What seems charitable may not always be deductible in the eyes of the IRS

What seems charitable may not always be deductible in the eyes of the IRS

With such a wide range of options available for you and your family to support your favorite causes and your community, ranging from crowdfunding to online solicitations, how do you know whether (and why) your donations are eligible for funding out of your account at The Community Foundation?

In short, contributions to organizations and causes that would fall into the non-tax-deductible category, although worthy investments to help the community, generally are not eligible recipients of grants from your funds at The Community Foundation. Remember, you received a tax deduction when you transferred assets to your fund at The Community Foundation, which means the money needs to be distributed to charitable organizations and causes qualified to receive tax-deductible contributions.

If you’re interested in the legal background, keep reading!

Section 501(c) of the Internal Revenue Code lays out the requirements for organizations to be considered tax-exempt, meaning they don’t pay taxes. This is a status for which an organization must seek IRS approval.

Even under Section 501(c), there are different types of nonprofits that are recognized by the IRS as tax-exempt. To qualify specifically under the Internal Revenue Code Section 170 charitable deduction for gifts to Section 501(c)(3) organizations, the recipient organization must be organized and operated exclusively for “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the prevention of cruelty to children or animals.” In other words, “charitable,” according to the IRS, has a very specific definition. Your funds at The Community Foundation help you support the 501(c)(3) charitable organizations you and your family care about.

Separate from your charitable donations, perhaps you and your family also support social welfare groups (organized under Section 501(c)(4) of the Internal Revenue Code). Examples of social welfare groups include neighborhood associations, veterans organizations, volunteer fire departments, and other civic groups whose net earnings are used to promote the common good. Donations to social welfare groups are tax deductible in only certain cases (e.g., gifts to volunteer fire departments and veterans organizations). Your fund at The Community Foundation can’t be used to support non-tax-deductible civic causes, but certainly you can continue supporting these causes out of your personal assets.

Similarly, chambers of commerce and other business leagues fall under Internal Revenue Code Section 501(c)(6); donations to these entities are not tax deductible, either.

In addition to your civic activities, perhaps you’ve also helped set up a dedicated account at a bank to provide scholarships to the children of an accident victim, or even participated in a GoFundMe fundraiser to help a specific family. These vehicles, along with other crowdfunding platforms, typically do not meet the qualifications for a charitable organization under Section 501(c)(3), usually because the funds are earmarked for a particular person or persons.

We know the rules are complex and can be overwhelming! If you have any questions about the tax deductibility of your contributions to various organizations, and whether your community foundation funds can be deployed to make the contributions, please reach out to the team at The Community Foundation. We are immersed in the world of Section 501(c) every single day and are happy to help you navigate the rules.

The team at The Community Foundation is honored to serve as a resource and sounding board as you build your charitable plans and pursue your philanthropic objectives for making a difference in the community. We also encourage you to consult your tax or legal advisor to learn how this information might apply to your own situation. 

Call us any time from 9am to 5pm Monday through Friday at 540-432-3863 for questions. www.tcfhr.org

 

Is the cost of event tickets tax deductible?

Is the cost of event tickets tax deductible?

As charitable organizations emerge from pandemic restrictions, in-person fundraising events are beginning to rebound, especially athletic events that are held outside. This is a good time for a quick refresher course on the charitable deduction rules related to events, which can be tricky.

As a general rule, if you purchase a ticket to a fundraising event and attend the event, the IRS only allows a tax deduction for the portion of the ticket price for which you received nothing of tangible value in return. So, when the charity sends a receipt for the gift, you will see that the charity has subtracted the fair market value of the perks–food, beverage, entertainment, T-shirts, and other goodies–from the full amount of the contribution. The rules for raffles, auctions, and games of chance are also complex, exacerbated by the increase in virtual events and online fundraisers.

What’s the reason for all of this complexity? Simply put, tax-deductible dollars cannot be used for private benefit. The point of the charitable tax deduction is to incentivize taxpayers to use their own money to help others. Even when a portion of a donation can be tied to funding the charity’s programs, the intermingling of event-related benefits back to the donor (even if it’s just a T-shirt or a dinner) becomes too much of a tangled web, in the IRS’s view, to discern the true amount of the charitable deduction, and without that clarity, none of it is deductible.

The good news here is that the team at The Community Foundation is on top of it. We are here to answer your questions about tax deductibility and how to help the charities you care about.

Call us any time from 9am to 5pm Monday through Friday at 540-432-3863 for questions. www.tcfhr.org

 

Summer legislative updates–and looking ahead to sunsets

Summer legislative updates–and looking ahead to sunsets

Reconciliation legislation is back in play, and includes a few tax provisions (e.g., adding a corporate minimum tax and eliminating the carried interest tax break). Notably, though, the proposal includes $80 billion in budget increases for the Internal Revenue Service, which will help shore up the IRS’s expertise and pay for enforcement efforts to collect taxes.

Philanthropic individuals and families and their advisors also continue to watch the status of SECURE 2.0 because of the enhancements it proposes to the rules for Qualified Charitable Distributions.

While potential tax reform through budget reconciliation legislation may be top of mind for taxpayers and advisors, it’s also important to remember that the Tax Cuts and Jobs Act of 2018 (which seems like a long, long time ago!) included several changes to the tax rules for individuals that are set to expire after the close of the 2025 tax year. Unless those provisions are extended, the sunsets could impact tax planning for philanthropic families and individuals. For example, the standard deduction will decrease by nearly half, adjusted for inflation. This means some clients may once again itemize their deductions, thereby influencing charitable giving income tax strategies. In addition, the estate and gift tax exemption amount, increased under the Tax Cuts and Jobs Act, will be cut down so that in 2026 the exemption amount will be approximately $6.2 million adjusted for inflation. This will impact not only estates valued above the current exemption amount of $12.06 million but also estates valued in the $6 to $12 million range.

As your clients begin to set their philanthropic goals for the next several years, the team at The Community Foundation is happy to help structure long-term strategies to maximize not only your clients’ tax benefits, but also the benefits to the community. Our professionals are deeply familiar with the short-term, mid-term, and long-term needs of our community, as well as the nonprofits that are working to address those needs. Our experienced team works with you to help your clients support community needs now and in the future through clients’ donor-advised funds, field of interest funds, designated funds, and other vehicles established at The Community Foundation. We strive to align the interests of everyone involved: your client, the charities your client wants to support to improve our community, and you in your trusted role as the client’s advisor.

Learn more at www.tcfhr.org, email Revlan at [email protected], or give us a call at 540-432-3863.

 

Generational giving through retirement plans, life insurance, and meaningful bequests

Generational giving through retirement plans, life insurance, and meaningful bequests

August is national Make a Will Month. You’ve likely already worked with your advisors to establish an estate plan, including a will and even a trust. Still, this is a good time of year to review your plan in case things have changed.

As you review your estate plan, consider whether your documents are aligned with your philanthropic intentions, especially if you’ve captured your philanthropic intentions through one or more funds at The Community Foundation. A fund at The Community Foundation can be an ideal recipient of estate gifts through a will or trust, or through a beneficiary designation on a qualified retirement plan or life insurance policy.

In particular, bequests of qualified retirement plans can be extremely tax-efficient. This is because charitable organizations such as The Community Foundation are tax-exempt. This means the funds flowing directly to your fund at The Community Foundation from a retirement plan after your death will not be reduced by income tax. This also means the assets will not be subject to estate tax.

Don’t overlook life insurance, either. Not only are you able to designate a fund at The Community Foundation as the beneficiary of a life insurance policy, but in some cases you also may elect to transfer actual ownership of certain types of policies. For example, if you were to make an irrevocable assignment of an eligible whole life policy to your fund at The Community Foundation, a tax-deductible gift of the cash value of the policy occurs at the time of the transfer. A gift like this could potentially ease your income tax burden, especially if the Foundation continues to own the policy and you make annual tax deductible gifts to cover the premiums.

The Community Foundation makes it easy for you to work with your advisor to draft bequest terms in legal documents, including beneficiary designations of retirement plans and life insurance policies. Please ask your advisor to contact our team for the exact language that will ensure alignment with your intentions. In many cases, anytime during your lifetime, you may even update the terms of a fund at The Community Foundation that you’ve designated to receive a bequest upon your death.

Learn more at www.tcfhr.org, email Revlan at [email protected], or give us a call at 540-432-3863.

 

Thinking differently about scholarships can make all the difference

According to statistics gathered by the National Scholarship Providers Association, approximately $100 million in scholarship money is left sitting on the sidelines each year, unused. Even though the number of scholarships awarded in the United States has increased overall by more than 45% over the last decade, not enough students are applying. These are sobering statistics, considering that the burden of tuition and student loan debt is weighing heavily on America’s young adults.

This presents a challenge for you and other donors who are interested in supporting education as a charitable giving priority. On one hand, you want to help students get the education they need to thrive in their careers. On the other hand, no one wants to fund a scholarship that goes unused.

The Community Foundation can help. Our team will work with you to establish a tailored charitable giving plan that meets your desire to support education while helping to ensure that the money does not go unused.

First, we’ll help you think broadly about education. Limiting a scholarship fund to four-year institutions could result in a lot of missed opportunities. A college or university is not the only option for post-secondary learning and career readiness. Community colleges, trade schools, vocational programs, and out-of-the-box learning experiences may be a better fit for some students.

Next, our team will help you craft the criteria for the scholarship so that it is not too narrow. In other words, casting a wide net can be important to ensure a strong pool of applicants. Limiting scholarship recipients to one area of study, or very specific high school credentials may mean that there simply will not be enough applicants to fully utilize the scholarship dollars.

Finally, The Community Foundation team is happy to help you with the strategy for getting the word out. Many times, would-be applicants simply are not aware of all the options for scholarships. If scholarship funds don’t adequately promote the opportunities, it may be hard to capture students’ attention as they wade through the vast amount of information available about paying for college.

The team at The Community Foundation is honored to serve as a resource and sounding board as you build your charitable plans and pursue your philanthropic objectives for making a difference in the community. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. Please consult your tax or legal advisor to learn how this information might apply to your own situation.

Want to learn more? Call The Community Foundation at 540-432-3863 or email Ann Siciliano at [email protected]!

Great Community Give – Early Giving Begins Today!

The Great Community Give takes place on Wednesday, April 21, 2021 from sunrise to sunset. April 7 begins a period of Early Giving for this annual event.

What is ‘Early Giving’?

Early Giving is defined as the time range where donors can make their gifts to their favorite local charities before the Great Community Give event on April 21, 2021. Donors can make a gift to a participating nonprofit organization starting April 7, 2021 through April 20, 2021. Donors’ gifts will not be displayed on the website until 6:30AM on April 21, 2021. Donors’ ‘early gifts’ will be counted towards nonprofits’ overall online fundraising totals and will count towards determination of Leaderboard prizes. Early gifts will NOT count towards the determination of Power Hour prizes or Golden Tickets on the day of Great Community Give.

Donors’ payment methods, whether they be credit cards, e-checks, ($50 or more), or Mobile Wallet, will be immediately charged once their donation has been made.

NEW! Give back via cash and checks sent DIRECTLY to your favorite nonprofit organizations. Make checks payable to the nonprofit of your choice and write ‘Great Community Give’ in the memo line.

Another Anonymous Donor Challenges Donations for COVID-19 Fund

The Community Foundation and The United Way of Harrisonburg and Rockingham County are pleased to announce a second anonymous gift of $20,000 from a generous community member. The donor states, “Now is the time to give to support members of our community who have lost their jobs and don’t have a savings account to fall back on”. The donor encourages others to give and is offering this gift as a challenge. The donor will provide a dollar for dollar match, up to $20,000 for new gifts given to the COVID-19 Harrisonburg Rockingham Community Response Fund which means this could be an additional $40,000 to this Fund. The Community Foundation received and met its first $20,000 challenge from another generous anonymous donor. With both of these gifts, an additional $80,000 can be raised for our community.

“We are very grateful to both anonymous gifts and for each contribution that has helped us exceed the first challenge. To date the funding has been granted to local nonprofit organizations that are focused on basic essentials, access to food and access to safe shelter.  It has provided funding for nutrition drinks for the elderly, food supplies for those in need, vehicle repairs and gas cards for working low income individuals, hygiene items, rent assistance, and financial assistance to shelters for hotel bills for clients who need to be quarantined.” – Revlan Hill, Executive Director of The Community Foundation.

The Community Foundation of Harrisonburg and Rockingham County and the United Way of Harrisonburg and Rockingham County announced a joint partnership to raise funds for the COVID-19 Harrisonburg Rockingham Community Response Fund. Gifts may be mailed to The Community Foundation at PO Box 1068, Harrisonburg, VA 22803, or given online at www.tcfhr.org.

GreatCommunityGive 2020 postponed until June

The Community Foundation of Harrisonburg & Rockingham County has announced that the Great Community Give, slated for April 22nd has been rescheduled for June 24th, 2020.  The GCG2020 Planning Committee considered as much relevant information as possible to unanimously agree that delaying the event was necessary.

“We have to give consideration to minimizing health risks to the nonprofit staff and volunteers until COVID-19 cases begin to subside. GCG uses countless volunteers on the day of the event.  While the giving occurs online, it is also a social occasion on many levels.   For the purposes of planning, we have chosen June 24th as an optimistic date and hope it turns out to be the case. “– Revlan Hill, Executive Director of The Community Foundation.

“Although a difficult decision, postponing the event is best for everyone. We feel we can have more excitement and enthusiasm by gathering again as groups.  We believe the Great Community Give will be more successful for the nonprofits and less risky for health reasons later in June.  We owe it to the nonprofits to help them raise the most money we can” – Amanda Bomfim, Program Officer, The Community Foundation of Harrisonburg & Rockingham County.

The Great Community Give is in its third year as a community-wide day of online giving to 100 local nonprofits. The Planning Committee hopes that in moving the date, the goal of raising $600,000 for local nonprofits can be achieved. Planning for GCG2020 will continue through the new date of June 24.

 

In the meantime, The Community Foundation is actively encouraging donors to remember nonprofits in this time of social-distancing requirements and will continue its grant making to nonprofit organizations. Efforts to support nonprofit organizations during the COVID-19 crisis are ongoing. The Community Foundation and United Way of Harrisonburg and Rockingham County have jointly announced the establishment of the COVID-19 HR Community Response Fund. Grants from the fund will help support front line human services organizations that have deep roots in Harrisonburg and Rockingham County and strong experience working with those vulnerable in our community.

 

“We encourage everyone to write a check or go online and give to your favorite community based nonprofit organization today.   Our community is well known for its generosity of giving and we don’t have to wait for the Great Community Give on June 24th to make that contribution.   “– Revlan Hill, Executive Director of The Community Foundation.

 

Please contact Amanda  Bomfim at 540-432-3863 or [email protected] for information and interviews.  To learn about Great Community Give, visit www.greatcommunitygive.org

Giving Back 2019-2020 published

The 2019-2020 edition of Giving Back is published as an insert in today’s Daily News-Record. Local nonprofit organizations submit project funding needs through an application process once each year and all are featured in this publication. As you plan your charitable giving for the rest of 2019 and into 2020, please use this resource to provide more information on the needs of the nonprofit community in Harrisonburg and Rockingham County.

 

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