Why the Charitable Deduction is Special
and Should be Treated That Way
On January 1st, the passage of the American Taxpayer Relief Act created a tenuous tether to keep the country from tumbling over the ominously named fiscal cliff. Although the legislation does not specifically reduce or eliminate the amount taxpayers can deduct for charitable contributions, the law has that effect by lumping charitable giving in with all other deductions, and then reducing the amount of all deductions for tax filers with higher incomes.
We think this is not only bad news for charities, but it is also bad news for the country and the culture of philanthropy that is one of the hallmarks of America.
First, a summary: The legislation reinstates a provision eliminated in 2010 (the so-called "Pease Limitation") that reduces the value of itemized deductions by 3% of the amount of a taxpayer's income in excess of $300,000 for households ($250,000 for single filers). The reductions can climb to 80% of all deductions.
Why is this bad for charities, since relatively few taxpayers fall into the impacted income range? Analysis conducted by Independent Sector in February 2012 found that high-income donors contribute 36% of the money given by individuals to charities, and 85% of high-wealth individuals give to organizations that address basic needs.
We are not saying that these high-income individuals will stop contributing to charities in light of the reduced tax advantage, but it would be naïve to believe that the decision about how much to give is not influenced by overall tax planning.
This means there will be less money available to fund critical services provided by nonprofits — services that fill gaps left by reduced government funding — and ever-increasing need. The charitable sector — and the people, animals and causes that rely on it — will be harmed.
But the new legislation potentially delivers an even greater blow to the core culture of philanthropy in America. The U.S. tax code now places charitable giving — an altruistic act — in the same category as expenditures motivated by self-interest. The essence of philanthropy is unselfish — the act of taking personal resources (time, money, material) and giving it away to help the greater community. The donor no doubt benefits from the improvement to the community, but others benefit much more so. This world view treats charity like any other deduction that directly benefits the taxpayer.
We think this is a mistake.
Charity should be honored and distinguished by the government for the role it plays in building a stronger society. Especially at a time when the government is threatening to reduce the funding for basic safety-net programs in this country — programs that protect the environment, educate young people, and provide support for people who are ill or poor or homeless — the government should encourage individuals to invest in their communities. Government should not be saying, "giving to charity is no different than helping yourself."
Charity is different. And a charitable nation — one made up of people who care about their neighbors, who care about their environment, who care about animals — is a better nation. We know that there will be many more fights this year to protect the charitable deduction in any form. We hope you'll join us in fighting for this important issue. To learn more about efforts to protect the charitable deduction, go to www.protectgiving.org.
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Donor Cultivation: More Important Than Ever
Donor cultivation is more important now than ever before. We know that, on average, one donor supports 11 nonprofit organizations. And in this uncertain economy, when donors are likely to curtail their support, you want to make sure that you have created the strongest relationship possible with your donors — so your organization stays at the top of their list for charitable dollars.
How do you do this? Not surprisingly, it's like cultivating and maintaining a good friendship.
Start the relationship right. Every organization thanks donors for their gifts, but if you do it quickly, donors will be much more likely to remember you. Get your thank you letters out within 48 hours of receiving that gift, if possible — or a week at the most. New donors are excited about supporting you, so send a meaningful welcome kit that provides more information about your organization, and other ways to participate — such as volunteer opportunities, and information on your monthly donor program. If possible, set up a new donor track so donors receive one of your strongest appeals as their first mailing, after their welcome package.
Make every "thank you" count. Be sure to let donors know how their gifts were used and how grateful you are. Make sure your letter reflects the appeal to which the donor gave. At higher levels, include a live signature, and write a personal note if possible. (Smaller organizations can do this at all gift levels — which is terrific!) A handwritten carrier will really help your letter stand out in the mail.
Respect your donors' privacy. Regularly offer donors the chance to opt out of having their names exchanged. And get ahead of the curve by complying with the DMA's Commitment to Consumer Choice: offer donors the opportunity to reduce the number of mailings they receive from you. Make sure your donor services department is set up to honor requests about mail frequency and privacy. Get back to your donors right away to let them know that their requests have been noted.
Stay in touch. Monitor your communications calendar to make sure that you are writing regularly. Think about the sequence of appeals, newsletters, online communications and telemarketing calls from your donor's point of view — to ensure that they work together.
Not every letter should include an ask. Schedule one or two contacts a year just to share information about your work — but not ask for money. Tell your donors that they are important to you, and that's why you are sharing special information with them. And of course, thank them for making your work possible!
Invite them for a visit. Invite donors to events designed to showcase your work: a behind-the-scenes tour, for example, or a special holiday meal for your clients. Most will probably decline to attend, but will be pleased to have been asked — and will feel closer to your organization.
Following these strategies can ensure that in good times and bad, your donors will continue to maintain and grow the relationships that are so important to both of you!
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Maximize the Value of Your Direct Mail Program … Through Planned Giving
Every direct response fundraising program is a source of hidden gold — in the form of planned gifts. Direct response donors tend to be excellent planned giving prospects. But to find this hidden gold — and to maximize the value of your direct response fundraising program — you need to let your donors know (again and again and again) how they can make a big difference for your organization by making a planned gift.
First, by way of definition, planned giving refers to any gift that a donor decides to make at a future date. While there are many ways to make a planned gift, the most common vehicle is through a simple bequest.
So how do you turn your pool of direct mail donors into planned gift givers? The key is continued messaging about planned giving opportunities. This is something your organization can start doing now with very little cost.
Every donor communication provides an opportunity to promote planned gifts. Here are some examples:
1. Include a check-off box on the reply form in all direct mail solicitations that gives donors the opportunity to learn more about making a bequest — or to indicate that they have already made a bequest.
2. Include an insert about planned giving opportunities in your gift acknowledgements.
3. Include profiles of donors who have made a bequest or other planned gift in your donor newsletters (both print and electronic!).
4. Devote a portion of your website to promote planned giving.
If your organization can invest in planned giving promotion, you can also send targeted planned giving mailings to segments of your file.
Once you've decided how you are going to get the planned giving message out, you need to define your message. Here are some important guidelines:
1. People make planned gifts for the same reasons they make any other donation — and at least part of the reason is because they want to help support your mission. Make sure you tell donors how their bequest will help make your work possible in the future.
2. Do not use a lot of jargon. Most people don't know what planned giving means, but they do understand what it means to make a bequest or include your organization in their will.
3. Make it easy for your donors to make a bequest. Provide sample bequest language, including your organization's full legal name and tax ID number so that the bequest they make will actually get to you.
4. Let them know that planned giving is something that anyone can do — you don't have to be a millionaire. Share profiles of everyday folks who made a bequest and what motivated them to do it.
The most important thing to remember is that the benefits of planned giving marketing are realized over time — not days and months, but years. It can take up to three years for you to begin to see the impact of this marketing. But when the bequests start coming in, the impact on your organization can be incredible.
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Not Even a Hurricane Can Stop the Staff at DOROT from Helping Those in Need
Hurricane Sandy was the most devastating storm to hit the New York and New Jersey area in decades. In the days immediately following the storm, the staff and volunteers at DOROT rushed to make sure all of their clients were accounted for and safe. Any homebound elder who couldn't be reached by phone was visited personally by staff and volunteers who were armed with food, water and other necessities.
DOROT also helped assist other elders whose meal providers were shut down or unable to help. In many cases this called for DOROT staff to deliver boxes of supplies and help with household tasks such as emptying refrigerators of spoiled food.
DOROT works tirelessly throughout the year to make sure frail seniors in the New York and New Jersey area receive healthy meals delivered to their doorsteps and friendly visits from volunteers. And this disaster was no different. As one senior who hadn't heard from anyone in days put it, "I needed a hug and your phone call gave it to me."
Lautman Maska Neill & Company is proud to partner with DOROT and we are even more proud and honored in the wake of Hurricane Sandy. DOROT's continued efforts to care for the homebound elderly in the New York and New Jersey area during this disaster show what a truly remarkable organization it is.
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Lautman Gives Back … Holiday Edition
December is the season for giving, and a time to help others in need. For Lautman Maska Neill & Company, this is when we come together as a staff to continue a meaningful holiday tradition — sponsoring families in the Shelter Plus Care Program at Volunteers of America, in Lanham, MD. The Shelter Plus Care Program provides permanent housing, rental assistance, and counseling to homeless families.
Back in 2009, we decided as a staff to forgo the traditional office Secret Santa gift exchange and give back to our community with holiday gift giving. That's when we came across an article in a Volunteers of America newsletter about a family who had been a beneficiary of holiday gifts purchased by employees at a local company. Now in our fourth year partnering with the Shelter Plus Care program, we sponsored five families this December by purchasing various items on their wish lists … clothes, books, toys, and general household items … as well as gift cards so that they could get some of the extra things that didn't make the list.
We were so happy to make the holidays a little brighter for these families in need, and look forward to continuing this holiday tradition in years to come.
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