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New Obama Plan Would Reduce Charitable Deductions for Wealthy  

President Obama proposed limiting the value of the tax break for itemized deductions, including donations to charity, to 28 percent for families making more than $250,000.

By limiting the size of charitable tax breaks for the wealthy, this measure would reduce by as much as 20 percent the amount wealthy taxpayers could get in tax breaks, reports The Chronicle of Philanthropy. The measure could have big consequences for nonprofit organizations.

However, two AFP members and planned giving experts note that there are strong reasons why the negative effects of this law would be moderate rather than severe.

People Give Because They Care

“Before we begin writing the epitaph for major gifts from generous donors, let’s keep their motivation in mind,” says Sandy Macnab, FAHP, CFRE, president of Alexander Macnab & Co, a Chicago-based fundraising consulting firm. “People do not make charitable gifts because it makes them eligible for a tax deduction. Some give because they want to give back, some to search for a cure, some to support those in need and all because they want to help—personally and privately.”

“While some donors may change the timing or amount of their gift due to tax incentives, they give in the first place because they care,” he adds.

“I think there is less cause for concern here than initially appears,” agrees Richard Barrett, president of Barrett Planned Giving Inc. in Washington, D.C. “People give from the heart—the tax deduction is just icing on the cake.”

Many Wealthy Not Affected

Further, Macnab and Barrett both point out that many wealthy donors that would otherwise have a 33 percent, or even 35 percent deduction, are already subject to the Alternative Minimum Tax which eliminates many deduction options and taxes them at 28 percent. That means they would see no impact with a cap at 28 percent as Obama proposes.

However there do remain wealthy donors who are not subject to the AMT and are taxed at 33 or 35 percent of their adjusted gross income.  An example often given, Macnab says, is that these taxpayers who make a $100,000 gift would save less in taxes, in this example, $7,000 less, than the $35,000 they can now save if Obama’s proposed measure becomes law.

President Obama says the proposal on itemized deductions—which would also apply to claims such as mortgage interest—would raise $318-billion over 10 years, the Chronicle reports. That money would help pay for a 10-year $630-billion reserve fund designed to help make healthcare more affordable and available.

The Effect

Will generous donors who are able to make a large gift now give less?

“That didn’t happen in the wake of the Tax Reform Act of 1969 when the cap on donating appreciated assets dropped from 50 percent of adjusted gross income to 30 percent,” says Macnab, citing information reported by the Charitable Giving Tax Service of R&R Newkirk. “There was fear then that gifts of appreciated assets would diminish or disappear. They didn’t.”

“However, as all charitable organizations struggle to maintain levels of support that will make it possible to serve growing needs in the current economy, it seems inappropriate and short-sighted to do anything that would be a disincentive to encouraging the most generous gifts possible,” he says and adds, “saving taxes helps increase the size of the gift.”

AFP Response

While supportive of the president’s intentions to raise money for healthcare and other projects, AFP President and CEO President V. Maehara, CFRE, CAE, strongly disagreed with the provision. “Not only do charities represent a significant portion of the American workforce, but in the current economic environment they are being asked to provide more services and programs to people in need,” Maehara said. “Limiting the deduction is a self-defeating policy that in the long run will hurt more than it will help.”

Maehara indicated that AFP would begin an aggressive education campaign to members of Congress and the White House about the importance of the tax deduction and the potential impact it would have.

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Leona Helmsley's Trust Can Support More Than Dogs, Court Rules  

In an unusual case that is raising eyebrows among fundraisers and donors alike, the court defied Helmsley’s wish for the bulk of her $5.2 billion estate to be directed solely to the care and welfare of dogs.

Helmsley became America’s top donor in 2008 with a bequest gift estimated at $5.2 billion. As of 2003, her wishes for the money included medical and healthcare services for children and the indigent. A mission statement she signed in March 2004 revoked this statement, leaving out mention of human services and directing the money strictly to dogs, according to The Chronicle of Philanthropy.

But, Helmsley did add to the final mission statement the phrase “and such other charitable activities as the trustees shall determine,” according to The New York Times. The newspaper also reports that experts in trusts and estates had warned that her wishes to support only canines was not legally binding, since the mission statement was never incorporated into her will or the trust documents.  

The Leona M. and Harry B. Helmsley Charitable Trust will become one of the wealthiest foundations in the United States as a result of the bequest. The trustees who filed the motion that the money not be limited to helping dogs—which include Helmsley’s brother, a close friend and two grandsons—said they will announce their first charitable grants next month.

What Are Your Thoughts?

eWire is interested to hear what you think about a court overturning expressly stated donor intent. What do you think are the ramifications for bequest fundraising? We will publish your comments in the next issue of eWire. Email ewire@afpnet.org. Please keep your responses brief and include your name, city and state/province.

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Number of Charitable Gifts of $1 Million-plus From Individuals Fell in 2008  

After record-breaking totals in 2007, the last quarter of 2008 saw the amount of million-dollar gifts drop far below the average.

The findings are from the Center on Philanthropy’s Million Dollar List™, which tracks gifts of that amount or more reported in the news media. It is the second largest drop in individual gifts during the last half of a year to occur in the past decade. The largest drop, 35 percent, was in 2001.

The 333 gifts of $1 million or more from individuals in the second half of 2008 represents a decline from the record high of 495 such gifts made in the second half of 2007. It is also 14 percent below the 386 individual gifts given in the second half of 2006, a more typical year.

Foundations Gave More

Although the number of individual gifts fell, the number of $1 million-and-up gifts from foundations in the second half of 2008 increased 10 percent from the same period a year earlier, to 551 (up from 500), while the number of corporate gifts at that level remained the same at 146.

Overall, for all of 2008, at least 2,270 gifts of $1 million or more from individuals, foundations and corporations were announced, 4 percent more than for all of 2007.

About the Million Dollar List

The Million Dollar List™, compiled by the Center on Philanthropy at Indiana University, documents gifts of $1 million or more announced in the news media. While it is not a comprehensive record of all million-dollar-plus gifts, it is indicative of trends in giving at that level.

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Four New Books Added to Fund Development Series Will Be Released at Conference  

The AFP Publishing Advisory Committee and publisher Wiley will welcome four new books into the AFP Fund Development Series at the AFP International Conference in New Orleans.

(Please see the electronic version of this story for the link to the conference book signing schedule.)

(Don't miss out on the largest gathering of fundraisers in the world this year in New Orleans. Register today for the AFP International Conference on Fundraising happening March 29-April 1.)

The new titles cover subjects ranging from donor relations and working with consultants to fundraising management and global philanthropy.

The AFP Fund Development Series was created in 1996 to provide development professionals with the cutting-edge information they need to reach their professional goals and advance their careers. The series continues to grow each year with the addition of titles on a variety of topics ranging from the practical to the thought-provoking.

The AFP Fund Development Series currently includes more than twenty titles including seven titles in the user-friendly Nonprofit Essentials Series.

The series is always looking for new authors. So if you have a good idea for a book on fundraising, fund development or nonprofit management (even if you’ve never written a book before), you may want to explore this unique opportunity! AFP is holding a special session, "Publishing Your Book Through AFP," at the International Conference on Fundraising in New Orleans on Sunday, March 29 at 1:15 p.m. in the How To Theater at the convention center. You can also find information by contacting Jan Alfieri at jalfieri@afpnet.org.

Books New to the Series:

Effective Donor Relations
By Janet L. Hedrick, CFRE

This book is a concise and professional guide to donor relations in a format that is accessible, lively, easy to read and that provides in-depth advice from an expert in the field. The book illustrates the creation and implementation of each aspect of a donor relation plan, providing recommended solutions to frequently encountered dilemmas. It includes sample documents, checklists and other tools to help shape an effective program.

Fundraising Consultants: A Guide for Nonprofit Organizations (To be released in New Orleans)
By Eugene Scanlan, Ph.D., CFRE

Fundraising Consultants: A Guide for Nonprofit Organizations provides a thoughtful and deliberative guide for how to select, develop and maintain successful relationships with consultants that can help organizations achieve their goals. It is also an excellent resource for consultants, both new and experienced, on how to best serve clients.

The Complete Guide to Fundraising Management, 3rd Edition (To be released in New Orleans)
By Stanley Weinstein, ACFRE

There are now more than 1 million nonprofit organizations in the United States, and the fundraising industry is one of the fastest-growing segments of the economy. The Complete Guide to Fundraising Management presents step-by-step guidance on planning, self-assessment, continual improvement, cost effective fundraising strategies and much more. An accompanying CD-ROM contains checklists, grids and sample forms. Plus, the third edition adds a chapter on Internet fundraising as well as updated statistics. Fundraising professionals will benefit from the practical advice on managing the complexities of a development office.

Philanthropy in a Flat World: Inspiration Through Globalization (To be released in New Orleans)
By Jon Duschinsky

Open, honest and challenging, this visionary guide looks at the forces at work in creating the global philanthropic world of tomorrow. It is a must-read for every fundraiser and nonprofit manager seeking to compete and succeed in today's "borderless" world. This compelling and practical resource reveals how your nonprofit can become more flexible, adaptable and international in approach to help it survive the coming challenges.

You have a choice. Bury your head in the sand and pretend the world is still round and suffer the consequences, or take advantage of this incredible opportunity. Philanthropy in a Flat World: Inspiration Through Globalization is your insider guide to meeting and exceeding your nonprofit's goals for decades to come.

Each of these books will be available in the AFP Bookstore following their unveiling at AFP's International Conference on Fundraising in New Orleans, March 29-April 1. To access the AFP Bookstore, go to www.afpnet.org and click on AFP Marketplace and Bookstore.

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Watch for the March/April Issue of Advancing Philanthropy!

Volunteers are the lifeblood of your organization. Do you know how to manage and motivate them? How would volunteers describe working in your organization? Also, read research findings on partnering with wealth advisers, hear how The Just Enough Planning Guide™ can help you plan some campaigns and learn about the importance of bringing back information and sharing knowledge.

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Newly Revised CFRE Review Course Now Available

AFP’s CFRE Review Course offers development professionals an opportunity to review the main components of a complete fundraising program. It is a two-day, intensive program that provides an overview of skills, techniques and program components based on fundraising experience at the five-year level. For more information on hosting the course in your chapter, please contact AFP’s Professional Advancement staff at (703) 519-8494 or email profadv@afpnet.org. To view courses now being offered go to www.afpnet.org and click on Education and Career Development. Then click on CFRE Review Course.

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