Challenge:

The foundation has its roots in a humble frontier feed store. Founded in the 1890s, the store eventually grew into a sizable company with a household name. Relatives of the three brothers who grew that company founded their foundation in the 1940s, and it has been in operation ever since.

Today, the board of the foundation, which is comprised of descendants of the brothers, pays homage to its history by keeping track of other descendants through familial records. There are now dozens of descendants and, upon reaching the age of 18, they are all eligible to join the foundation as a non-voting member and attend board meetings. The foundation will match up to three member gifts to charity for as much as $1,500 total in a given year. Members are also able to provide feedback via grant committees for organizations that have applied for funding.

The foundation’s tradition of making giving a (very large) family enterprise is one of its most cherished hallmarks. Even so, all that gift-matching and grant committee activity makes for an enormous amount of paperwork and a sizable administrative burden.

Collaboration:

Foundation Source set up their gift-matching program on Applications, our online grants management system for accepting, organizing, tracking, and replying to charitable requests. (Applications is available as an add-on to the robust platform our clients use to manage their foundations.)

Family members use Applications to apply for their gift match. Foundation Source verifies that the family member made a donation and that the recipient organization is eligible to receive grants from the foundation. We also customized Applications so that when a family member is a part of a grant committee, they can log in, review their committee’s applications, and then leave comments for board members.

Outcome:

Thanks to their experience with Applications, the foundation now benefits from a seamless, paperless process for its gift-matching program. The foundation is free to celebrate its heritage without worry that the growth of its family tree will outstrip its administrative capabilities.

The post How a Private Foundation Is Keeping An (Extended) Family Tradition Going Strong appeared first on Foundation Source.

Challenge:

The board of the Charles R. Wood Foundation carries on the work of its late founder by supporting children, the arts, and healthcare in upstate New York.

While traveling in rural North Carolina, the president of the foundation read an article in the local newspaper about Dolly Parton’s Imagination Library program and its outreach to the region. This national program, which is available to any community, mails a book to children under five years of age each month. The purpose of the program is to boost early childhood literacy and foster a love of reading.

As the Charles R. Wood Foundation wanted to promote childhood literacy in upstate New York’s rural counties, they asked their Private Client Advisor at Foundation Source to get them information on how they could get involved.

Collaboration:

The Private Client Advisor contacted the Dollywood Foundation, which was able to provide the demographic research the foundation required to assess regional need. Dollywood also identified possible literary agencies that might be willing to partner with the Charles R. Wood Foundation. Foundation Source coordinated the effort by discussing the program with the Literacy Volunteers of Clinton County, who agreed to handle the child registration process.

Foundation Source has streamlined the entire application process, saving the foundation significant time and administrative effort. The foundation is very pleased with their new process, but we revisit it each year and continue to refine it based on their evolving needs.

Outcome:

The Foundation now supports the Imagination Library program, enabling 3,500 children in Clinton, Essex, Franklin, and Hamilton counties to participate. The foundation is thrilled that Foundation Source could help connect them with the necessary partners to make this project happen, and they appreciate how easy we’ve made it for them to track its results, procuring semi-annual updates for their review.

The post Connecting a Private Foundation to An Opportunity for Literacy appeared first on Foundation Source.

• Increased income tax rates
  • Individuals to 39.6% (ordinary) and long-term capital gains (LTCG) and dividends for taxpayers with adjusted gross income (AGI) of more than $1 million
  • Increase in corporate tax rate from 21% to 28%
• Gifts, bequests, trust distributions as capital gains realization events
  • Loss of capital gains“step-up”
  • Gifts and certain trust distributions as realization events
  • 90-year trust realization event
  • $1 million exclusion

THE POTENTIAL IMPACT ON CHARITABLE GIVING

• The top marginal individual income tax rate would increase from 37% to 39.6% for taxable income in excess of the top bracket threshold—as tax rates rise, the value of itemized deductions also rises.
• For taxpayers with AGI of more than $1 million, long-term capital gains and qualified dividends tax rate would increase to match the proposed ordinary income tax rate. For a taxpayer with income in excess of $1 million, rates would jump from 20% (or really 23.8%, including the net investment income tax) to 39.6% (or really 43.4%, including the net investment income tax).

2. The House Ways and Means Proposal

• Return of proposed estate tax changes instead of capital gains tax
  • Accelerate “sunset” of current estate tax levels (effectively dropping in half from $11.7 million to about $5.5 million)
  • No mention of loss of “step-up” or gifts/distributions as realization events
• Income tax changes
  • Highest personal rate to 39.6%; capital gains rate to 25% – 3% surcharge for in come over $5 million
  • Corporate rate to 26.5%
  • Changes to certain cross-border tax rates and rules
• Changes to grantor trusts (pulled into taxable estate)
• IRA changes
  • Increased required minimum distribution for high-income taxpayers with large balances ($10 million plus, and can never stay over $20 million)
• In terms of charitable giving, like with the Green Book proposals, higher taxes lead to a more valuable deduction
• Estate taxes
  • Brings a lot more people into the estate tax net
  • Eliminates a lot of common planning for reducing estates (e.g. grant or trust planning) – Eliminates valuation discounts
  • Makes gifts to charity and certain charitable lead trusts far more valuable

3. The ACE Act

Co-sponsored by Senators Angus King (I-ME) and Chuck Grassley (R-IA)

• Private foundations would no longer be allowed to count grants to DAFs towards meeting the annual minimum distribution of income requirement (MDR) if the private foundation retains advisory privileges.
  • Note: This is not a concern for a terminating foundation or for a foundation that grants to a DAF account over which the foundation has not retained advisory privileges.
• Private foundations would no longer be able to count administrative expenses (for example, payroll, travel, and other similar expenses) of certain insiders towards meeting the MDR.
  • Note: This limitation is targeted only at insiders who are family members of a foundation’s substantial contributors. The payroll and expenses of non-family members would still count towards satisfying the MDR.
  • Note: This rule would still allow foundations to pay salary to and cover the expenses of the targeted insiders—these expenditures would not be taxable expenditures. However, such expenditures would not count towards satisfying the MDR.
• Private foundations that choose to sunset within 25 years would pay no excise tax. However, if such a foundation makes prohibited grants to related foundations, or it opts not to sunset at the point in the future when it is required to do so (after not paying excise taxes for 25 years), the foundation would have to pay the IRS any taxes it saved because of this tax break.
• Private foundations would pay no excise tax in any year in which it satisfies a voluntary 7% payout requirement determined by reference to the value of the foundation’s assets on the first day of the tax year.
• A private foundation that uses DAFs to avoid “tipping” of the public charity status of a donee may no longer be able to do so, as distributions from DAFs will be treated effectively as distributions from the private foundation.

THE POTENTIAL IMPACT ON DAFS

• For non-community foundation DAFs, generally, the legislation would allow a current charitable deduction for cash or marketable security gifts to a DAF only if such gifts are distributed by the DAF to charities within 15 years of the first contribution to the fund and all advisory privileges terminate.
• There are narrow exceptions to these rules for DAFs that are set up at community foundations, but the exceptions apply only for amounts donated up to $1 million or there is a 5% MDR on the individual qualifying community foundation donor-advised fund.

The post Philanthropy in Transition appeared first on Foundation Source.

The post Foundation Source Gets a New Look for the Journey Ahead appeared first on Foundation Source.

Challenge:

When we met her, this successful actress already had a private foundation, and she had a good handle on its finances. She didn’t need us to monitor the finances or prepare the foundation’s tax returns, but she did need help organizing her giving. Every time she wanted to review her grantmaking history with the various organizations she supports, she had to comb through files stuffed with acknowledgment letters and receipts. Researching new potential grantees was a hassle and, since she expected her grandkids to take over the foundation in a few years, she wanted to get an organizational system in place that would make it easy for them to take the reins.

Collaboration:

To fund her grantmaking, Foundation Source set up an operating account for the client at Sterling National Bank. Going forward, since all of the grants and qualified expenses would be paid out of this operating account, the actress, her accountant, and anyone else she permits will be able to quickly and easily review the foundation’s transactions. Foundation Source also introduced her to Impactfully, our exclusive “command center” that enables clients to research nonprofit organizations, make grants, and review their grantmaking history from any location, at any time.

Outcome:

The client loves how easy it is to make grants using Impactfully. In fact, it has completely changed the way she gives, helping her track how many times (and how much) she’s given to a specific charity and enabling her to access important information on organizations through sources like Guidestar® and Charity Navigator.TM Moreover, now that the foundation’s house is in order, the actress doesn’t worry about burdening her grandchildren with its day-to-day operations. “Foundation Source has made my life so much easier,” the client says, “It’s a gift from heaven!”

The post Organizing and Informing Giving appeared first on Foundation Source.

Start by thinking about the foundation’s funding priorities and consider if they continue to make sense in today’s world. The primary funding focus may or may not need to adjust to a shift in objectives and values, business focus and nonprofit needs. You’ll also want to evaluate the board’s interest in blending long-term goals and a programmatic strategy for impact with the ability to respond to urgent needs. What is the right balance in addressing these two different types of needs?

2. Grantmaking Structure

Whether you invite proposals or exclusively seek out nonpro t organizations with whom you want to partner, it’s important to ask questions during the development of a grant and consider various approaches:

• Aligning budget constraints with impact goals
• Creating long-term or short-term partnerships
• Determining to what degree you want to stand out as a lead funder
• Focusing on capacity building for grantee sustainability or targeting project support
• Developing a signature program

3. Community Impact

It’s important to keep the end goal of your giving in mind. Start by defining realistic goals and metrics and determining if there are new and different indicators for success that have been influenced by recent events. Do the interventions you have been supporting make sense in reaching your goals? Consider engaging community partners and experts in the field to define evolving needs and suitable interventions. This will help you tailor your response, maximize the impact of donations and allow you to respond quickly when the need is greatest.

4. Communications

Messaging plays a key role, particularly for corporate foundations, and it starts with having a communications plan. As new funding priorities emerge, there may be ways that the foundation can amplify the work of grantee partners. A communications plan can help reinforce a funder’s renewed or revised values and priorities. In addition, it can align foundation and parent company objectives; inform the philanthropic community on how shifting priorities will be addressed; and develop immediate connection to corporate priorities in all geographic arenas.

5. Employee Engagement

In terms of corporate philanthropy, engaging employees to carry the message forward has become a standard component of many companies’ philanthropic activities. Employee voices can contribute to a corporate foundation’s understanding of community needs. They can also mobilize the workforce, influence the role of leadership, and create grassroots enthusiasm in addressing shifting community needs.

The post Philanthropy Refresh appeared first on Foundation Source.