Nine Months That Changed Everything

As a father of six children, I have personally experienced the monumental difference that nine months can make in a life. Apparently, that applies to charities as well. During the last three fiscal quarters, the leadership of the Boys and Girls Club of Door County has made dramatic changes and is successfully addressing its financial crisis.

Quite simply, the organization had become a victim of its own success. After opening the David G. Hatch Center in 2016, it had more activity space than ever before. With good hearts and the right spirit, its leadership threw the doors wide open and invited in every child who needed its resources.

Unlike a business in which new customers translate into more profits, whenever a new group of kids walks through the door, the Boys and Girls Club loses more money. Most of its children could never afford to pay the full cost of the services they receive, yet the organization must always maintain a ratio of at least one adult for every 15 kids. More kids mean greater costs but almost no new revenue. It’s a nonprofit precisely because there is no profit to be made.

Throughout 2018, the Boys and Girls Club was running an absolutely alarming deficit. It had to borrow money to meet its current obligations and was having difficulty covering payroll. That’s when its leadership came to visit us at the Door County Community Foundation.

After a painstakingly thorough evaluation of the Boys and Girls Club’s financial crisis and proposed workout plan, we at the Community Foundation felt confident enough to encourage the people of Door County to join us in giving the organization a second chance to thrive. We sent letters to our friends, and I wrote the column “Don’t You Quit.” I’m pleased to report that not only did our community give the Boys and Girls Club that second chance, but it’s now well on its way to thriving.

Since the crisis began, the Community Foundation has been receiving regular strategic and financial reports and has met with the organization’s leadership on several occasions. Our most recent meeting was just a few days ago with CEO Julie Davis, CFO Cindy Neuville, and board member Erich Pfeifer. I’m pleased to report that things are trending in a very optimistic direction.

On the revenue side of the ledger, consultants were brought in to help implement proven strategies to acquire new donors, and a stewardship committee was formed to better engage current donors. As a result, the number of donors increased by 29 percent. Nationally, the average donor-retention rate (the percentage of last year’s donors who gave again this year) typically hovers around 45 percent. The Boys and Girls Club’s rate is 61 percent.

On the expense side, the organization has consolidated operations and found efficiencies in how it deploys staff. As a result, payroll was cut by 14 percent, and overall expenses were reduced by 17 percent compared to the fiscal year before the crisis began.

Of course, all of these changes come with a human cost. The Boys and Girls Club cannot afford to serve the same number of children that it did a year ago. Then again, the reality is that it couldn’t afford to serve all those kids last year either. The only way it was possible then was to borrow money and go into debt.

Gratefully, because of our community’s generosity over the last few months, the organization is now completely debt free.

The fundamental causes of this financial crisis were overly optimistic revenue assumptions combined with exceedingly aggressive program expansion. Although that was a strategic mistake and a long-term recipe for disaster, we should pause to celebrate the spirit behind those decisions.

Within the leaders of our Boys and Girls Club is the compelling and sometimes overwhelming desire to help every child who needs them. That’s the kind of spirit we want in those who run the organization. Yet we also need the leadership of human-service organizations to make sure that their hearts remain in balance with their heads. Although we may want to rescue everyone who’s fallen into the water, we must also ensure that we aren’t so overwhelmed that we end up sinking the boat.

The Boys and Girls Club has used our community’s recent generosity wisely. It has plans for future growth, but those plans are realistic and appropriate, and they should be implemented at a far more measured pace. Thankfully, it appears that the Boys and Girls Club of Door County will be here for our children for many years to come.

This article, written by Community Foundation President and CEO, Bret Bicoy, originally appeared in the Peninsula Pulse.

A Donor’s Horror Story

Imagine making a contribution of $25,000 to your favorite charity only to have the Internal Revenue Service disallow your tax deduction. This nonprofit horror story may sound absurd, but if you’re not careful, it could happen to you.

It starts with a nonprofit that you’ve been giving to for many years and know very well. It’s a legitimate 501(c)(3) public charity as recognized by the IRS. You know members of the board of directors and have met regularly with the professional staff. It truly is a great organization and unquestionably, your gift will do wonderful things for the charity and the community it serves.

Several years pass and you see the impact of your gift, and you couldn’t be more pleased. But during a routine audit of your taxes by the IRS, your $25,000 deduction is suddenly, and completely, disallowed.

You’re confused and don’t understand what you did wrong. This is a legitimate nonprofit organization. You did not receive anything in exchange for your gift. Everything about this gift and the charity involved was honest and appropriate. It turns out the IRS disallowed your gift because of the omission of a single sentence.

The receipt provided by the organization failed to state that you “did not receive any goods or services” in exchange for your contribution.

That’s it. That’s all it took. The failure of the charity to include a single sentence was sufficient for the IRS to disallow the deduction. Somewhere, really anywhere, on a receipt, thank you letter, or other acknowledgment of your gift, the charity needed to include that sentence. The charity can word it in a variety of different ways, but it needs to put into writing that that “you did not receive any goods or services in exchange for your contribution.”

These are the essential facts of the real life nonprofit horror story of David and Veronda Durden. In 2007, the Durdens made a contribution of nearly $25,000 to their nonprofit church and received an acknowledgment of their gift for tax purposes. This generous couple did not receive anything tangible or substantial in exchange for their gift, but the thank you letter from the charity did not explicitly say so. Thus the IRS disallowed the deduction.

There is some logic to the IRS’ position. Before you are allowed to claim a tax deduction, the government wants to be assured that your charitable gift was actually a gift, and not a payment. For example, the checks you write to a nonprofit preschool for your child’s tuition are not charitable gifts. You’re purchasing a service. The IRS needs to be able to differentiate between your payments to a nonprofit to obtain a good or service and charitable gifts for which you receive nothing substantial in return.

In the case of the Durdens, theirs was a legitimate charitable gift but their church failed to clearly state that no goods or services were provided. Of course, you would have thought that they could have simply corrected this problem by asking the organization to correct their omission. Indeed, that is exactly what the Durdens did in 2009, more than two years after they made their gift. The charity issued a second letter, this time including the key sentence that no goods or services were provided to the donors. Unfortunately, the IRS still disallowed the contribution.

The IRS says that “a donor claiming a deduction of $250 or more is also required to obtain and keep a contemporaneous written acknowledgment for a charitable contribution.” The key word is “contemporaneous.” The IRS says that “to be contemporaneous the written acknowledgment must generally be obtained by the donor no later than the date the donor files the return for the year the contribution is made.” (Both quotes are taken directly from the IRS website).

In practical terms, the IRS was saying that it was too late for the Durdens to obtain a new letter from the charity. The new 2009 acknowledgment letter correctly included the key sentence about “no goods or services” but it was not “contemporaneous” because it was obtained after their taxes were filed.

Needless to say, many thought this was absurd and thus the Durdens took the issue to tax court. After years of court battles, and to the dismay of the Durdens and donors everywhere, in Durden v. Commissioner of Internal Revenue Service the Court sided with the IRS. Clearly, the charity erred in its failure to include the “no goods or services” sentence, but the court affirmed that obligation to obtain the correct documentation before filing their taxes is on the Durdens, not the charity.

And so here we are. A couple makes a remarkably generous gift of $25,000 to a charity. The charity screws up and fails to put into writing that no goods or services were provided in exchange for that gift. As a result, the IRS disallows the tax deduction to which the donors should have been entitled. It’s every donor’s horror story.

So when you make a gift, remember that the IRS says that it’s your responsibility to obtain the necessary documentation to claim a tax deduction. Here’s what the IRS says you need as a donor:

  • For gifts of less than $250, you must have a bank record or written communication from a charity documenting the gift.
  • For gifts of $250 or more, you must obtain a contemporaneous written acknowledgment (a thank you letter, receipt, or other acknowledgment letter) from the charity stating what was contributed.
  • If nothing substantial was provided to you in return for your gift, the acknowledgment must say so in writing, something to the effect of “no goods or services were provided in exchange for your contribution.”
  • If you received something substantial in return for your gift, such as when you purchase tickets for a golf fundraising event, the acknowledgment letter should value those services and state something like “you received lunch and a round of golf valued at $75 in exchange for your contribution of $250.”

For more information, visit the IRS website and to download IRS Publication 1771, Charitable Contributions – Substantiation and Disclosure Requirements. Don’t let a nonprofit horror story happen to you.

Bret Bicoy is president & CEO of the Door County Community Foundation. Contact him at the Community Foundation.

(This column originally appeared in the Peninsula Pulse.)

Margaret Lockwood Featured in Winter Exhibition

The community is invited to attend a reception on Saturday, January 23rd from 5 p.m. to 7 p.m. at the Door County Community Foundation to open its Lobby Gallery Winter Exhibition featuring works by artist Margaret Lockwood. The Community Foundation is located at 342 Louisiana Street in Sturgeon Bay across from the Post Office.

Lockwood 01Margaret has a constant desire to paint canvases that create the feeling of space. Her tools are color relationships, layers of atmosphere, and rhythmic interludes. Margaret says, “I want each work to gently welcome viewers into a peaceful place within the painting and within themselves. My work sometimes begins with looking at the surrounding landscape or often begins as a conversation with the painting before it.” No matter how they are started, the real work comes in the doing, while she is in the middle of it all. Margaret is required to have trust in the unknown and yet-to-be, remaining open to change and chance along the way, but also to direct the creation.

In Door County, Margaret lived in the woods and then in a farmhouse with open fields all around. Her work is overwhelmingly a response to her appreciation of the fragile beauty of those remembered trees and the peacefulness of fleeting light and color across the fields and in the clouds above.

Lockwood 02Margaret shares, “I respond to the atmosphere and the private spaces and moments still to be found in our environment and daily lives as we have entered the 21st century. I am concerned with the layers of connection between our external world and that of our inner worlds, and how we relate to and are informed by our precious environment, each other, as well as our hopes and memories. I want to make visible the mysterious atmosphere of landscapes and spaces within us, our spiritual homes.”

“Each of us is alone ultimately. Understanding this solitude may bring feelings of sadness, but knowing that this is common to all of us can be profoundly reassuring. We can feel connected to our world if we notice. We can feel connected to those who are with us now, along with those who came before and those who are yet to be, if we care,” says Margaret. She hopes there are some who can feel this mysterious yearning mixed with wonder in her work.

The Community Foundation’s reception is being coordinated with the “You Draw & Paint on What?” exhibit at the Miller Art Museum that same evening. The exhibition will feature works of 12 Wisconsin artists who draw and paint with traditional and non-traditional media in new and surprising ways. Guests are encouraged to visit Sturgeon Bay and drop by both the Miller Art Museum and the Community Foundation Lobby Gallery opening receptions.

Refreshments will be served at the Door County Community Foundation by Morag Hornsby and her team at Serves You Right Catering.

Each quarter, different Door County artists will be invited to exhibit their work. The Gallery is normally open to the public during the Community Foundation’s regular hours of 8 a.m. to 4:30 p.m., Monday through Friday.

Grant Awarded to Door County Medical Center Foundation

The Door County Community Foundation has awarded the Door County Medical Center Foundation a Sustainability Grant from the Health and Human Needs Fund. This grant provides financial support for further development of the Ministry Memory Clinic.

The Ministry Memory Clinic Door County (MMCDC) was established in 2011 with assistance from the Wisconsin Alzheimer’s Institute and the support of Ministry Health Care. Its mission is to provide a center of excellence in the early diagnosis and treatment of dementia. It serves as a diagnostic service for patients with memory impairment and a resource of information and care management for families dealing with dementia.

2015-04-13 09.49.47“The Door County Community Foundation is committed to supporting the aging population of Door County through this grant to the Memory Clinic,” said Mike Felhofer, board member of the Door County Community Foundation.

The major outcomes desired from the Ministry Memory Clinic are threefold:  1)Accurate diagnosis of specific dementia through a comprehensive approach, 2)Improved accessibility to dementia-specific diagnosis and care 3)Improved access to  caregiver education and support.

The Door County Medical Center Foundation was created to develop and manage giving opportunities that support the health care needs of the community.  Since its inception in 1988, the Foundation has provided fundraising and grant writing support to the Ministry Door County Medical Center that has helped to create programs, provide health care related scholarship opportunities, update technology, construct new state of the art facilities, create endowment funds and provide hospital wide volunteer opportunities.

For more information about the Door County Medical Center Foundation, please call (920) 746-1071.

The Door County Community Foundation’s Sustainability Grants program distributes grant dollars from funds such as the Arts Fund, Children & Youth Fund, Green Fund, Health & Human Needs Fund, Education Fund, Historic Preservation Fund, Healthy Water Fund, and the Women’s Fund.

For more information about the Community Foundation’s services and various grant programs, please visit our website.

Crossroads at Big Creek Receives Grant

The Door County Community Foundation has awarded Crossroads at Big Creek a Sustainability Grant from the Education Fund. This grant provides financial support for the installation of cabinetry in the new, lower level learning space.

2015-05-19 11.57.59The lower level, multi-functional learning space fills a community need for an accessible and sound-proof room which has the flexibility to serve as a classroom, a dining space, a meeting room, or an exhibit hall. It can also be used as a childcare area when adult programming is occurring on the upper level.

“The Door County Community Foundation is pleased to support Crossroads at Big Creek as it continues to provide exceptional educational opportunities for community members and visitors of all ages,” said Marcia Smith, board member of the Door County Community Foundation.

Crossroads at Big Creek is a beautiful 125-acre preserve that provides experiential life-long learning which nurtures historical and cultural appreciation, scientific curiosity, and environmental awareness.

Foundation’s Sustainability Grants program distributes grant dollars from funds such as the Arts Fund, Children & Youth Fund, Education Fund, Green Fund, Health & Human Needs Fund, Healthy Water Fund, Historic Preservation Fund, and the Women’s Fund.

For more information about the Community Foundation’s services and various grant programs, please visit us online.

IRA Charitable Rollover

There is good news for Community Foundation donors in their 70s – and for the communities and causes they care about. Earlier today the President signed legislation renewing and making permanent a law making it possible to give individual retirement account (IRA) assets to charity, free from federal tax, annually. Prior to this new law taking effect, all lifetime distributions from IRAs were subject to taxation – even those given to charity.

As such, our donors can now give far more with less! This may be an attractive giving option for  you if you are:

  • Over 70½ and now receiving minimum IRA distributions – but do not need the extra income.
  • Interested in making a significant lifetime gift to impact your community.

Using IRA assets to make a gift during your lifetime, as opposed to giving via bequest in your will, enables you to experience the joy of making a major gift.

“We’re ready to help our donors take advantage of this legislation and make gifts during their lifetimes. Our personalized service and local expertise helps donors address the issues and causes most important to them,” said Bret Bicoy, President & CEO of the Door County Community Foundation.

How it works

  • You make a gift of up to $100,000 by transferring IRA assets to the Door County Community Foundation. You must be 70 1/2 years old. If married, each spouse can transfer up to$100,000 from his or her IRA annually.
  • Your gift can be placed into a charitable fund in your name, the name of your family, or in honor of any person or organization you choose. We handle all administrative details. Please note that private foundations and donor advised funds do not qualify.

By giving through the Door County Community Foundation, you can use your gift to meet ever-changing community needs – including future needs that often cannot be anticipated at the time your gift is made. Your gift can target the causes and programs you care about most.

Where you can give

  • Discretionary Funds. These offer the best of both worlds – the opportunity to choose a broad area that interests them while relying on the Community Foundation to identify the organizations that will make the greatest impact on that issue.  Discretionary Funds include the Arts Fund, the Children & Youth Fund, the Education Fund, the Green Fund, the Health & Human Needs Fund, the Healthy Water Fund, the Historic Preservation Fund, and the Women’s Fund.
  • Non-Profit Endowment Funds. The Community Foundation administers the vast majority of endowment funds for the charities of Door County.  Visit www.GiveDoorCounty.org for a listing of the countless local non-profits with endowments at the Community Foundation.
  • Scholarship Funds. You can create a scholarship in your family’s name to provide educational opportunities for our young people.

Contact us at the Community Foundation to learn more or download an information sheet.

Here is an analysis of the new law prepared by the Council on Foundations in Washington, DC:

Why do donors want to give IRA assets to the Door County Community Foundation?

After decades of deliberate saving, some of today’s retirees have more money in their IRAs than they need for daily living expenses and long-term care. For larger estates, a good portion of IRA wealth goes to estate taxes and income taxes of non-spousal beneficiaries; heirs may receive less than 50 percent of IRA assets passed on to them through estates.

Instead, IRA holders may choose to leave their IRAs to qualified charitable organizations—choosing charity over taxes.

Which donors stand to benefit most from giving their IRAs to charity?

Because charitable IRA transfers are not included in taxable income and not available for itemized charitable deductions, these special rules may benefit many different types of individuals:

  • Generous donorsWhen making a major gift, some taxpayers may give more to charity than they can deduct that year. Donors cannot deduct more than 50 percent of their income for gifts of cash to public charities (30 percent, if giving to private foundations). Although amounts over 50 percent can be carried forward and deducted in future years, taxpayers will face an immediate tax bill and may lose some of the benefit of the deduction if they die before the gift has been fully deducted. Donors who consistently give above the limit will not be able to take advantage of the carry forward provisions.
  • Non-itemizers—Donors who regularly give a portion of their income to charity are not able to enjoy a tax break from the contribution because the standard deduction is still greater than the total of all itemized deductions. This may be especially true if state and local income taxes are low.
  • Financially comfortable—Individuals or couples who distribute the minimum from their IRA—and have other forms of income to pay living expenses—may find that transferring their minimum distributions to the Community Foundation helps fulfill personal charitable goals, tax-free.

In the past, how did the tax law treat charitable gifts made from IRAs?

Prior to 2006, IRA holders faced a disincentive for giving retirement assets to charity during their lifetimes because all withdrawals from traditional IRAs were subject to income tax. Thanks to the renewed tax provision, retirees will be able to give far more support without being penalized, doing so during their lifetimes and seeing their gifts benefit their communities.

In the past, when a donor of any age withdrew IRA funds to make a charitable gift, he or she was liable to pay income tax on the withdrawal, offset to varying degrees by a charitable deduction for the gift.

As a consequence of this unfavorable tax treatment, very few individuals donated IRA funds to charity during their lifetimes.

How has the tax law changed?

The new law permits individuals to transfer up to $100,000 from individual retirement accounts directly to a qualifying charity without recognizing the assets transferred as income for federal tax purposes. A donor who has reached age 70½ is now allowed to exclude from his or her income tax calculations certain IRA withdrawals. In most circumstances, these charitable contributions are not tax deductible unless the retirement accounts were funded with after-tax dollars.

This provision is permanent.

What are the advantages of this new law?

The tax benefits now available to American seniors will encourage new contributions from individuals who will no longer have to pay tax on a charitable gift of IRA funds. When given through the Community Foundation, these contributions can support all aspects of community well-being: arts and culture, economic development, education, environment, health and human services, neighborhood revitalization and more.

Now it is easier than ever for more people to enjoy the experience of making the tax-free gift of a lifetime using their excess retirement assets.

What if a donor contributes more than $100,000 from an IRA?

Because the amount that the donor is able to exclude from income is limited to $100,000 under the act, the remaining amount would be recognized as income. Within a married couple, each person can transfer $100,000 from his or her account.

Donors may choose to contribute additional amounts to charity; however, the extent to which additional amounts can be deducted from their income will be determined following general rules of itemized deductions where the charitable percentage limitations and itemized deduction reduction are factors.

What is the itemized deduction reduction?

Higher income taxpayers must reduce their itemized deductions by the lesser of 3 percent of the amount by which their income exceeds a certain amount – $250,000 for individuals, $275,000 for heads of households and $300,000 for married couples filing jointly.

These taxpayers can lose up to 80 percent of the value of their deductions because most itemized deductions have to be reduced by 3 percent of the amount by which the taxpayer’s income exceeds a certain number, or 80 percent of the taxpayer’s itemized deductions.

Example: A married couple filing jointly has $500,000 in adjusted gross income (AGI) and because their AGI exceeds the $305,050 threshold, the 3 percent reduction applies to this couple’s itemized deductions.

AGI $500,000
Excess of couple’s AGI over $305,500 = $194,950
3% reduction x 3%
_______________
Reduction of itemized deductions $5,848.50

The couple’s itemized deductions will be reduced by the lesser of $5,848 or 80% of the itemized deductions.

Does a donor also receive a charitable deduction when he or she transfers assets to a charity under this provision?

No. The benefit under this provision is that the individual does not realize the amount contributed directly from the IRA to a qualifying charity. Because a donor does not include the amount in his or her gross income, the individual may not take a charitable contribution deduction for the contribution. To do so would allow a donor to receive a double benefit from the contribution. For this reason, charitable contribution deductions are explicitly prohibited.

How will charitable distributions affect the minimum required distributions from a taxpayer’s IRA?

Shortly after an individual reaches age 70½, he or she is generally required to receive distributions from his or her traditional IRA. Distributions from an IRA to a charity will receive the same treatment as distributions to the individual taxpayer for the purposes of minimum required distributions.

Are there any IRA transfers to the Door County Community Foundation that do not qualify for preferred tax treatment?

Yes. Transfers to Supporting Organizations and Donor Advised Funds do not qualify. In addition, split interest gifts, such as Charitable Annuities, Charitable Lead Trusts and Charitable Remainder Trusts, do not qualify. Further, an individual may not receive a benefit in return for an IRA distribution.

Because such transfers do not count as qualified distributions under these special rules, the donor will have to first recognize those distributions as income. The donor’s charitable deduction must then be calculated as a regular itemized deduction.

How can an IRA gift be made?

IRAs are typically held by a financial service or trust company. These custodians will likely provide a form that could be used to transfer the IRA directly to charity, with no tax incurred.

The information provided here was prepared by the Council on Foundation and is based on analysis of recent legislation. Every effort has been made to ensure accuracy of the answers to these questions. However, due to the complexity of the tax law and the fact that many of these provisions introduce issues that are new to the Internal Revenue Code, this information may be subject to change. It is not a substitute for expert legal, tax or other professional counsel and we strongly encourage donors to work with their professional advisors to determine the impact of this legislation on their particular situations. This information may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.

Giving Made Easy

The fastest growing vehicle for philanthropic giving just revved its engine and experienced one of its best years ever, according to the 2015 Donor Advised Fund Report, an annual study of how Americans use this unique giving tool. In 2014, a year when the U.S. economy as a whole grew by a modest 2.4 percent, the total assets in Donor Advised Funds increased by a staggering 24 percent to nearly $70 billion. Incredibly, last year about 1 out of every 12 dollars donated by an individual to charity went into a Donor Advised Fund.

Donor Advised Funds really took off as a tool for giving during the tech boom of the 1990s. A headline in the New York Times of nearly 20 years ago summed up the role of Donor Advised Funds quite succinctly with, “These Foundations Let Every Family Play Ford.” (Dec. 9, 1997).

Immediate Deduction, Deferred Distributions

You can establish a Donor Advised Fund in your name, your company’s name, or that of a loved one, such as the “John and Jane Smith Charitable Fund.” You then make a contribution into your newly created Fund and claim a tax deduction in the year your charitable gift was made. However, the distributions you make from your fund, commonly referred to as “grants,” can occur to virtually any charity you choose, anywhere in the country, on any timeline that works best for you. This makes a Donor Advised Fund an invaluable tax-planning tool.

For example, let’s say John and Jane’s business had an exceptionally profitable year. As a result, their accountant tells them that this would be a great year in which to make a significant charitable gift. Rather than giving it all away all at once to a single charity, John and Jane want spread their money around many organizations for many years to come. Hence, John and Jane donate $25,000 into their Donor Advised Fund. They can take a commensurate deduction on their 2015 taxes, but that $25,000 is available for John and Jane to make grants to the charities they love in future years. Even better, that $25,000 can be invested and will grow tax free, with all the earnings and appreciation available for any additional grants that John and Jane might choose to make.

Enormous Tax Benefits

Donor Advised Funds are similar to private foundations like the Ford Foundation or the Gates Foundation, but they offer several distinct advantages. You don’t need to have the billions of dollars of the Fords or the Gates to set up a Donor Advised Fund. While a private foundation typically takes millions of dollars of contributions before it is cost effective to operate, a Donor Advised Fund can be created at some organizations for as little as $1,000.

Donor Advised Funds operate under the corporate umbrella of a 501(c)(3) public charity, typically a regional community foundation (like our local Door County Community Foundation) or a national foundation affiliated with an investment company (such as Schwab). Whereas in a private foundation the accounting, administrative and investment costs are borne solely by a single donor, with Donor Advised Funds those expenses are spread out among hundreds if not thousands of funds. Hence, the cost of administering a Donor Advised Fund is typically a tiny fraction of the expense of operating a private foundation.

In addition, Donor Advised Funds are considered “public charities” by the IRS. As a result, donations to a Donor Advised Fund receive preferential tax treatment. For instance, cash contributions to private foundations are limited to 30 percent of your adjusted gross income as opposed to a more generous 50 percent limit for Donor Advised Funds.

The differences are even more pronounced when dealing with gifts of illiquid assets such as real estate. While you can generally claim a deduction of the fair market value of land you donate to your Donor Advised Fund, your deduction is limited to your cost basis – what you originally paid for the land – when you contribute it to a private foundation. The IRS also imposes excise taxes on private foundations and requires minimum distributions – rules which do not apply to Donor Advised Funds. That’s why Donor Advised Funds are known as the simplest, cheapest and most tax-efficient way for a donor to give back to the charities they love.

Making Giving Easy

Perhaps the greatest advantage of a Donor Advised Fund is how easy it makes your charitable giving. Rather than tracking dozens of contributions to different nonprofit organizations during the course of the year, you only need record the one gift you made into your Donor Advised Fund. You receive your deduction for your gift into your Donor Advised Fund, so the subsequent grants to charity you make from your fund have absolutely no impact on your taxes at all.

Donor Advised Funds also make it easier for you to donate appreciated assets. For instance, it is impractical to donate a single share of stock worth $100 to your church on Sunday. However, plenty of donors contribute a block of 100 shares of that same publicly traded stock into their Donor Advised Fund. The donor then generally avoids the capital gains tax, deducts the fair market value of their gift, and finally awards a grant of $100 in the form of a check from their Donor Advised Fund payable to their church on Sunday.

Finally, when you establish a Donor Advised Fund at your local community foundation, you have your own professional philanthropic staff. From the Silicon Valley Community Foundation with its $5 billion to the Door County Community Foundation and our $15 million in assets, each of the more than 750 community foundations across the country have a donor services team that serves as your philanthropic counsel. They are able to bring you ideas, quietly research charities on your behalf, and handle all the investment, accounting and administrative details so all you have to do is decide where you want your money to go.

Nearly $20 billion was donated into Donor Advised Funds last year. It’s the most convenient and flexible tool for giving available today. Visit your local community foundation to learn more, or visit the Door County Community Foundation online at GiveDoorCounty.org.

Bret Bicoy is president & CEO of the Door County Community Foundation. Contact him at the Community Foundation.

(This column originally appeared in the Peninsula Pulse.)