Nonprofits mobilize to capture IRA tax-free funds
The nonprofit fundraising community right now resembles a recently disturbed anthill. That’s because the Pension Protection Act, part of new tax legislation regarding charity donations, allows for up to $100,000 in tax-free giving from IRA accounts.
The excitement is so urgent because the act expires at the end of next year, leaving little time for donors to give. Further, in order to qualify, a participant has to be no younger than 70 and a half years old. This narrow window has spurred seasoned fundraisers to action in hopes of getting the word out about this temporary opportunity.
Vancouver-based Estate Planning Council Director Dan Marsh agrees the window is narrow for donations and said he is doing all he can to inform his clients about the new law.
"People are more motivated to give to a charity if the gift will not be taxed," he said.
Nonetheless, Marsh said of his total client base, only 10 percent are inclined to charity. Also, only IRA accounts that exceed $2 million are taxable in the first place.
"Most of them will leave their estate to family members," he said. "But some would be inclined to give the $100,000 in order to reduce the total of their IRA, and so not be taxed as heavily. I think in a few instances, people having wealth exceeding $2 million would like to make this donation."
Marsh said that only 1 percent of his Clark County client base falls into the over $2 million bracket, making the eligibility umbrella even smaller. Add to this the lack of information regarding the provision, and you get the anthill effect.
Some, like Shelley Giesbers, a fundraising specialist with Open House Ministries in Vancouver, did not know of the provision, but recognized the chance when informed of the legislation.
"It would be huge if we could get the word out to people who support us," she said.
Still others have been tracking the issue for years, and are suited up to take donations – providing the small group of eligible donors is informed.
Oregon Health and Science University Foundation Senior Gift Planning Director Pete Sommerfeld said he and his colleagues have been watching for the last 10 years to see if such proposed legislation would pass. Now that it has, in his eyes, it’s game time.
"Virtually everybody in the not-for-profit community is going to be trying to get these donors to contribute," he said. "It has incredible potential. I mean, that’s a lot of money."
The potential is certainly there. Just how much, is the question. Sommerfeld said his organization is working to determine how many IRA holders are eligible, in hopes of determining the exact donation potential. He’s in a unique position: The foundation appeals to graduates of the medical university, many of whom live in Clark County.
"Even some of our board members fit the criteria," he said. Last year, the foundation raised more than $70 million.
Getting donations as a result of the new legislation would be a boon to Sommerfeld’s efforts.
"It’s exciting," he said. "Already I’ve had phone calls from two people asking how they can donate."
Beyond specific organizations such as the OHSU foundation, some speculate that nonprofits in the midst of major fundraising campaigns are in a better field position to benefit from the legislation. Daybreak Youth Services Development Director Tom Bashwiner said this opportunity is clearly geared toward major donors.
"Charities who are in the middle of campaigns are most certainly meeting with these donors, saying, ‘Here’s your opportunity.’"
Sommerfeld said he’s had some potential donors on the hook for years, but has held them off with hopes of the legislation becoming reality.
"At least in some cases we’ve called interested donors and asked them if they still wanted to give, providing they still have the money for it," he said.
