Tag Archives: taxes

Anderson Cooper 360 Story on Obama Plan to Cut Charitable and Mortgage Tax Deductions

Charity Navigator CEO, Ken Berger talked with CNN’s Anderson Cooper about Obama’s plan to cut the charitable tax deduction.

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Nonprofit Recession Survival Guide to Getting Donations

First the markets, then Madoff, now the Obama administration is proposing reductions in the charitable tax deduction for your biggest donors. What else could possibly go wrong? Oh yeah, I forgot to mention the snow day and nobody came to work. One thing is for certain; raising funds in the current environment is much more difficult that it was last year at this time. Here are some specific suggestions and things to keep in mind as you talk to donors:

Speak the Unspoken Truth
Personally, I like this tactic. Call it like it is. What are the most powerful four words in the English language? “I NEED YOUR HELP”. Talk to your existing donors about what is happening and the state of your organization. Tell them you need help. Let your donors know how the current environment is impacting your organization.

Be Specific With The Ask
This is something that is always a good idea. Even before the mess the last year, donor fatigue was certainly an issue. I believe that in general, nonprofits do a poor job marketing themselves when it comes to being specific about their accomplishments, how donations help, and making specific connections between the ask and the impact. Kiva.org is the opposite of everything I just said. Their supporters choose the cause (lending to a specific entrepreneur who needs a loan), and Kiva reports back on the status of the loan from the individual it was given to. It’s a terrific example of the donor getting involved directly with the cause that they support. Strategic, venture, or tactical philanthropy; call it what you want, people have been demanding more accountability in recent years. This trend towards greater accountability and transparency is only likely going to increase. Help your donors go from a “spray and pray” approach go giving, to being focused and knowing exactly what they are giving to.

Create A Donor Adviser Panel
Invite your top donors into a room for a “Manhattan Project” style round table. The objective of the group is not to gang up on them and tell them how badly you need their money, but to come together and brainstorm new ideas for raising funds. Let them know how much you have appreciated their past support and you are offering them a “no money required” way to help make a huge difference with the organization. Ally you want is their input. Not only will they feel appreciated, do you think there might be a possibility they could cough up a little extra after sitting in on that? If I were a betting man, I’d say your odds are pretty good. That’s not the objective though. Remember that. You are after their ideas and things you are not thinking about right now.

Address Financial Fear
Your donors are shell shocked with what’s going on in the markets now. Everyone is. Do you want to be someone’s hero? Address this head on. This is the one I think that nonprofits have traditionally been the most uncomfortable with. Even large organizations that have planned giving departments have struggled with “the line of control” that exists between donors and their professional advisory team. While planned giving folks want to “get that seat at the table”, and be INVOLVED in the conversation with the financial adviser, attorney, or CPA at the time giving decisions are being made, often they are not. Understand that there is a line, and there should be. Generally speaking, the unspoken truth is that donors know that planned giving officers have one motive, to get money for their organization. This is nothing new though, so what?

The real opportunity to be a hero here is to talk about some of the things that donors are afraid of now and things that they can do to feel more financially secure. The number one concern of the wealthy is that they will lose what they have. While this has always been the biggest concern, the fear is now being realized. Understand that unless your donors feel financially secure, they will likely not give at the levels they had given previously. You cannot help them feel more secure, but you can make recommendations that will. One of the things that’s at the top of the list is recognizing that donors and high net worth clients traditionally have had multiple advisers giving them advice. Their accountant is discussing their returns, their attorney discusses their will (or might not have in a while), and their “financial adviser” is talking only about their investments. Most people have no idea who they should be talking to about the big picture and their ability to achieve what’s important to them.  No wonder you have such a hard time getting a seat at the table, that’s because there usually IS NO table. The advice your donors receive is sporadic and fragmented in professional silos and generally NOBODY is discussing the big picture! Markets aside, the tax changes occurring are faster than the drop in their portfolio value and now is a good time for them to be meeting with their team to reassess where they are and reevaluate their goals.

The key to success lies in your ability to have a trusted relationship with your donor, understand what attracted them to you, what inspires them, what they are afraid of, and how to connect them with the appropriate resources who can help them achieve everything that’s important to them. To the extent you make yourself a master networker and not make it about you and your cause, you’ll be a hero. Ask your donors, “How can I help, YOU?”

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Filed under Current Events, ECONOMY, ESTATE PLANNING, Financial Life Planning, FINANCIAL PLANNING, INVESTING, NON-PROFIT & CHARITY, TAX, venture philanthropy

Does Obama Owe the Nonprofit Community an Explanation?

I’ve been discussing Obama’s proposed tax changes reducing mortgage interest and charitable contribution deductions with just about every intelligent person I know who has been following this story. Not one person I talked to can make a rational arguement as to how this directly benefits anybody. I consider myself to be a pretty open minded guy and I want to know what I am missing here. You would think there would be a good reason for this.

I’ve had a few comments from people that it’s necessary to roll back some of the tax benefits that the rich have enjoyed under Bush and bring them back to levels that are Clintonlike. Some have said that the rich can afford to pay more in taxes, while others have said that cutting the charitable contribution deduction won’t impact giving levels all that much. I’ve described myself as fiscally conservative and socially liberal and while I do support adding to education, healthcare, and alternative energy, I haven’t been able to see how cutting the deductions on real estate and charitable contributions fit into the big picture.

These tax issues will only impact indivudials who earn over $250,000 per year in income, so sure, why not take more from the rich for other things. Folks, you are missing my entire point. You might even be surprised to hear that I support raising income taxes (BLAH!!!! Rich, you are no fiscal Republican you CLOSET LIBERAL!!!). Whoa, hold on a sec…I never said that people who have or make more shouldn’t pay more in taxes. That arguement has no part of this conversation so drop it. Second, forget whether this will only have a MINOR impact on giving and people will still give because, yes, most people give because they want to, not only for tax purposes. Folks, I’m with ya here too. Totally agree. Just explain to me what benefit we will see from cutting the deductions on mortgage interest and charitable contributions.

Ok, let’s start with the mortgage issue. For one thing, wasn’t real estate the source of the mess we’re in now? (Don’t start with “No it was those greedy folks on wall street” either). If we want to sove the real estate mess, one of the things we need to do is stop the decline in home prices. How do we do that? Prices will stabilize when credit markets open up and people begin buying again. How do you get people to start buying again? Don’t we want to get investors back into the market? How do we do that? Hmmm…Let’s see…How do you get your children to want to do something? Special treats? Any parents out there? Do you use treats to drive you children’s behavior? How about an incentive to purchase real estate? How about INCREASING the deduction for mortgage interest? How about offering INVESTORS (THE WEALTHY ONES) MASSIVE INCENTIVES to put money into real estate. How about not just limiting it to mortgage interest? Perhaps throw some other goodies in there. While I’m certainly not suggesting that we create a tax incentive aimed only at the wealthy, wouldn’t you agree that this would be a pretty juicy “scheme” to get those “greedy rich folks” to put some of their “bad money” into some of those empty bank owned homes that ar lowering propery values in our neighborhoods. Hmmm, not such a bad idea…I suggest creating some kind of similiar incentives to restore the health of the non-profit community. While we don’t live in a charity (although your spouse or your mother might disagree with you), charities provide a vital role in American society. Without a healthy and thriving nonprofit community, the services that they provide would either go away, or require the government to provide those services. I ask again; doesn’t that sound like a very “big government” agenda to you?

Ok, so the long and short question I pose to you is this: Regardless of what income bracket these rules would impact, does it make ANY sense to you to be removing incentives to investments in sectors that are among the leaders lagging the economy? Am I missing something here because this doesn’t seem to make one bit of sense to me. I certainly don’t claim to know everything since I’m just a Certified Financial Planner Professional, not a politician who knows much more than I. I really do like Obama and what he stands for and what he wants to do for healthcare, energy independence, and education. These areas are broken in my view. These are important issues for the nation and ones that I relate to personally. Frankly,  I don’t think that the Republicans have these issues on their agenda and about the only reason I’m a regiestered Republican is because I generally agree with their economic agenda. To be completely honest with you, I’ve never been registered with either party until this year’s presidential election when I became a Republican and voted for Obama. How’s that one for ya? I like to keep ya thinkin…

Ok, so now you know my concerns and questions. Anyone want to explain this to me? Anyone want to start a new political party?

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Filed under Current Events, NON-PROFIT & CHARITY, TAX

Is Obama’s Plan to Cut Charitable and Mortgage Deductions Really Stimulus?

The news is out. President Obama announced plans to cut the deductions for charitable contributions and mortgage interest incurred for Americans who earn more than $250,000 per year and raise the top tax bracket from 35% to 39.6%. I have some very sharp opinions about this proposal. For the sake of full disclosure, I voted for Obama but am a registered Republican. I vote issues and people, not along party lines. You might say I am socially liberal but fiscally conservative. That said, I have big problems with this proposal. Watch a CBS News Video about the plan here.

When I went to school to become a Certified Financial Planner Professional™, economics was one of the things they taught. Specifically, they discussed the role that taxes play within the government, how the Fed and IRS work, and how it is the job of the Executive Branch to drive an agenda through tax policy. Generally speaking, I believe Republicans perceive that adjusting taxes downward equals growth through increased investment, while Democrats view taxes as a way to redistribute wealth. While this is a simplistic way of looking at things, this is exactly the way I see the proposed tax changes that Obama introduced.

I believe that changes in tax policy direct our actions. For example, generally given the choice of withdrawing money from an IRA versus a taxable brokerage account, I would typically recommend that people first take from the taxable account because capital gains rates are typically lower than ones income tax rate that they would be subject to if withdrawing funds from the IRA account. The tax benefit drives the actions. Add a 10% penalty for an early withdrawal on top of an ordinary income tax rate, and the IRA quickly becomes the funding source of last resort. Taxes and penalties drive the behaviors of Americans. Good tax policy is meant to create healthy economies. That is exactly the opposite of what Obama’s proposal does.

Charities are struggling to keep their heads above water right now and the housing market has already gone under. The housing mess is the most pressing issue facing the economy in my view. While the government struggles to pay for all of the various “stimulus” packages, charities that provide essential services for the needy, the arts, and everything else are closing their doors in record numbers due to a combination of losses incurred from the stock market and lost donations from their donor base. In my opinion, the last thing the Obama administration should be doing is creating ANY disincentives away from charitable donations or from mortgage deductions. While some may say that this only impacts the wealthy, we all know how Wall Street has come to Main Street in the last year.

Mr. President, you should be INCREASING the mortgage and charitable deductions to INCENT people into these areas, not reducing them. Rich, poor, it doesn’t matter because while these initiatives may not take effect for some time, perception is reality when it comes to human assumptions. The dire economic situation that the nonprofit and real estate sectors face need all the help they can get in order to be put back on a more solid footing. I believe in the end, these moves do nothing but exacerbate an already bad situation in two of the areas that now require the most help.

Traditionally, charitable contributions have served as a great way to reduce taxes and everyone won. Charities provided services that the government wasn’t as good at providing, Americans got a tax deduction for funding them, and the government didnt’ have to do that job. Everyone won. By changing this balance now with charities struggling already, this will mean less donations, force charities to close due to ANOTHER financial setback caused by poor government policy, and put the onus of providing the services that these charities provided, squarely back on the government’s shoulders. This sounds like a very Democratic thing to do from a fiscal standpoint. As a fiscally conservative Republican, I fear the consequences this will have on the system at a time of such economic distress. There are lots of things I don’t agree with in the Republican party (like energy and environmental policies for one), but when it comes to this proposal, I would never side with the Democrats on this. It stinks.

Last year, I wrote a review of  a terrific book called  “Who Really Cares?”, about the giving habits of Americans, and specifically, Republicans versus Democrats. Since we are on the subject. It might be a good refresher for those thinking about cutting areas that impact giving. It was a great book that anyone interested in this subject should read.

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Filed under Current Events, ECONOMY, ESTATE PLANNING, FINANCIAL PLANNING, FOUNDATIONS, INVESTING, NON-PROFIT & CHARITY, TAX