Philanthropy Ohio comments on proposed regulations

On Monday, Philanthropy Ohio submitted the following comments in response to Notice 2017-73 that addresses the use of donor advised funds (DAFs), on behalf of our 48 community foundation members.

Philanthropy Ohio is a statewide membership association serving private and community foundations, corporate giving programs, government agencies, United Ways and other public charity grantmakers as well as individual philanthropists. Our mission is to be the leading voice and premier resource for philanthropy across the state, particularly serving our over 220 members who collectively awarded more than $4 billion in grants last year. We provide the network, tools and knowledge to help people engaged in philanthropy become more effective, powerful changes agents in their communities.

Community foundations are a vital part of Ohio’s philanthropic landscape; we have the second highest number of any state (67 active, stand-alone foundations) and are third in giving ($515 million in 2015). As you might expect, donor advised funds are important, growing vehicles for our community foundations. About two-thirds of Ohio’s community foundations have DAFS, including small foundations serving rural communities as well as the largest grantmakers serving major cities. Recently completed research demonstrates the popularity and power of DAFs in our community foundations: the 10 largest community foundations have 3,345 DAFs that collectively hold $1.1 billion in assets and granted $184.5 million, representing an average payout of 11.6 percent (source: 2015/16 990s).

We see first-hand the impact that these foundations have in their communities, bringing local social and financial capital to address critical problems. These charitable endowments provide countless opportunities and numerous vehicles (including DAFs) for new and seasoned philanthropists to give back to their communities and make smart decisions about their charitable giving.

For many years, Philanthropy Ohio has advocated for policies that: encourage charitable giving; give donors the widest possible choice of vehicles for giving; and simplify the processes related to giving, at both the state and federal levels. Given the recently passed federal tax reform bill and its potential impact on charitable giving, we believe it is more important than ever that federal rules, regulations and tax laws make charitable giving easier rather than more complex and harder. It is from these values and vantage point that we offer comments related to the operations of DAFs as outlined in the Notice. We believe that minus evidence of widespread abuse related to any of the proposed topics addressed in the Notice that any guidance should have as its goal making the use and operation of DAFs easier and less complex for both donors and sponsoring organizations.

Section 3: Certain distributions from a DAF providing a more than incidental benefit to a donor, donor advisor or related person

We believe that the rules that apply to charitable deductions allowed for individual taxpayers should be mirrored in those for DAFs. An individual taxpayer may claim a charitable deduction for the portion of an event ticket or sponsorship for which no value or benefit is received, based upon the charity’s estimate of the value of those benefits. Current law and regulations do not prohibit such bifurcation and community foundation practice varies on this topic as some continue to bifurcate in such situations. Community foundation staff have and demonstrate the requisite skills and knowledge to accurately implement bifurcation, indeed helping donors comply at a higher rate, we suspect, than do individual taxpayers making similar charitable contributions. Further, there is nothing that states a legislative intent that DAFs and individuals by treated differently. For these reasons, Philanthropy Ohio requests the IRS and Treasury Department to reconsider the proposed guidance and accept the regulations and laws already in place that allow bifurcation.

Section 4: Certain distributions from a DAF permitted without regard to a charitable pledge made by a donor, donor advisor or related person

We appreciate the IRS proposal that distributions from a DAF to a charity that fulfill a pledge would not result in a more than incidental benefit to the donor/advisor but are troubled by the provision that makes it such only if the sponsoring organization makes no reference to the existence of the pledge when distributing the gift to the charity. We believe that this “don’t reveal” safe harbor for such distributions runs counter to our values – and those of our members – around transparency and accountability as we urge the adoption of best practices and credentialing. We also share our concern about the administrative burden the proposal places on charities that are charged with determining the legal enforceability of a pledge; we see that our community foundations’ practice is mixed and confused in the current environment and doubt that charities would be better equipped to make such determinations. For these reasons, Philanthropy Ohio asks the IRS and Treasury Department to adopt a regulation that explicitly permits the pledge of a donor/advisor to be paid from a DAF without further language about enforceability or lack of reference to the pledge during distribution.

Section 5: Preventing attempts to use a DAF to avoid public support limitations

We are not aware of instances where DAFs are being used to avoid public support limitations and believe that the proposed regulations would impose burdensome administrative requirements that far exceed the perceived problem. DAFs are public charities and grants from them should continue to be treated as public support, without any required attribution or aggregation and without any erosion of their public charity status. There is a perception perhaps on the part of the IRS that donors/advisors improperly control DAFs, a perception that is not supported by the practices and policies community foundations put in place to govern the operation of the funds and the foundation. Philanthropy Ohio opposes the proposed regulations and hopes that any regulations, if adopted, would provide relief from administrative burdens of sponsoring organizations and grantees.

Section 6: How private foundations use DAFs in support of their purposes

Our research into this area surfaced only a handful of examples of private foundations using DAFs at community foundations. In these cases, the private foundations used the funds to achieve a number of purposes related to their mission and, in most cases, the sponsoring organization imposed either formal policies or informal practices about required distributions, with disbursements occurring as early as 3 months from the date of the contribution. About one-third of Ohio’s community foundations comply with National Standards for Community Foundations, which include requiring adoption of best practice policies to address inactive DAFs, and many more are actively seeking such compliance. While we understand IRS concern about the potential for private foundations to use DAFs to avoid payout requirements and retain control over funds, this does not appear to be supported by the evidence. Philanthropy Ohio opposes any new regulations that would exclude DAF contributions from a private foundation’s qualifying distributions and suggest any new regulation be carefully crafted to stop any bad practice without limiting DAF use for genuine charitable purpose.

Claudia Y.W. Herrold

How will the new tax law impact the nonprofit sector?

As the dust settles and we plan our work for 2018, many in the nonprofit sector – funders and grantees alike – are wondering just what the recently-passed tax reform bill will mean for them. It’s a mixed bag of impacts, both potential and certain. Here’s what we know and what we don’t know but anticipate.

First, the Tax Cuts and Jobs Act did NOT repeal the Johnson Amendment. The law, in place since 1954, prohibits nonprofits from political campaigning; nonprofits can neither contribute to nor endorse candidates for any elected office. Philanthropy Ohio thinks this is a good thing and opposes its weakening and repeal. There are still bills in Congress aimed at repeal, so the sector needs to keep a close eye on those. HR 781, the Free Speech Fairness Act, has 61 co-sponsors including Ohio Representatives Jordan and Renacci and its companion bill, S 264, has 5 sponsors.

Noteworthy among other provisions of the Tax Cuts and Jobs Act is one that will assess a 21 percent excise tax on compensation at nonprofits paying staff $1 million or more. Our colleagues at Clark Schaefer Hackett have a good article that explains the details of this provision, along with the tax on college investment income.

The tax law doubles the standard deduction, which means many current itemizers – projected as high as 95% – will stop itemizing deductions and claim the standard, especially since the deduction for state and local taxes was limited. This will likely impact charitable giving but it’s uncertain at what level. Estimates of projected decreases in giving range in the billions; a study by the Lilly Family School of Philanthropy and Independent Sector pegs the range of potential impact at $4.9 to $13 billion. The Tax Policy Center’s analysis puts the number at the high end; it looked at impacts on various income levels and concluded “the new law is likely to reduce charitable giving by somewhere in the neighborhood of 5 percent. And those gifts will come from fewer—and richer—givers.”

We also know that donors at the higher end of the income spectrum are more likely to give their charitable contributions to arts and culture organizations as well as colleges and universities, while those with middle and lower incomes tend to support organizations providing safety net services – food pantries, homeless shelters and the like. Accordingly, it may be that the tax law disproportionately affects donations to human service organizations.

Here in Ohio, about one-quarter of taxpayers have historically claimed charitable contributions as itemized deductions. In 2015, the latest year for which we have IRS data, 1.1 million Ohioans claimed gifts totaling $5.85 billion, gifts that went to all kinds of nonprofits across the state, nation and world. Ninety-five percent of our state’s itemizers were responsible for over $3 billion in charitable donations; that is a big chunk of money that’s potentially at risk. While we don’t believe that tax policy creates a charitable intent, it does influence the timing, amount and form of gifts. This was clear just this past year, as described in a Chronicle of Philanthropy article that showed online donors gave 38 percent more to charity and made 18 percent more gifts during the last week of 2017 than in the final week of 2016, with 61,000 donations totaling over $14 million given on New Year’s Eve alone.

How can foundations and grantees prepare for the uncertainty posed to their fundraising? One piece of advice: without the artificial deadline of December 31 for tax purposes, resource development, annual giving campaigns and crowdfunding activities need to be planned now and implemented earlier. And, given the proclivity of millennials and others toward online giving, nonprofits need to up their game using social media and technology.

The sector also should ramp up its advocacy activity to lobby for the creation of a universal deduction for charitable gifts. We lobbied long and hard for its conclusion in the tax reform bill, without success, and will renew our efforts this spring when we visit Washington for Foundations on the Hill.

Additionally, we’ll be asking our Ohio delegation to extend and expand the IRA Charitable Rollover, which could open new sources of donations by allowing those aged 59 ½ and over to contribute assets tax-free and by including donor advised funds as eligible recipients. These provisions could offset – at least partially – the anticipated drop in charitable contributions, continuing the strong American tradition of giving by individuals to help neighbors and by foundations to invest in addressing critical community needs.

Claudia Y.W. Herrold

Implications of tax reform bill

As the dust settles on the tax reform bill, I wanted to point out key provisions that will likely impact community foundations and other public charity grantmakers and suggest that you consider amplifying your end-of-year appeals in the face of anticipated losses next year.

Briefly, doubling the standard deduction and eliminating or reducing other credits and deductions is projected to result in 95% of current itemizers no longer using that schedule. In Ohio, based on 2015 data provided by 1.5 million itemizers with charitable deductions, that means $3.8 billion of total $5.5 billion given by individuals (not via bequests) is at risk.

What does this mean for your organization and those you support? We don’t know for sure but we do know that tax policy plays a major incentive for charitable giving and are afraid of how those donations might fall. Additionally, the exemption from the federal estate tax was doubled to about $22 million for couples.

A few of our members have asked today about how to position their organization for planned or special appeals before the end of the year, beyond sending the message of “send more money now.”

Pointing out that this may be the last year for which most donors will have the tax incentive to give, you might suggest that they use their IRA assets (if they are 70 ½ or older) and/or that they consider making a one-time substantial gift.

Three positive items to note: the Johnson Amendment stands, prohibiting political activity by nonprofits; no changes were made to donor advised funds; and donors can receive a tax deduction for cash gifts of up to 60% of their adjusted gross income, up from the current 50% limit.

As we look to next year, we’ll be heading to Washington D.C. for Foundations on the Hill, where we will talk about a number of ways to mitigate the damage to charitable giving that we anticipate:

• Allow IRA assets to be given to donor advised funds;
• Decrease the IRA charitable rollover age to 59 ½; and
• Create an above the line, universal deduction for charitable gifts.

It will be a critical year, please consider joining your philanthropy colleagues from across the country on March 12 – 14 for Foundations on the Hill.

Claudia Y.W. Herrold

Charitable giving is at risk

Tomorrow is Giving Tuesday, a day when charities across the country raise the money that sustains their efforts to help those most in need – whether that need is for a college education or workforce training, for food and a safe place to sleep, for addiction treatment or for dental care. If Congress has its way, those charities are going to be in a world of hurt as the charitable deduction so many charities rely on to spur donations comes to an effective end if the tax reform bill passes in its current form.

The Tax Cuts and Jobs Act eliminates a number of deductions and credits while doubling the standard deduction, a move that is intended to both simplify tax returns and lower the amount of taxes owed – at least for some individuals. While the bill keeps the charitable deduction – which has existed for 100 years – many fewer individuals will choose to itemize since they would lose other deductions and credits – like those for tuition, medical expenses and payment of state and local taxes. National estimates project that 95% of taxpayers who currently itemize their deductions (including the charitable deduction) will no longer do so once the other deductions and credits are deleted. A study by the Tax Policy Center estimates that charities would lose between $12 and $18 billion next year because of the tax bill’s effective elimination of the charitable incentive for donating to nonprofits. Here in Ohio, that 95% gave almost $4 billion in 2015, an amount that would be at risk of dramatically decreasing if the incentive for giving goes away. And, not only would thousands of charities and those they serve be impacted by such a reduction, so would Ohio’s economy, since almost 12% of the workforce is employed by a nonprofit.

There is a way to offset – at least partially – this anticipated decrease: create a universal deduction for gifts to charity, similar to the deduction enacted in the 1980s. In fact, HR 3988 proposes doing so, allowing all Americans to deduct their charitable donations without itemizing. We call upon Senators Portman and Brown to offer this as an amendment as the bill moves to the Senate floor.

It is critical to recognize that philanthropy cannot fill the needs – here in Ohio or nationwide – created as a result of the many provisions negatively impacting charitable giving and low- and middle-income workers and families. Ohio’s foundations, United Ways and other public charities gave over $2 billion to nonprofits in 2015, the highest on record, but it’s insufficient to fill anticipated gaps if the tax reform bill passes in its current form.

Claudia Y.W. Herrold

Open letter to Ohio’s Congressional delegation

The Honorable Joyce Beatty
U.S. House of Representatives
Washington, DC

Dear Representative Beatty,

As we watch the U.S. Congress move with all due haste toward passing a tax reform bill, Philanthropy Ohio urges you to carefully evaluate proposed reforms’ impact on philanthropy and on the lives of our most vulnerable citizens, those whom our philanthropic dollars serve through our nonprofit partners.

The pending tax debate is critical for the philanthropic sector, as we have witnessed during conversations with Trump Administration officials and congressional staff. Those conversations revealed the widely-held, misguided understanding that Congress can enact severe tax cuts because philanthropy can step in to meet the resulting needs of the underserved. We in philanthropy know this is a fallacy of supreme proportions and we continue to push back on that statement.

For the first time, Philanthropy Ohio is weighing in on tax policies beyond the typical items related to charitable giving; as you well know, we have visited with you and others to advocate for expanding the IRA Charitable Rollover; reducing the private foundation excise tax; and maintaining the full scope and value of the charitable deduction. Those are all important for philanthropy’s continued strength and vitality – but this time we turn our attention as well to a number of other items that help those served by philanthropy, lower- and middle-income individuals and families.

You are familiar with Ohio’s current economic circumstances, where townships and small- to mid-sized legacy cities are experiencing unprecedented financial insecurity. The Ohio United Way’s ALICE® Report (Asset Limited, Income Constrained, Employed) found that in 2015, 14% of Ohio’s households faced financial hardship and an additional 26% (1.2 million households) were identified in the ALICE category. It is this population of Ohioans about whom we are most concerned when we read the tax reform proposals, concluding that they could very well do more harm than good on the lives of those we in the philanthropic sector have the privilege to serve.

Consider, for instance, two tax credits for low- and middle-income workers under debate: the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), both of which help individuals and families make ends meet by keeping more of what they earn. The EITC refundable tax credit incentivizes work and depends on a worker’s income, marital status and number of children. In Ohio, 939,000 workers claimed the EITC last year, putting $2.3 billion into Ohio and lifting people out of poverty. The EITC’s power could be increased by extending it to younger adults, parents not living with their children and veterans. Similarly, the CTC should be protected as a refundable credit and considered for expansion to older adults, especially given the number of seniors raising grandchildren as a result of the opiate addiction crisis.

For a working family in Elyria, Ohio, that earns $12 an hour in a local manufacturing plant, living paycheck to paycheck requires vigilance and planning that few of us with privilege understand. Life for many families is wrought with uncertainty, and a tax refund check can mean the difference between eviction or being able to pay for medicine. Both Republicans and Democrats have supported the EITC and current proposals to change these effective policies would push more people in lower- to middle-income brackets into full-blown poverty that will increase demands on philanthropy and nonprofits.

Another set of credits at risk in current debates is also of concern to those of us who look at education as a step out of poverty: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LTC), designed to help low and middle class taxpayers afford higher education expenses. The AOTC is the more lucrative of the two as it can provide a family with about $2,500 a year for each eligible student. Foundations know that for many families a $5,000 top-off to a financial aid package can mean a world of difference for a student embarking on a four-year college education or community college. The LTC provides up to $2,000 for qualifying tuition and fees for those who may be older and returning to school to pursue a new career at higher pay. We know from our colleagues in the education sector, the lifetime earnings of a person holding a four-year degree is about $1.9 million, about twice what the typical high school graduate earns, and $335,000 more than what the typical associate degree program graduate earns. Despite this evidence, a 2014 Congressional Budget Office report suggested elimination of these and similar credits to help reduce the deficit. Philanthropic dollars will never be able to make up the difference this reduction would have on this important form of college financial aid.

We are also concerned about the proposal to double the standard deduction, intended to simplify the tax code by reducing the number of itemizers by 95%. In Ohio, that would mean 1.25 million fewer itemized returns reporting charitable contributions in a given year. Of the 1.31 million Ohioans who itemized charitable contributions on their federal returns, 24 percent had incomes less than $50,000 and made $612 million in contributions to local charities. Further, middle-income taxpayers (income between $50,000 and $200,000) gave $2.6 billion dollars and made up two-thirds of all itemizers.  The remaining 7 percent – the wealthy donors with income over $200,000 – presumably would be the only ones left itemizing. Research suggests that overall charitable giving in the U.S. would drop dramatically if this provisions passes. The nonprofit sector, which in Ohio constitutes 10% of the work force, would be significantly impacted by reduced charitable contributions and services would be dramatically cut – all leading to increased demands on philanthropic dollars. And, some models have shown that doubling the deduction would actually increase the tax burden on low to middle-income taxpayers, when all itemized deductions are foregone. What looks like an admirable simplification could result in a larger tax burden for many.

Here In Ohio, philanthropy leaders realize that as co-investors with government on a wide array of critical issue areas – including education, health, human services and economic development – the federal tax code is a tool that allows this partnership to flourish and that supports the common good of a vibrant and informed democracy filled with opportunity for all to achieve the American dream. We hope that reform discussions occur within a framework that considers how the tax code can: promote and sustain a robust tradition of generous charitable giving by Americans helping their neighbors; ensure the vibrancy of the nonprofit sector, where its citizens voluntarily engage in their democracy; advance economic security for all Americans; and invest in educational opportunities that prepare Americans for the dramatic changes facing us in this 21st century.

We urge you to use these goals as you consider the tax reform proposals being debated and we stand ready to provide additional information and insights as would be helpful.

Sincerely,

Suzanne T. Allen, Ph.D.                                  Claudia Y.W. Herrold
President & CEO                                               Senior Vice President

What we heard in DC

As you might imagine, our recent trip to Washington, D.C., for Foundations on the Hill was abuzz with talk about presidential candidates – with not a lot of mention about our own governor – and their prospects in upcoming primaries. Panelists and speakers in various venues were happy to predict what might happen at conventions for both parties and what that might mean for the future.

And it wasn’t all focused on the race for the presidency: added to the conversation mix was the fact that 34 senators are up for election, including several very competitive races like the Portman-Strickland matchup here in Ohio. There was quite an attitude of “inside the beltway” nearly-obsessive focus on the November election, with both parties vying for control of the White House and the Senate.

Our first meeting in Washington for Foundations on the Hill was with Sen. Rob Portman. Pictured from left: Suzanne T. Allen, Heidi Jark, Sen. Portman, Claudia Y.W. Herrold, Brian Wagner, Marissa Williams, Kate Keller and Renee Harvey.

That focus played out in our meetings on Capitol Hill, where elected officials and staff alike predicted that not much would get done for the rest of this year. Which has eight months left to go. One must-pass bill, we heard, is one dealing with FAA matters, and of course, there’s the budget bill or potential for a continuing resolution to fund the government if that fails to pass.

Renee Harvey and Sylvia Perez speak with Sen. Rob Portman.

While hearing that may have dampened our hopes for moving our issues forward this year, it didn’t dampen the voice of those who spoke on behalf of philanthropy. 153 regional association foundation staff and trustees trekked the Senate and House office buildings to accomplish a few common goals:

• Thanking those who voted for the PATH Act, which made the IRA Charitable Rollover permanent: after years of asking for reauthorization, there is no certainty for those donors aged 70 ½ or older to use their retirement assets for gifts to qualified charities without being taxed;
• Asking them to support a further improvement to that provision, to allow donor advised funds (DAFs) to receive the IRA assets: HR 4907 and S 2750 both would make that change for this fast-growing charitable vehicle (Ohio’s community foundations hold 5,095 DAFs that made grants of more than $193 million in one year; and
• Asking them to support a simplification and reduction of the private foundation excise tax: the current, two-tiered system that assesses tax on a private foundation’s net investment income is a complicated calculation that, if changed to a flat 1 percent as proposed, would provide more dollars for grantmaking.

Our Ohio delegation met with Gideon Bragin, senior tax policy advisor for Sen. Sherrod Brown.

Of our eight meetings with Ohio’s members of Congress – including those who serve on the all-important Senate Finance and House Ways & Means Committees – no one expressed concern about these provisions. But – and it’s a big but – no one held out much hope that either would move this year. That said, all also agreed that the bills and our meetings urging their passage, were important for setting the stage for the next congress. And that’s ultimately what our policy work is all about: being willing to stick with it (it took us 10 years to get the IRA Charitable Rollover made permanent) and acknowledge that policy work is a long-term venture and commitment.

Thanks to our Ohio leaders who traveled to Washington: Leah S. Gary, Renee Harvey, Heidi Jark, Kate Keller, Sylvia Perez, Brian Wagner and Marissa Williams.

Claudia Y.W. Herrold

10 trends in charitable giving

The headline in the latest Ohio Gives report reads “$7.42 Billion in Total Charitable Giving.” It is a staggering number and it’s fairly intuitive to think that the wealthy or the big foundations or our large companies and corporations are making these donations to our charities. But the truth is, of the $7.42 billion, only 18 percent came from foundation grants and just 7 percent from other types of funders. The rest—75 percent—came from individuals.

Nationally, the story doesn’t vary much. Of the $358 billion that Americans gave to charity in 2014, only 14 percent came from foundation grants and just 5 percent from corporations, with 81 percent coming from individuals. Inherent in the data, particularly at the national level, are some interesting trends. For example, between 70 and 90 percent of all U.S. households donate to charity in a given year and the typical household’s annual gifts add up to between $2,000 and $3,000.

In Ohio, we know that 22 percent of our population report making a charitable gift on their federal tax returns. We are listed as the 31^st most charitable state in the nation, with a giving ratio of 2.82 percent. (A giving ratio is the percentage of the adjusted gross income that is reported to the IRS as charitable deductions.) And, our average gift size is $2,794.

If you missed last week’s Let’s Talk Philanthropy: Ohio Gives webinar, check out the recording and presentation.

While these facts are interesting, what helps leaders plan and what drives the proverbial “philanthropic bus” are the trends that underpin these facts. Here are the ones that interest me the most:

1. 2014 marked the fifth year in a row that giving increased, nationally.
2. Mobile giving has increased 45 percent from 2014 to 2015.
3. In 2013, online giving grew by 13.5 percent, while overall charitable giving grew by 4.9 percent.
4. Women continue to demonstrate innovation and leadership in how they give: the projection is that by 2025, 60 percent of all billionaires will be women.
5. Innovative structures will become more popular – remember the recent Chan Zuckerberg Initiative LLC? (See Is the Chan Zuckerberg Initiative Good for Philanthropy?)
6. Philanthropic activism will continue to rise as the funding for the public sector continues to decline, shifting the funding responsibilities to private funders.
7. Democratized philanthropy – now, not only can everyone spell philanthropy, everyone can be a philanthropist. From the Ice Bucket Challenge to Go Fund Me campaigns, everyone can give to causes they care about … easily (See trend #2).
8. For the first time in history, there are four generations in the workplace and in the philanthropic marketplace – Silent/Great, Baby Boomer, Gen X and Millennials. These four generational views and societal influences create very different approaches to philanthropy.
9. Donor advised funds continue to grow in size and popularity. Charitable assets under management in all donor-advised fund accounts totaled $70.7 billion in 2014, an all-time high, and grant payouts continue to exceed 20 percent.
10. The 2014 U.S. Trust® Study of High Net Worth Philanthropy found that philanthropic giving by households with at least $5 million in assets rose by an astounding 43 percent over the two-year period ending in 2013, with average donation amounts reaching $166,602.

What trends are you seeing and how are they impacting your work? Share your thoughts in the comments section below.

Suzanne T. Allen, Ph.D.

Are you prepared for when disaster strikes?

Whether it’s Winter Storm Jonas that just finished dumping feet of snow across the east coast, an earthquake in Alaska or flooding in the Midwest, philanthropy is fast on the scene to help with relief and recovery. The newly-released Disaster Philanthropy Playbook is filled with resources and strategies to help philanthropy respond to such disasters. It’s a multimedia, interactive magazine that’s easy to access and use.

Available for free download online, the guide has compiled a wide array of strategies, best practices and lessons learned about how philanthropy has helped local economies, nonprofits and populations when disaster struck. It was published earlier this month by the Center for Disaster Philanthropy, whose sole mission is to increase the effectiveness of funders and donors who respond to disasters both at home and abroad.

Of particular interest to funders is a resource on philanthropy’s role in disaster planning and response, a 47-page book based on the experience of 62 Alabama tornadoes that killed 248 people in 2011. The massive storm system damaged or destroyed more than 23,000 houses in rural and urban areas in a single day. Sherri McGill, president of the Jessie Ball duPont Fund, says this about philanthropy’s role, in her preface to the book:

“No doubt, we must be prepared to fund immediate relief. But that stage ends quickly. To help individuals and communities raise the capital they will need to recover and rebuild, we must be communicators of accurate information, for individuals, for the media, for mayors, church and civic leaders. If communities have not built the necessary infrastructure for receiving public and private capital designed to rebuild a community – housing is among the greatest needs – philanthropy must lead the effort to build that infrastructure.”

Explore the excellent resources that can help you prepare – before disaster strikes.

Claudia Y.W. Herrold

Is the Chan Zuckerberg Initiative Good for Philanthropy?

Recently, Philanthropy Ohio’s President & CEO Suzanne T. Allen, Ph.D., wrote a guest blog that was featured on The City Club of Cleveland’s website about the Chan Zuckerberg Initiative. Please see below for a re-post of that blog.

The Chan Zuckerberg Initiative introduced by Facebook CEO Mark Zuckerberg and his wife, Dr. Priscilla Chan, has the philanthropic and business communities talking. But they aren’t talking about the fact that two people are giving 99 percent of their Facebook shares worth $45 million to support efforts over the coming decades to advance human potential and promote equality. No, the conversation is because of the three letters that appear after the Chan Zuckerberg Initiative’s name: L.L.C.

“What could they be thinking?” asked some leaders in the philanthropy world, because traditionally the wealthy have set up nonprofits, donor-advised funds or foundations to make their charitable donations.  The use of an L.L.C. is a radical, new idea for high-net-worth donors seeking flexibility, autonomy and privacy in their investments.  It’s structured partly like a corporation and somewhat like a business partnership and it gives the owners more control over their assets and grants (expenditures) than a private foundation would.

They can have much more flexibility when investing in for-profit social enterprises and supporting political causes. They won’t have the private foundation’s 5 percent payout requirement and they won’t have to disclose their tax documents publicly. They also will not have to disclose any contracts they might have with for-profit businesses or nonprofits.

While Chan and Zuckerberg won’t receive an immediate charitable tax deduction for any shares they give to the initiative now, as they would with a foundation or public charity, they will see the deduction when the initiative makes grants to nonprofits.

After the initial announcement, Zuckerberg wrote a follow-up post on Facebook. “By using an LLC instead of a traditional foundation, we receive no tax benefit from transferring our shares to the Chan Zuckerberg Initiative, but we gain flexibility to execute our mission more effectively,” Zuckerberg wrote. “In fact, if we transferred our shares to a traditional foundation, then we would have received an immediate tax benefit, but by using an LLC we do not.”

In a New York Times article, GuideStar CEO Jacob Harold said, “It’s buying optionality, so that down the road they could still decide to direct money to nonprofits or they could choose to invest in really cool solar energy companies that are doing a lot of good… and it will enable the creative and flexible use of capital over time.”

It makes me wonder what people in Cleveland were talking about 100 years ago when a man named Frederick Goff said that his vision was to pool the charitable resources of Cleveland’s philanthropists, living and dead, into a single, great, and permanent endowment for the betterment of the city. According to the Cleveland Foundation’s history, “Community leaders would then forever distribute the interest that the trust’s resources would accrue to fund such charitable purposes as will best make for the mental, moral, and physical improvement of the inhabitants of Cleveland.”  This had to be just as radical as the Chan Zuckerberg Initiative is today.  And look where Goff’s vision is today…

Suzanne T. Allen

Passage of IRA Charitable Rollover heralded

December was a celebrated month for charitable giving. In the last week in session before the December break, Congress made the IRA Charitable Rollover a permanent incentive for charitable giving in the federal tax code. On behalf of our members, we are very thankful for the U.S. Congress’ action that will impact community foundations, nonprofits and donors for years to come.

“We are so excited at this major accomplishment for the nonprofit sector,” said Dr. Suzanne T. Allen, president and CEO of Philanthropy Ohio. “And, we are equally pleased that Ohio’s congressional delegation voted overwhelmingly for its passage.”

The House passed the PATH Act 318 – 109; all of Ohio’s representatives except Rep. Marcia Fudge (voting no) and Rep. David Joyce (not voting as he was attending his daughter’s graduation) supported the bill. In the Senate, the vote was similarly positive, 65 – 33, with Senator Brown voting yes and Senator Portman voting no.

The IRA Charitable Rollover, which allows tax-free donations to qualified charities from IRA accounts, has been an important source of donations for Ohio’s community foundations, which have used the funds to support critical local needs.

Making this provision permanent is something we at Philanthropy Ohio have been working on since its creation as a two-year provision in the Pension Protection Act of 2006. Having to reauthorize it every year or two has created great uncertainty for donors and nonprofits. Making it permanent strengthens its role in encouraging charitable giving here in Ohio and across the country.

Special thanks to all, including our members, who urged their representatives to vote yes on the legislation!

Jessica Howard