the Facts

“Just the facts, ma’am.”

That’s what the Jack Webb character always said on Dragnet. The same applies to charitable gift planning, to donor situations, where the law is usually clear, but what’s often unclear are the facts.

For example, a donor says, “I own a corporation that has some real estate. I’d like to give the real estate.” This is the sort of statement one hears working in gift planning. It cannot be taken at face value, however, because taken at face value the statement is meaningless.

Why meaningless? Two reasons:

The donor doesn’t “own the corporation.” The donor owns stock in the corporation. That’s what the donor owns.

The donor can’t give the real estate, because he doesn’t own it. The corporation does. If any party is going to give the real estate, it’s going to be the corporation. Which possibly leads to various tax questions, such as: if the corporation makes the gift, who—if anyone—gets a charitable deduction for the gift? But at least the tax questions are questions of law, which ordinarily have clear answers.

Let’s consider the term “charitable deduction.” A perfectly good term that’s sometimes used in a misleading way. For example, a letter to a donor says that the donor can get a “charitable deduction” for giving her vacation house. What’s possibly misleading here? It’s true that the donor may get a federal income tax charitable deduction, subject to various conditions and limitations. The donor, however, may not get a state income tax charitable deduction, depending on the donor’s state of residence. So the statement about getting a charitable deduction is factually overbroad.

And, by the way, no charity “gives charitable deductions.” Charities issue gift receipts. The tax law in some situations allows one to claim a charitable deduction. Focus on the facts.

Words matter; facts matter. Muddled words create a muddled fact picture, which inhibits gift planning. Bottom line: gift planners need to be both word managers and word decoders . . . so the facts are clear. So gift planning can move forward rationally. If you need help managing words you want to communicate or decoding words communicated to you, contact a Sharpe Group consultant.

Click here for a recent piece with more info on charitable deduction traps.

by Jon Tidd

Gala Dinners—Two Important Tax Issues

gala dinner-184075132A charity’s gala dinner for friends and supporters involves two very important federal tax issues:

  1. How should the value of the benefit provided to an attendee be calculated?
  2. Who may pay for an individual’s place at the dinner?

Calculating the value of an individual’s benefit.

It’s clear, for example, that if an individual place at the dinner costs $10,000, and the value of the benefit (meal, entertainment, etc.) allocated to an individual place is $3,100, the deductible portion of $10,000 paid for a place at the dinner is $6,900. The question is, how is the $3,100 figure in our example to be calculated?

IRS has made crystal clear that the value of the benefit for tax purposes is the cost of an identical benefit package at a comparable venue.

Note carefully that the value of the benefit is not simply the per-person out-of-pocket cost to the charity of putting on the gala dinner. This means, for example, that it’s irrelevant to attendees for tax purposes that a corporate sponsor underwrites the entire cost of the dinner.

Who may pay for the dinner?

The better question is, who may not pay for the dinner?

Let’s cut to the chase. IRS rules are clear that an individual’s private foundation may not pay any portion, not even the deductible portion, of the cost for the individual to attend the dinner. IRS says such a payment is self-dealing by the foundation.

Sure, this rule is violated frequently—sometimes out of ignorance, sometimes willfully. So are traffic laws and other laws. Frequency of violation is no excuse for, no defense to, an IRS charge of self-dealing.

What are the consequences if the IRS make such a charge? The IRS can order the offending foundation to recover the amount paid improperly under threat of penalties. No one wins here … except the IRS.

For more information on gala dinners, check out IRS Publication 1771.

An article in the October 2015 Give & Take looks at token donor gifts and charitable deductions. Read it here.

by Jon Tidd


On Donors and Dementia

Losing Brain Function

Gift planning fundraising presents a unique set of challenges in that the targeted donors for these gifts of a lifetime are elderly. As we age, we encounter more challenging health issues. One of these issues that many face is diminished mental capacity.

As fundraisers, dementia can pose serious concerns when communicating with donors. Development professionals generally do not hold medical degrees, so determining a donor’s mental capacity is tricky, and the consequences of ignoring possible dementia can be catastrophic.

It’s an issue we must face with sensitivity, and we must not do it alone. I was recently quoted in this excellent article, “How a Rise in Dementia Poses Tests for Charities” in a special “The Aging of America” edition of The Chronicle of Philanthropy. Click here for the entire article and here for more on this special issue on aging.

by Barlow Mann