New Tax Bill May Make Donations Less Appealing

New Tax Bill May Make Donations Less Appealing
As a result of the new tax law passed last month, investors donating stock to charities and charitable trusts may find they're getting less back in return. Instead, it may make more sense to give stocks that have risen in value to their kids or donate non-stock gifts, like collectibles, to charities according to this news article from Dow Jones.

The New York Times Gets it One-Third Correct

The New York Times Gets it One-Third Correct
The top story making the rounds in the world of philanthropy is the latest report from the American Association of Fund Raising Counsel, which showed only a 0.5% decrease in giving among individuals, corporations and foundations in 2002. The New York Times article which gave an analysis of the report was helpful, but incomplete.

While the $241-billion in private giving is substantial, the fact is this amounts to only 30% of all charitable revenue.

Over 64% of all charitable income is generated by fee for services (33%), and from government (about 31% which includes federal, state and local). With the government at all levels slashing spending on all social programs (from education and housing, to health care, the arts and environment), and the economy still weak, the vast majority of charitable revenue is in jeopardy.

The private giving figures are a glimmer of hope, but by no means the entire story.

PipeVine Shuts Down Pipeline to Charities

PipeVine Shuts Down Pipeline to Charities: Well rumors are flying all over about the demise of Pipevine, which handled over $100 million in donations for organizations including the United Way of the Bay Area and NetworkforGood, the online joint venture of AOL, Yahoo and Cisco (poor AOL can't catch a break!). With California's attorney general looking into this matter, an internal accounting report found misappropriation of funds go back as far as two years. With countless charities struggling to survive, it is estimated that PipeVine could owe anywhere from $100,000 to several million dollars. What has fueled this speculation is the rapid demise that led to shutdown of operations on June 2 and the layoff of its 55 employees. According to the several reports, problems did not surface until March of this year, and within a span of weeks the operation closed its doors.

SARS Fund to Be Launched

SARS Fund to Be Launched: Give2Asia, a provider of philanthropic and grant making services for Asian-based charitable organizations is in the process of establishing a fund to address SARS. We had the opportunity to meet with Mike Rea, Managing Director, who stated that his group is responding to a number of requests to establish a specific fund to provide medical services, educational support, and other capacity building initiatives for local NGOs and government agencies that are struggling with this virus. Give2Asia is based in San Francisco, and was founded two years ago by The Asia Foundation (which has been making grants in Asia since 1954, and has 17 offices throughout Asia). They expect to have more information in the next couple of weeks. If you would like to find out more about their efforts call (415) 743-3336.

More Donor Advised Funds than Foundations

More Donor Advised Funds than Foundations: A significant event in philanthropy went unnoticed in 2001. It's official...and you heard it here first, there are now more donor advised funds than foundations in the United States. The May 15, 2003, edition of The Chronicle of Philanthropy reported that donors had set-up 62,245 donor advised fund accounts by 2001, while the Foundation Center estimated that 61,180 private, community and corporate foundations were in existence that same year. While the number of private foundations accelerated in the late-1990s, donor advised fund growth has been even faster. Despite the weak economy, the number of donor advised fund accounts grew 12.2 percent 70,066 in 2002.

What does this mean for philanthropy? On the one hand, it means that philanthropy is becoming "democratized." Instead of the exclusive province of individuals of significant wealth where you need $3-$5 million to set up your foundation, the "price" of entry is a few simple forms, and $10,000.

It also means that philanthropy is maturing. For decades, financial experts have been advising their clients to diversify their portfolios, and allocate their investments among a number of vehicles (CDs, mutual funds, IRAs, etc.) so as to minimize their risk and maximize their return. Now the same is occurring in philanthropy. A generation ago, wealthy individuals equated philanthropy as two options -- the checkbook or the foundation. Over the last 30 years, with the emergence of community foundations, national donor advised funds, and planned giving specialists, coupled with an interest among financial service firms to serve high net worth clients, the same message is being delivered to philanthropists. Don't tie up all your charitable assets in a foundation -- establish a donor advised fund, set up a charitable remainder trust, or charitable gift annuity.

Contrary to some of my colleagues, philanthropy is not a zero-sum game. The rise of donor advised funds does take away from other charitable giving options. Our experience is that it augments it -- expanding the pie of giving. As Bill Bradley, Paul Jansen and Les Silverman noted in the current Harvard Business Review (“The Nonprofit Sector’s $100 Billion Opportunity") “[Donor Advised Funds] offer tremendous convenience. They help donors research grantees, and by lowering start-up costs…they actually encourage [donors] to give more.”

This is big news -- too bad everyone missed it.