Save time and energy – and give more – with our new easy QCD Program

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A new giving option with The Community Foundation of Harrisonburg and Rockingham offers an efficient way for donors to benefit from Qualified Charitable Distributions and help our local nonprofits.

By allowing TCF to do the work, donors save time and energy, and experience the rewards of hassle-free giving.

How does it work?

  1. Donors or their financial advisors send the Community Foundation
    • one check
    • a list of charities and designated amounts.
  1. We forward the funds to the charity on the donor’s behalf.
  2. The donor receives one receipt.

What’s the fee?

Working with The Community Foundation, even the fee benefits the community!

A flat fee of $100 and 5% of the total gift (a minimum of $500) is charged for non-fundholders.

    • The $100 covers administrative costs to process the gift, therefore supporting the work of the foundation.
    • The 5% helps support one of four endowments, donor’s choice: The Harrisonburg/Rockingham Food Pantry Endowment; Dolly Parton’s Imagination Library Endowment, a preK literacy initiative; our Vocational Education Endowment supporting adults seeking vocational education; or the Community Endowment, benefiting a variety of needs of our community, including arts, culture, human services, youth services, and healthcare.

Please contact us for specific fee information for TCF fundholders.

Event tickets: Beware of the split

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Many of your philanthropy-minded clients enjoy attending fundraising events for their favorite charities. Especially as community events start ramping up this fall, you’ll want to be aware of a little wrinkle in the IRS rules that may surprise your clients so much that they ask you about it.

Here’s how this might go.

Client: “We wanted to buy a table at the fall gala through our donor-advised fund, but the team at the community foundation said that’s not possible and they suggested alternate ways of meeting our goals. What’s up with that?”

You: “Ummmm ….”

And no one could blame you for that response! The rules behind this are obscure and confusing, even by IRS standards.

Here’s what’s going on: The IRS frowns on donor-advised funds paying for any part of an event ticket to a charitable fundraiser–even if a portion of the ticket is tax-deductible.

Big picture, the IRS is likely striving for administrative simplicity to enforce the longstanding tax principle that a taxpayer cannot deduct value given to a charity that is effectively transferred back to the taxpayer. At a typical event, of course, your client receives food, drinks, entertainment, and even t-shirts and other fun swag. The IRS knows this!

The IRS’s commentary on this topic is not new; IRS Notice 2017-73 addresses a concept known as “bifurcated gifts,” meaning a portion of a gift is tax deductible and the other is not. The background here is that the IRS has taken the position that Internal Revenue Code Section 4967 prohibits donor-advised grants from conferring “more than incidental” benefits to donor-advised fund holders. In its 2017 Notice, the IRS expresses its opinion that donor-advised fund grants that enable attendance or participation in a charity-sponsored event (such as buying tickets or a table) do indeed provide more than just an incidental benefit, even if the taxpayer pays out-of-pocket for the non-deductible portion of the ticket.

Ever since the notice was released, it’s been on the radar of tax professionals, and many predict that the IRS will eventually formalize its opinion by issuing new regulations. It’s wise to keep an eye on this because the penalties certainly are not negligible and include excise taxes imposed on the donor advisor and potential penalties for donor-advised fund programs that knowingly authorize such payments.

There is good news, though!

We understand the rules inside and out, and we are here to help your clients stay compliant and achieve their charitable goals. In situations like this, we help your clients structure gifts from their donor-advised funds to support general event sponsorships if the client declines all benefits, or even recommend that the client pay the ticket portion from their personal funds and use donor-advised funds to give separate and additional amounts for general support unrelated to the event specifically. We can also talk with your client about how to participate in rallies for outright donations during a fundraising event and ensure that the client is not receiving any benefit in return.

Into the great unknown

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Humans crave certainty, and that is certainly not what we have right now during election season, especially where taxes are concerned.

Your clients who support charitable causes may be wondering how the election outcomes might impact their philanthropic plans. You’re probably wondering that, too!

It is impossible to predict tax law changes, and that will still be the case to some extent even after the elections. So much can change between a tax proposal and what is ultimately enacted into law. Still, you’d at least like to have a general idea. In that spirit, let’s break down at a very high level where the proposals are trending and what might happen with charitable giving depending on the outcome of the November elections.

Capital gains tax

–Donald Trump has not yet formally proposed a new tax policy on capital gains.

–Kamala Harris has called for an increase on the top long-term capital gains tax rate to 28% for taxable income above $1 million. This change could translate into more incentive to give appreciated assets to funds at the community foundation and other charities.

Income tax

–Trump could make income tax cuts permanent. These cuts are currently subject to next year’s scheduled sunsetting of provisions in the 2017 Tax Cuts and Jobs Act. Note that in this scenario, the higher standard deduction under the Act would presumably continue, reinforcing what many have observed as a chilling effect on charitable donations.

–Harris has proposed expanding several tax credits, but sources opine that it is still unclear whether the higher standard deduction would be allowed to sunset.

Estate tax

–Trump has indicated that he will prevent the estate tax cuts (ie., higher estate tax exemption) from expiring.

–Harris appears to signal that she would increase estate taxes, perhaps leaning toward the policies laid out in President Biden’s Fiscal Year 2025 Budget Proposal, which modeled tightening the estate tax. If the estate tax exemption were to drop according to the sunset provisions under current law, or if other changes were to increase the estate tax, high net-worth taxpayers would have a greater tax incentive to make large charitable gifts and bequests.

Remember that it’s not only the presidential election that will impact tax changes. Passing actual laws depends on the make-up of Congress, too.

We’re keeping tabs on this – and will keep you posted on developments during election season and throughout the year.

Less can be more: Charitable giving helps parents pass wealth to children

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How much is too much? That’s a question many parents ask as they structure lifetime gifts and bequests to children in their financial and estate plans. Wealthy clients are sometimes concerned that leaving millions of dollars, or even hundreds of thousands, to their children could backfire and hinder their kids’ ability and motivation to achieve financial independence.

In addition to concerns about fostering entitlement and dependency, many parents are concerned that their children will miss out on the satisfaction of knowing they built wealth on their own. These parents believe that the challenges and struggles along the way will ultimately enrich their children’s lives with intangible benefits that are far greater than the obvious benefits that come with gifts or an inheritance of significant financial resources.

As you work with clients who feel this way, please reach out to The Community Foundation of Harrisonburg and Rockingham (TCFHR). Every day, our team works with families who are in this exact situation. We’ll help you evaluate strategies such as:

–Establishing philanthropic components of an estate plan so that children receive only the amount that can pass to them free of estate tax, with the rest passing to a charity, such as a donor-advised fund at the community foundation.

–Setting up a donor-advised fund at TCFHR to allow your clients to support favorite charities during their lifetimes, with the terms of the donor-advised fund providing that the children step in as successor advisors following the clients’ deaths. Minimum balances do apply.

–As successor advisors to the donor-advised fund, the children can work with the community foundation to recommend grants to favorite charities, support interest areas pre-selected by their parents, or both.

Many clients are attracted to this type of structure because not only could it avoid estate tax, but it also allows their children to stay involved with all of the family’s wealth, work together and keep sibling bonds strong, and get involved in the community.

We look forward to exploring strategies to help your clients meet their financial and tax goals, as well as honor their wishes for children to live happy and productive lives.

Gifts of real estate: Watch every step

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We’re hearing from more and more attorneys, accountants, and financial advisors that your clients are expressing interest in giving real estate to charity. This is wonderful news!

You’re certainly aware that gifts of real estate to a fund at the community foundation, just like gifts of other long-term capital assets, can be extremely tax-efficient. That’s because your client is typically eligible for a charitable deduction based on the fair market value of the property. Because the community foundation is a public charity, when it sells the donated property, the proceeds will flow into the fund free from capital gains tax.

To achieve the best tax outcome and overall charitable result, though, it’s critical to undertake a careful process along the general lines of the following (depending of course on the specific situation):

–First, you’ll need to determine that the real estate is a long-term capital asset (held for more than one year). That may sound obvious, but we’ve talked with advisors and their clients in the past about a potential gift of real estate and it turned out that the property was only recently purchased. The fair market value deduction (versus cost basis deduction) is available only for a long-term capital asset.

–Next, work with the team at the community foundation to structure a donor-advised or other type of fund to receive the asset, if your client does not already have a fund in place. The deductibility rules are different for real estate gifts to a public charity (such as a community foundation fund) versus a private foundation. Again, clients may not be aware of the pitfalls here. Sometimes we meet with advisors whose clients are very close to transferring real estate to a private foundation, which could be devastating in terms of missed tax savings.

–You’ll need to verify that the property is not subject to a mortgage or other debt. Transferring encumbered property triggers important considerations with potentially significant tax consequences. The lender might not even allow a transfer in the first place. If you’re dealing with commercial property, you’ll also need to check to be sure that the property is not subject to “recapture” if your client has previously taken depreciation deductions.

–You will need to determine whether the property produces income and discuss this with the community foundation. Income-producing real estate can potentially trigger Unrelated Business Income Tax (UBIT) for the community foundation. Although there are exceptions and strategies to minimize UBIT’s impact, it’s important that this issue be dealt with up front.

–Work with the community foundation to determine whether an environmental audit is required for the property.

–Verify that the client has not entered into any discussions about an imminent sale of the property. Even if the community foundation will sell the property shortly after receipt (so that the proceeds can flow into the donor-advised or other fund to support the client’s favorite causes), your client cannot have pre-arranged this sale. Doing so could trigger the IRS’s step transaction doctrine and wipe out the tax deduction.

–A qualified appraisal to determine the fair market value of the property must be signed and dated no earlier than 60 days of the date of the gift. This is critical to obtain a tax deduction, and the appraised value must be reported to the IRS on a Form 8283 in strict compliance with the IRS’s rules.

–Finally, after approval from the foundation for acceptance of the gift, transfer the property with the appropriate legal documents, including a deed.

Gifts of real estate can be a wonderful tool for both your client and the charities they want to support through their fund at the community foundation. Our team can help you through the process, every step of the way. We have professionals in house, as well as on-call experts with whom we work regularly, to ensure that your client’s real estate gift is handled without a hitch, opening the door to bring their charitable goals to life.

Charitable planning can help ease client procrastination

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“Nothing is so fatiguing as the eternal hanging on of an uncompleted task.”

–William James

Procrastination is a drain in ways that go far deeper than the incomplete task itself. We know this intellectually, but it can be so hard to break the procrastination habit. It seems that the more daunting the task, the harder it is to tackle. This surely is a major reason some of your clients routinely put off important planning discussions. And of course, many of those discussions are tax-sensitive, which means year-end can get very hectic and stressful for clients who wait until the last minute.

As the year begins to wind down, consider tapping into your clients’ philanthropic interests as a catalyst to motivate them to start addressing year-end planning items right now rather than waiting until November or December. You may discover that the uplifting topic of philanthropy makes it easier to at least start a conversation. Then, the conversation can evolve to include not only charitable giving topics, but also other tax planning topics that need attention.

Here’s how this could work with a client:

–Review the charitable components of the client’s estate and financial plans, including provisions in wills and trusts, beneficiary designations, donor-advised funds, prior years’ tax deductions, and historical gifts to favorite charities.

–Reach out to the client to suggest that you meet–or at least jump on a call–to check in on 2024 charitable giving plans and other items.

–Open the conversation by briefly recapping the charitable planning components already in place and the client’s history of giving. Then ask the client about their plans for 2024.

–As you talk with the client about charitable intentions, bring up various charitable giving tools and opportunities that match those intentions. In each case, use the charitable discussion as a springboard for general tax planning items that need to be addressed before year-end.

–For example, if a client who is over 70 ½ mentions wanting to support a particular need or organization in the community, you can suggest that you loop in the community foundation team to potentially establish a field-of-interest or designated fund, which can then receive distributions from the client’s IRA up to $105,000 annually per spouse. This, in turn, opens the door to discuss Required Minimum Distributions and other elements of retirement planning in general.

–If the client mentions that they are already dreading gathering tax receipts for 2024 charitable donations, suggest that the client consider setting up a donor-advised fund at the community foundation to serve as a convenient and rewarding “hub” for charitable giving. Going forward, the client can conduct the bulk of their giving using the donor-advised fund and avoid the mad scramble for receipts. If the client already has a donor-advised fund, make sure they know how to use it most effectively, and reach out to the community foundation team for help. What’s more, discussing charitable donation receipts presents a nice opening to remind a client about other paperwork that may need to be gathered or completed to meet overall estate and financial planning goals.

–When your client talks about charities they plan to support before year-end, remind your client not to automatically reach for the checkbook. Most of the time, highly-appreciated marketable securities (or other highly-appreciated, long-term assets) are ideal gifts to a client’s fund at the community foundation or other public charity because the client is eligible for a tax deduction at the assets’ fair market value, and the proceeds from the sale of the assets will flow into the client’s fund at the community foundation free from capital gains tax. That means more funds are available to support the client’s favorite causes. Conveniently, the conversation about highly-appreciated stock can segue naturally into a conversation about overall stock positions.

–Philanthropy topics can naturally lead into even more topics that are sensitive to year-end timing, such as annual exclusion gifts, estimated tax planning, and updating wills and trusts before the extended family gathers for the holiday or travels together overseas.

The community foundation team is here to help you serve your charitable clients. We understand that late-December transactions are often unavoidable. The net-net is that we’re happy to work with you according to your clients’ schedules, whether that means getting a jump on a new year and processing stock gifts in February, helping you plan in September for year-end, or preparing fund agreements in December.

Donor-advised fund fees decrease

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Donor-advised fund fees at The Community Foundation of Harrisonburg and Rockingham County have been lowered to 1 percent, fulfilling a promise to donors made in 2013.

That was the year that fees were increased – to 1.25 percent – to accommodate for necessary investments in technology, cybersecurity, and staffing.

That change nearly 11 years ago was made with great reluctance, says Executive Director Revlan Hill. “At the same time as we were experiencing growth with our donors, we also had challenges in the market and with major rising operational costs. The problem was actually one a growing foundation wants to have. We raised the fees with the promise that we would return it to the lower rate as soon as possible.”

The lower fee of 1% allows for “more dollars to support nonprofit organizations as recommended by the donor,” Hill said.

It’s also a sign that the foundation is carrying more assets, building on a solid financial footing, and continuing to grow at a healthy rate.

The current fee structure helps to cover administrative costs of the donation and grants processing, annual audits, preparation of tax returns, insurance and other operating expenses – all of which are required to exceptional services TCFHR donors have come to expect.

“Fulfilling this promise is a sign of our thriving and our commitment to excellent management,” Hill said. “We’re grateful to the generosity and trust of donors, the partnership of professional advisors, and the wisdom of staff and our board which made this possible.”

Summer reading that’s worth a forward

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Summer reading that’s worth a forward

Every week, the team at The Community Foundation works with a wide range of charitably-minded individuals and families who are either already working with The Community Foundation or are considering establishing a donor-advised or other type of fund to organize their giving. We also talk with attorneys, accountants, and financial advisors as they work alongside charitably-minded clients. Indeed, many advisors are telling us that they’re taking advantage of summer’s slower pace to get a jump on 2024 tax planning and estate plan updates.

As you work with your advisors over the next few months, be sure to let them know that The Community Foundation can serve as the hub of your family’s philanthropy by administering a wide range of charitable giving vehicles, including:

–Donor-advised funds, which may be a better fit for families than a private foundation

–Field-of-interest funds and designated funds, which enable you to support specific causes and organizations and, if you are 70 ½ or older, can receive a tax-savvy “Qualified Charitable Distribution” from your IRA

–Bequests and other legacy gifts to help ensure that the causes you’ve supported during your lifetime can continue to benefit from your generosity for years to come

–Unrestricted gifts to support The Community Foundation’s work to grow philanthropy and improve the quality of life in our region across generations, especially as community needs evolve

 

Along these lines, some of you have requested that we provide a reading list to pass along to your advisors to help them stay up-to-date on legal and tax issues impacting charitable giving. Here are a few suggestions you could forward to your advisors (or simply forward this email):

–For advisors working with clients who support higher education, it’s important to stay on top of the tax treatment of NIL collectives. The team at The Community Foundation is happy to talk with your advisors about what’s going on here and how they can follow best practices.

–It’s becoming more and more popular for philanthropists to explore giving cryptocurrency to charitable causes. Encourage your advisors to reach out to the team at The Community Foundation as they encounter this issue with clients.

–A focus on donor intent is especially important as cautionary tales emerge in case law. The Community Foundation is committed to helping advisors help their clients achieve charitable goals. Our knowledgeable staff and independent board of directors are dedicated to carrying out donors’ philanthropic wishes.

 

As always, please let us know if you’d like our team to be part of a conversation with your advisors. We welcome the opportunity to serve as the go-to charitable giving resource as you build a comprehensive financial and estate plan that includes philanthropy.

Thank you for the opportunity to work together! Give us a call at 540-432-3863.

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Philanthropy: It’s not one size fits all

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Philanthropy: It’s not one size fits all

Charitable giving traditions are a big part of many peoples’ lives. The ways philanthropic values translate into action and behavior, however, vary widely from person to person. And that’s a good thing! When you align your charitable giving activities with your own personality and the ways you like to do good, you’ll enjoy it a lot more and as a result, you’ll be more likely to get even more involved with your favorite causes.

Indeed, your choice of the causes you support may be based on personal experiences or even how you view your character. You may also find that philanthropy fosters personal growth and self-discovery. Some people find that getting involved in the community creates opportunities for networking and building relationships based on shared values and goals.

That’s why it’s important to acknowledge that not everyone likes to “do good” in exactly the same way. To figure out what mix of charitable activities might best suit your personality, consider reflecting on whether you tend toward an ”investor,” “connector” or “activator” profile.

 

Here’s what it might look like to be an “investor” type of philanthropist:

–You like to get involved in community activities where you can act independently, rather than scheduling dedicated time.

–You may feel that you often have more money than time.

–You’re happy to write a check or purchase a product that supports a cause.

If you tend toward the “connector” type, this may describe your preferences:

–You like community activities where you can collaborate with friends and family.

–You enjoy the opportunity to meet people who care about a variety of causes, not necessarily a specific charity.

–You like attending charities’ fundraising events, and you might even regularly promote your favorite causes on social media.

If you’re an “activator” type, here’s what that could look like:

–Your philanthropic passion lies with one or two specific causes.

–You like the idea of playing a small part in “changing the world” and impacting a single issue that could potentially benefit society on a broad scale.

–You might enjoy serving on charities’ boards of directors.

Whatever your personality type, The Community Foundation can help! Whether it’s setting up a donor-advised fund to organize your giving, working with you and your advisors to establish a legacy bequest, or getting your family and friends involved in site visits to favorite charities, we’re here for you!

 

Thank you for the opportunity to work together! Give us a call at 540-432-3863.

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Up in the air: Charitable planning in a shifting tax landscape

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Up in the air: Charitable planning in a shifting tax landscape 

It’s an election year, which means you may have more questions than answers as you work with your advisors to build out your financial and estate plans. In particular, the looming sunset of key provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 has created a tremendous amount of ambiguity.

For many taxpayers, the potential sunset of the TCJA’s higher estate tax exemption is top of mind. Unless Congress intervenes, the exemption is set to fall after December 31, 2025 from roughly $27 million per couple to approximately $14 million per couple (depending on inflation adjustments).

No one has a crystal ball, and it is impossible at this point to know whether or when you should implement planning strategies to address potential changes in the law. Nevertheless, if you are among those who would be affected by the estate tax exemption’s precipitous drop, it’s important to know that charitable strategies can fit nicely into a gifting plan that would help offset the sunset’s impact.

If you’re a business owner, for example, you could explore launching a gifting program now to transfer shares of the business not only to your heirs to take advantage of the higher exemption, but also to a donor-advised or other fund at The Community Foundation. With these gifts, you could reduce the value of your taxable estate while also executing a business transition and philanthropy plan that aligns with your overall intentions regardless of the tax laws.

Along those lines, some families may decide to lean into annual exclusion gifts ($18,000 per gifting spouse per recipient in 2024) to family members and other individuals to reduce taxable estates without eating into the lifetime gift and estate tax exemptions.

If you’re considering ramping up your annual exclusion gifts, you might consider adopting a parallel strategy for charitable gifts. Gifts to charities are deductible for gift and estate tax purposes (as well as for income tax purposes) and therefore will also reduce the value of your taxable estate without using your exemption. Some philanthropists report that they like the idea of making annual exclusion gifts to family members, and, while they’re at it, making stock gifts of an equal amount into a donor-advised fund at The Community Foundation.

Given the uncertainty about what might happen with the estate tax exemption, some people might consider updating their estate plans to increase a bequest to a donor-advised or other fund at community foundations. This would help blunt the impact of estate taxes, and the bequest can be adjusted during lifetime as planning goals and estate tax laws evolve.

The Community Foundation is here for you! Our team is happy to help you navigate the opportunities and pitfalls presented by potential changes in the tax law. It is our pleasure to work with you and your family to maximize your charitable goals.

 

Thank you for the opportunity to work together! Give us a call at 540-432-3863.

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.