Crowdfunding Rap

I’m moderating a panel on crowdfunding this morning at the 20th Annual Western Conference on Tax-Exempt Organizations. In honor of the session, and thinking back to my recent trip to New York where reasonably priced Hamilton tickets were impossible to find, I wrote the following (still unfinished) rap –

In the style of Lin-Manuel Miranda‘s Alexander Hamilton 

How does a program, project, dream of a board and a concept,
popped in the middle of a popular site on the Internet by management, unsupported, no hollers,
Grow a big force of supporters and dollars

A ten-dollar contribution for a solution
Goes a lot farther, not working a lot harder
By being a lot smarter
By using a fund starter
By ‘15, 34 billion on sites like Kickstarter

And every day while staff were fundraising their hearts out
Online across the masses, ideas started to breakout
Mil’le’nnials were longing for something to be part of
Their movements were ready to grow, build, advance, and spread love

When a hurricane came, and devastation reigned
People saw their futures drip, dripping down the drain
But a coder started coding, and published on her domain
The creation of a chain, with testaments to their pain

Well, the word got around, they said, “This site is insane, man”
Gave money to the fund just to send them to the pained land “
We are sympathetic, can’t forget from whence we came, and
The world’s gonna know the same: We’re not lame, man.”

Fundraising through crowdfunding
It’s online fundraising through crowdfunding
And there’s a million things that you can fund
But just you wait, just you wait …

When it started the skeptics said, full of dread, forbidden
Registration, conduit and quid pro quos are hidden
Private interests advanced each click, just a schtick
But the sites got better and grew bigger real quick

Built as platform, not a fundraiser they clarified
No handling money, not qualified, but unsatisfied
A voice saying
“You gotta market yourself.” – “FundMe, you gotta market yourself.”

They started exceedin’ and placin’ other platforms on the shelf

There could have been AGs hot to sue
Concerns were so acute
They coulda feared fraud and ill-repute
Without a chance for restitution
It’s concernin’, learnin’ ‘bout false substantiation
Lettin’ donors deduct gifts though no charity donation
Scammers for every cause they can get their minds on
Clamor for the money, see them now as they stand on
The claim of a cool platform for a new land
On the web, you can have a new plan

On the web, you can have a new plan

Program-Related Investments

Goodness

Program-related investments (PRIs) are investments (different from strictly donative grants) made by private foundations in which:

  1. The primary purpose is to accomplish one or more of the foundation’s 501(c)(3) exempt purposes (other than testing for public safety),
  2. Production of income or appreciation of property is not a significant purpose, and
  3. Influencing legislation or engaging in political campaign intervention is not a purpose.

While PRIs are not used widely by the vast majority of private foundations, PRIs can be an effective alternative strategy to grantmaking in advancing the foundation’s charitable purpose and meeting its minimum distribution requirements. One reason why PRIs are not used more broadly is the difficulty in interpreting whether a particular investment would qualify as a PRI and not subject a foundation to penalties for making a jeopardizing investment or failing to meet its distribution requirements (if it relied on the investment being part of its qualifying distributions). Some foundation rely on legal opinions to mitigate such risks, but this may not always be cost-effective, particularly for smaller investments. But legal opinions are not always necessary provided that the the foundation has a sufficient understanding of the PRI rules and how they are applied and is comfortable accepting and managing a modest amount of risk. The trade-off can be key in allowing a private foundation to use PRIs to “get more bang out of their buck.”

The following examples and principles are listed on the IRS webpage on program-related investments:

5 Examples of PRIs

  1. Low-interest or interest-free loans to needy students,
  2. High-risk investments in nonprofit low-income housing projects,
  3. Low-interest loans to small businesses owned by members of economically disadvantaged groups, where commercial funds at reasonable interest rates are not readily available,
  4. Investments in businesses in low-income areas (both domestic and foreign) under a plan to improve the economy of the area by providing employment or training for unemployed residents, and
  5. Investments in nonprofit organizations combating community deterioration.

7 PRI Principles

  1. An activity conducted in a foreign country furthers an exempt purpose if the same activity would further an exempt purpose if conducted in the United States,
  2. The exempt purposes served by a PRI may include any of the purposes described in section 170(c)(2)(B) are not limited to situations involving economically disadvantaged individuals and deteriorated urban areas,
  3. The recipients of PRIs need not be within a charitable class if they are the instruments for furthering an exempt purpose,
  4. A potentially high rate of return does not automatically prevent an investment from qualifying as program-related,
  5. PRIs can be achieved through a variety of investments, including loans to individuals, tax-exempt organizations and for-profit organizations, and equity investments in for-profit organizations,
  6. A credit enhancement arrangement may qualify as a PRI, and
  7. A private foundation’s acceptance of an equity position in conjunction with making a loan does not necessarily prevent the investment from qualifying as a PRI.

Two Sticky Issues

  1. When a private foundation makes a particular investment, like a loan to a for-profit, can the foundation reasonably justify that such investment was made primarily to advance the foundation’s specific exempt purpose? According to the regulations: “An investment shall be considered as made primarily to accomplish one or more of the purposes described in section 170(c)(2)(B) if it significantly furthers the accomplishment of the private foundation’s exempt activities and if the investment would not have been made but for such relationship between the investment and the accomplishment of the foundation’s exempt activities.”Beyond the PRI rules, can the foundation also show that any private benefit it provides to the for-profit is incidental, quantitatively and qualitatively, to furthering its exempt purpose? An interesting example of an investment target would be a local for-profit newspaper. If the private foundation makes a high risk $1 million loan to the newspaper company at below market interest, is that consistent with the foundation’s educational goals? Is the newspaper company only incidentally benefited by the loan primarily extended to help assure the local public remain informed of important issues?
  2. If the production of income or appreciation of property is a secondary purpose for making the loan (the primary purpose being to advance the foundation’s exempt purpose), how can the foundation tell if such secondary purpose is significant? According to the regulations: “In determining whether a significant purpose of an investment is the production of income or the appreciation of property, it shall be relevant whether investors solely engaged in the investment for profit would be likely to make the investment on the same terms as the private foundation.”Using the newspaper example above, what if, in lieu of a loan, the foundation purchased a $1 million equity stake in the newspaper company? Such purchase may be at below the stock’s market value (particularly if the foundation accepted non-preferred stock), but it could help leverage additional equity investments from other investors seeking more preferential terms, which could ultimately result in a high return for all shareholders. While a high rate of return in and of itself does not signal that the foundation had a significant profit motive at the time it made the investment, how can one tell?

Resources

Program-Related Investments: Will New Regulations Result in Greater and Better Use? Nonprofit Quarterly

Strategies to Maximize Your Philanthropic Capital: A Guide to Program Related Investments TrustLaw, Thompson Reuters Foundation for Mission Investors Exchange

Examples of Program-Related Investments – Final Regulations  Federal Register

 

Nonprofit Fundraising Masters Conference Series

FundraisingMasters_440x220TwitterAd

Last year, we were a Publication Partner of Darian Rodriguez Heyman‘s Nonprofit Fundraising 101. This year we’re happy to promote Darian’s Nonprofit Fundraising Masters Conference Series in Silicon Valley on Wednesday, July 27, and San Francisco on Wednesday, October 19. Tickets are just $95 – $175 depending on your budget, and registration includes access to the full-day program, breakfast, lunch, all-day coffee and tea, a cocktail reception following the program, and a copy of the new best seller, Nonprofit Fundraising 101. And you can even save $20 when you use the “NEO” promo code. Sign up now at http://fundraisingmasters.org/ and hope to see you there!

You can find information for the Silicon Valley conference here. I’d love to meet any readers of our blog at the conference – please say “hi” if you spot me.

Among the distinguished group of interviewees:

  • Beth Kanter, author of The Networked Nonprofit and social media guru
  • Lynne Twist, author of The Soul of Money
  • Kay Sprinkel Grace, major gifts consultant Beyond Fundraising author
  • Story of Stuff developer and Greenpeace US E.D. Annie Leonard
  • Sierra Club E.D. Mike Brune
  • Planned & legacy giving guru Greg Lassonde

Fundraisers are understandably most focused on relationships and mission. But they also have to be aware of the laws and risks to manage when building and implementing great fundraising programs.

Fundraising Legal Issues – 10 Resources

Top 5 Fundraising Legal Tips

6 More Fundraising Legal Tips

Fundraising (National Council of Nonprofits)

Giving Tuesday: 10 Legal Tips for Nonprofits

Major Gifts – Part II: Considerations for Legal Compliance and Avoiding Lawsuits

Understanding Crowdfunding after a Tragedy (Nonprofit Quarterly)

Fundraising Issues for Nonprofit Organizations (Public Counsel)

Legal Implications of Fundraising via Social Media (Columbia Law School)

Legal Issues Involved in Charitable Fundraising (Adler & Colvin)

Developing Fundraising Policies and Procedures (Association of Fundraising Professionals)

Darian’s Request for Interview Questions

You can literally ask them anything… so what would you ask? Your goal is to unearth their secrets to success, most valuable tips and tools, and sources of inspiration.

 

I’m hoping to develop a set framework that I can use with all interviewees at both these events and others coming up around the country, sharing the insights generated with both a live audience and book readers down the road. I’d love your help balancing the need for inspiring stories with concrete, useful tactics and tools.

So far, here are a few questions I’ve been toying with:

 

  • If there is one thing that you believe most enabled you to succeed in fundraising where others have not, what would it be?
  • Can you share one specific document, template, or practice that’s facilitated your work engaging donors and supporters?
  • Tell us a story of a prospect who initially declined to contribute, but who ultimately decided to provide support.
  • Please share the story of the single largest gift you ever raised.
  • In today’s attention economy, how do you ensure that your cause is able to cut through the clutter and appeal to donors?
  • What keeps you inspired when things get stressful and hard?
  • How did you first come to realize that you were a fundraiser?

Hopefully that’s enough to get your creative juices flowing, or at least give you an idea of what we’re thinking. So let me know what you think: which of these questions would you be most excited to hear experts answer; which aren’t that compelling; and which killer questions am I missing? Bear in mind each interview is only 45 minutes, so we won’t have all day, but we hope to cover a lot of ground in these dynamic fireside chats.

 

Thanks and can’t wait to hear your ideas!

Understanding Crowdfunding After A Tragedy – Nonprofit Quarterly

burning memorial candles

NEO attorneys Michele Berger and Gene Takagi wrote this article on crowdfunding published in The Nonprofit Quarterly on June 28, 2016.

As was evident after the horrific shooting in Orlando on June 12th, crowdfunding has become the most visible, and arguably the most effective, way to quickly raise money and awareness for a charitable cause triggered by an event. The Nonprofit Quarterly previously reported that a single crowdfunding campaign to support the Orlando victims raised $4 million from more than 87,000 people within a day after the attack. And five days later, reportedly, more than 300 crowdfunding campaigns raising $6.2 million for victims of the shooting were set up on GoFundMe, which is just one of more than 2,000 crowdfunding websites.

However, while the magnitude and reach of crowdfunding are substantial, there remain many misperceptions and issues to be understood and managed by nonprofits, donors, and regulators.

Read the full article here.

Legal and Ethical Crowdfunding for Non-profits: An ABA Webinar

Crowdfunding Law

I’ll be on a panel presenting a webinar for the American Bar Association titled Legal and Ethical Crowdfunding for Non-profits: Opportunities, Pitfalls, and Best Practices. Date: June 28, 2016. Time: 10:00 – 11:30 am PT / 1:00 – 2:30 pm ET. 1.50 Ethics/Professionalism CLE Credit Hours.

Presenters:

Michael E Adler, moderator
Katherine Emily Redman
Gene Takagi
Hash Zahed

Program Description:

This program is intended for lawyers who work in or represent non-profits and are interested in (or provide legal counsel on) crowdfunding for an organization or charitable cause, including for litigation funding. Crowdfunding – raising money to support an undertaking or cause by reaching out to large (often unknown) numbers of people as donors through in-person events or social media – has become increasingly common. Websites including CauseVox, KickStarter, GoFundMe, and others are growing more popular, and LinkedIn offers hundreds of listings somehow related to crowdsourcing. All in all, an array of legal and ethical issues can trip up any individual or organization testing this financing approach. Lawyers need to be positioned to counsel clients effectively on the parameters, ethical considerations, and legal conditions surrounding crowdfunding. Our speakers will provide examples and guidance to put you on the right path.

Supplemental Resources:

Crowdfunding for Nonprofits (Michigan Community Resources Crowdfunding Legal Team)

Crowdfunding for Nonprofits (National Council of Nonprofits)

Risks and Rewards of Crowdfunding for Nonprofits (Foundation Center)

Nonprofit Radio: Crowdfunding

Nonprofit Crowdfunding Risks

Crowdfunding Platforms & Commercial Fundraisers

The Global Crowdfunding Industry Raised $34.4 Billion In 2015, And Could Surpass VC In 2016 (DazeInfo)

Crowdfunding and Nonprofits (California Attorney General)

 

Multistate Registration and Filing Portal

Register text on keyboard button

Currently, 39 states and the District of Columbia each require some form of periodic charity registration, which creates a substantial administrative and filing burden for organizations fundraising in multiple jurisdictions. 36 states and DC will accept the Uniform Registration Statement (URS), but that still requires an organization to file the URS with each state’s charity official (typically the Attorney General) and, in 13 jurisdictions, specific supplemental forms.

The Multistate Registration and Filing Portal, Inc. (MRFP), the National Association of State Charities Officials, and the National Association of Attorneys General started development of a Multistate Registration and Filing Portal,  to make it easier for nonprofits to register in multiple jurisdictions using a one-stop online portal. According to the Portal’s website:

The portal will maximize efficiency, data transparency, and information sharing by enabling compliance with registration requirements for all participating states without duplication of data entry. It will make the collected data available to the public in a searchable and interactive format. Academics, policy makers and the public will be able to conduct their own inquiries or download data in machine-readable format. Multistate registrants will realize reduced administrative costs and inefficiencies in complying with 39 states’ different registration requirements, allowing more resources to be devoted to charitable mission. Single state filers will avoid the inconvenience and uncertainty of paper filings. Registration service providers will be able to electronically transmit data for multiple clients. State filing fees will be collected and disbursed to states through the Single Portal.

 

We intend that the system will enable population of data fields from electronically filed Forms 990, thus avoiding further reentry of data. The system will enable regulators to combine 990 data with state registration data. Analytics will enable regulators to better understand charitable resources and solicitations, to better focus law enforcement and fraud prevention resources, and enable better policy making for protection of charitable resources. Electronic filing will allow states to direct limited resources from processing paper to our core regulatory responsibilities of preventing fraud and abuse of charitable funds and solicitations.

On February 17, 2016, MRFP posted a Request for Information (RFI) to invite input and proposals for development of the Portal. The RFI will remain open until April 1, 2016. To allow for additional feedback, MRFP is hosting a conference call on March 15, 2016 open to the public.

5 Likely Implications

  1. Easier registration process for charities with online capacity.
  2. Greater enforcement of registration, including use of penalties and sanctions for noncompliant organizations, in all states in which an organization engages in more than minimal fundraising.
  3. More clarity about the thresholds triggering registration requirements in states other than the charity’s state of formation.
  4. Growth of charity ratings services and the sophistication of their methodologies.
  5. Improved use of data and analytics by charities.

Additional Resources

New developments in the Single Portal Multi-State Charitable Registration project (National Council of Nonprofits, 1/20/16)

Nonprofit Fundraising 101

Nonprofit Fundraising 101

I’ve had the pleasure of knowing Darien Rodriguez Heyman for several years and proud to be one of Nonprofit Fundraising 101‘s Publication Partners. The book was “written by and for front line practitioners and geared towards a global audience of emerging and established leaders.”

“You don’t have to know all the answers, you just need to know where to find them.”

Nonprofit Fundraising 101 starts out with this quote from Albert Einstein and describes itself as a “reference manual” to apply as needed. Among the many notable interviewees whose expertise is tapped in the book: Steve MacLaughlin,  Kim Klein, Kay Sprinkel Grace, Mal Warwick, Kivi Leroux Miller, Beth Kanter, and John Haydon.

Heyman summarizes three important common themes and ideas that appear throughout the book.

Plan for Success: …Planning is the lynchpin of any nonprofit’s success …. Take a moment to step back and envision your path before you dive into any activity or project to ensure you’re as impactful as possible. ..

 

Meet People Where They’re at: … you cannot expect donors to come to you; you need to court and steward them where – and how – they’re most comfortable. …

 

It’s Not About You: … The most successful nonprofits and fundraisers communicate not about their work, needs, or impact, but rather about the impact the donor or prospect makes possible. … people want to be part of a winning team, so framing your work as powerfully as possible is critical.

And quoting Sprinkel Grace:

“People don’t give to you; they give through you.”

 

“People don’t give to you because you have needs. They give to you because you meet needs.”

Nonprofit Fundraising 101 is full of great ideas from some of the leading fundraising experts. I particularly enjoyed reading the chapters covering event-based fundraising, social media and crowdfunding, cause marketing partnerships, and earned income strategies.

One area that I’d like to see more coverage of in a future edition: legal compliance. Here are some links to articles we’ve written covering fundraising legal issues:

Giving Tuesday: 10 Legal Tips for Nonprofits

Nonprofit Radio: Crowdfunding

Top 5 Fundraising Legal Tips

6 More Fundraising Legal Tips

Major Gifts – Part II: Considerations for Legal Compliance and Avoiding Lawsuits

Commercial Fundraiser – A Revised Definition

Commercial Fundraiser

Beginning on January 1, 2016, a “commercial fundraiser” in California is defined as any individual, corporation, unincorporated association, or other legal entity who for compensation does any of the following:

  1. Solicits funds, assets, or property in this state for charitable purposes.
  2. As a result of a solicitation of funds, assets, or property in this state for charitable purposes, receives or controls the funds, assets, or property solicited for charitable purposes.
  3. Employs, procures, or engages any compensated person to solicit, receive, or control funds, assets, or property for charitable purposes.
  4. Plans, manages, advises, counsels, consults, or prepares material for, or with respect to, the solicitation in this state of funds, assets, or property for charitable purposes, but is disqualified as a fundraising counsel for charitable purposes pursuant to subdivision (a) of Section 12599.1.

It’s the fourth activity (described in red font above) that newly creates another category of commercial fundraiser. Planning, managing, advising, counseling, consulting or preparing materials for, or with respect to, charitable solicitations, in and of themselves, are activities that are generally associated with another regulated fundraising position known as fundraising counsel. But such activities can lead a professional fundraiser to fall within the definition of a commercial fundraiser if:

  • the professional fundraiser is compensated as a percentage of the funds, assets, or property received as a result of a solicitation campaign rather than as a flat fee; or
  • the professional fundraiser receives or controls the funds, assets, or property received as a result of a solicitation campaign, including indirectly by:
    • the right to approve or veto any payment from an escrow account to which such funds are subject;
    • maintenance of an interest in an account into which solicited funds are deposited;
    • the right to access such funds, assets, or property held by a caging company (a business that receives contributions, processes donor mail, and deposits all contributions to an account under the sole control of the charitable organization);
    • any ownership or management interest in any other entity that receives or controls the funds, assets, or property solicited for charitable purposes, including, but not limited to, an escrow agent or caging company, but not including any federally insured financial institution; and
    • receipt of any financial benefit, directly or indirectly, from any other individual or entity that receives or controls the funds, assets, or property solicited for charitable purposes, other than the trustee or charitable corporation soliciting the funds, assets, or property for charitable purposes.

The purpose behind this change in the definition (as part of AB 556) is to close a loophole that some professional fundraisers used to avoid the more rigorous disclosure requirements to which commercial fundraisers are subject:

  1. Commercial fundraisers must disclose to donors that the solicitation is being conducted by a commercial fundraiser and must identify themselves by the name under which they are registered with the Attorney General.
  2. Commercial fundraisers must disclose the percentage of total fundraising expenses of the fundraiser (the ratio of the total expenses of the fundraiser to the total revenue received by the fundraiser for the charitable purpose for which funds are being solicited) upon receiving a written or oral request from a person solicited.

Principal Registration and Reporting Requirements

Commercial fundraisers in California are also subject to several registration and reporting requirements, including:

Form CT-1CF (Annual Registration Form)
For use by commercial fundraisers prior to soliciting any funds in California for charitable purposes.

Form CT-2CF (Annual Financial Report – Commercial Fundraisers)
Disclosure reporting form for use by every commercial fundraiser to report funds or assets received as a result of a solicitation for charitable purposes.

Form CT-10CF Form (Notice of Intent To Solicit For Charitable Purposes – Commercial Fundraiser)
For use by commercial fundraisers for charitable purposes to provide 10 working days’ notice prior to the commencement of each solicitation campaign, event, or service, in accordance with Govt. Code sec. 12599(h).

See Office of the Attorney General site for Forms and Instructions.

Not Commercial Fundraisers

The following persons or entities are explicitly not commercial fundraisers:

  • any trustee holding property in trust pursuant to any charitable trust, or any of such trustee’s employees;
  • any charitable nonprofit corporation or any employee of such nonprofit corporation;
  • any employee of a commercial fundraiser;
  • any federally insured financial institution that holds, as a depository, funds received as a result of a solicitation for charitable purposes; or
  • any escrow agent or caging company that receives or controls funds received as a result of a solicitation for charitable purposes.

Characterization by the Office of the Attorney General

Presumably, in large part due to the efforts of some commercial fundraisers to hide or misrepresent the amounts they raise that ultimately go to the targeted charities, the Office of the Attorney General has included some cautionary statements on its webpage describing commercial fundraisers:

Historically, use of a commercial fundraiser has meant higher costs for a charity. Most of the charities registered with the Registry of Charitable Trusts do not employ commercial fundraisers to solicit donations on their behalf. Historical figures show that a campaign conducted by a commercial fundraiser returns to charity, on average, less than 50 percent of the contributions it raises on a charity’s behalf. The remainder is retained by the commercial fundraiser as a fundraising fee and for reimbursement of expenses.

Legal Compliance

With the heightened scrutiny of commercial fundraising practices, it is more important then ever for commercial fundraisers to operate in full compliance with applicable laws. Here are a few tips for commercial fundraisers beyond the registration and reporting requirements:

  • It must enter into a written contract with a charity for each solicitation campaign, event, or service. Such contract must be available for inspection by the Attorney General and contain all of the provisions required under Gov. Code Sec. 12599(i).
  • It must provide to the charity the right to cancel the contract without cost, penalty, or liability for a period  of 10 days following the date on which the contract is executed, and the right to terminate the contract at any time with or without cause upon 30 days’ written notice.
  • It must only contract with a charity that is actively registered with the Attorney General’s Registry of Charitable Trusts or agrees to register prior to the commencement of any solicitation.
  • It must provide to the Registry of Charitable Trusts with each application for registration and registration renewal a cash deposit or bond in the amount of $25,000 for the benefit of any person damaged as a result of malfeasance or misfeasance in the conduct of the commercial fundraiser regulated activities.
  • It shall not misrepresent (including through the failure to disclose a material fact) the purpose of the charity or the nature or purpose or beneficiary of a solicitation.
  • It shall ensure that charity knows that the charity must establish and exercise control over its fundraising activities conducted for its benefit, including approval of all written contracts and agreements, and must ensure that fundraising activities are conducted without coercion.

PATH Act: 3 Charitable Giving Tax Incentives Made Permanent

Progress written on rural road

Last week, the Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”) was passed by Congress and signed into law. Included in the Act were 3 charitable giving incentives that had previously expired on January 1, 2015. Rather than simply extending the incentives retroactively for another year, which was the manner in which Congress had passed the incentives for the past several years, the PATH Act made them permanent. The legislation also made permanent the Earned Income Tax Credit and Child Tax Credit, two of our most important and effective anti-poverty tools, and the American Opportunity Tax Credit for college tuition and related expenses.

IRA Charitable Rollover

The IRA Charitable Rollover provision allows individuals aged 70½ and older to donate up to $100,000 from their traditional or Roth IRAs to eligible public charities without having to count such qualified charitable distributions as taxable income. Distributions from IRAs, which are required starting at age 70½, are otherwise typically included in the individual’s adjusted gross income (AGI) and subject to income tax.

Excluded from the IRA charitable rollover provision are distributions to supporting organizations, donor-advised funds, or private foundations and distributions from SEP or SIMPLE IRAs.

Because the qualified charitable distributions aren’t counted in an individual’s AGI, the individual cannot claim an itemized charitable deduction for them. But lowering AGI is generally considered a more valuable tax benefit than the alternative of recognizing taxable income and taking a corresponding charitable deduction because:

■ Medical expenses for seniors are limited to the excess over 10% of AGI
■ Miscellaneous itemized deductions are limited to the excess over 2% of AGI
■ Itemized deductions are generally reduced by 3% of AGI above a threshold
■ Personal exemptions begin to phase out as AGI exceeds a threshold
■ Up to 85% of Social Security income becomes taxable as AGI increases
■ Eligibility for Roth IRA contribution goes away after AGI exceeds a threshold
■ The 3.8% tax on net investment income only applies to AGI above a threshold.

See Should You Make A Charitable Contribution From Your IRA? (Forbes)

The IRA Charitable Rollover, unlike the charitable contribution deduction, is also available to taxpayers who do not itemize their deductions. This tends to help facilitate contributions from older individuals who have paid off their home mortgages and may no longer itemize deductions.

Deeper Dive:

Analysis of IRA Charitable Rollover Extension (Council on Foundations)

Enhanced Deduction for Food Inventory

The Enhanced Deduction for Food Inventory provision allows taxpayers other than C corporations to receive an enhanced deduction for certain contributions of food inventory. Without the enhanced deduction, such taxpayers would only get a deduction of their basis (e.g., cost) in the inventory even though C corporations would continue to benefit from the enhanced deduction. Generally, the enhanced deduction is equal to the basis of the property contributed plus one half of the appreciation (e.g., profit that would have been recognized if the inventory were sold at its fair market value), not to exceed twice the basis.

According to a coalition of 8 leading nonprofits (Independent Sector, United Way, National Council of Nonprofits, Council on Foundations, Feeding America, Land Trust Alliance, Jewish Federation, Y) in their letter to the Senate Finance Committee (the “Coalition Letter”), this incentive for donating food has translated to a 137 percent increase in the amount of food donated by restaurants to food banks.

Enhanced Deduction for Land Conservation

The Enhanced Deduction for Land Conservation provision allows land owners to reduce their taxable income by giving up development rights to their property (through a conservation easement) for purposes of preserving natural resources. Under prior law, a land owner can deduct the value of a conservation easement, up to 30% of his or her adjusted gross income, for up to six years. The enhanced deduction raises the maximum deduction a land owner can take for donating a conservation easement from 30% of their AGI to 50% (qualified farmers and ranchers can deduct up to 100% of their AGI) and increases the number of years over which the land owner can take deductions from 6 to 16 years.

According to the Coalition Letter, the enhanced deduction for land conservation increased conservation totals by 30 percent, up to one million acres per year.

Deeper Dive:

Income Tax Incentives for Land Conservation (Land Trust Alliance)

Giving Tuesday: 10 Legal Tips for Nonprofits

Giving Tuesday philanthropy day message.

Here are 10 legal tips for nonprofits for Giving Tuesday:

  1. Ensure your charity’s fundraising communications (written and oral) are all accurate and truthful and do not contain any material misrepresentations.
  2. Ensure that your charity is properly registered to engage in charitable solicitations in any applicable states and jurisdictions (including any foreign countries). See The Unified Registration Statement website and The International Center for Not-for-profit Law website for resources.
  3. If operating or running fundraising events in another state or jurisdiction other than your charity’s state of formation, make sure your charity is qualified to operate there (this is separate from the charity registration requirement) and determine whether it should apply for state tax-exemption.
  4. Be intentional if soliciting funds for a specific program, project, or purpose as you may be creating restricted funds that need to be accounted for separately from your general operating funds.
  5. If using independent contractors to assist in or operate your Giving Tuesday fundraising campaign, make sure they are registered commercial fundraisers or fundraising counsel or fall outside of the definitions of those regulated positions. See definitions on the Office of the Attorney General website.
  6. Provide a proper form of donation receipt to your donors to allow them to take a charitable contribution deduction.
    • All receipts should state the name of the donor, the amount of the contribution, and the date of the contribution.
    • For a charitable contribution of $250 or more, the receipt (written acknowledgment) must include a statement that provides either (1) that the charity did not give any goods or services to the donor in return or (2) that the charity did give goods or services to the donor in return (in which case, the acknowledgment should describe the goods or services, including a good faith estimate of their value).
    • If the charity provided goods or services back to the donor in exchange for a payment of more than $75, the receipt (written disclosure) must include a good faith estimate of the value of goods or services provided to the donor and a statement that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of money (and the fair market value of property other than money) contributed by the donor over the value of goods or services provided by the charity.
  7. If using a crowdfunding platform, be aware of and prudently manage any associated risks. Make sure your charity is aware of and manages any crowdfunding campaigns raising funds on the charity’s behalf (sometimes well-intentioned and not-so-well-intentioned individuals will start campaigns claiming to benefit a charity, which may be unaware of the campaigns).
  8. Have policies regarding the acceptance of restricted gifts or noncash gifts that may not be easily marketable.
  9. Prevent donor-intent disputes and communication problems that may be associated with major gifts with restrictions or conditions. See Major Gifts – Part II: Considerations for Legal Compliance and Avoiding Lawsuits.
  10. If soliciting pledges, understand whether your charity and the donor intend the pledge to be legally enforceable. If there is a contract and the charity either (a) provides some consideration for the pledged amount (e.g., promise to do something or not do something) or (b) relies on the promised pledge to its detriment (e.g., puts a down payment on a building), the pledge may be legally enforceable. But that doesn’t necessarily mean that a charity should always sue a donor that reneges on a pledge. See Legal Issues Related to Unfilled Charitable Pledges (Perlman & Perlman).

See our legal tips for donors for Giving Tuesday here.

Additional Resources:

Top 5 Fundraising Legal Tips

6 More Fundraising Legal Tips

A Playbook To Kickstart Your Nonprofit’s #GivingTuesday Campaign (Beth Kanter)

Giving Tuesday, In Its Fourth Year, Is Now Officially a “Thing” (Nonprofit Quarterly)

Simple Donation Page Tips for Giving Tuesday (John Hayden)