Posts Tagged ‘charitable deduction’

Friday Dog Day 19 June 2009: Squirrel! Plus: why money is like water.

19 June 2009

Mingus the Super Dog and I took our lunch break out the door and up past Marin Stables along Wood Lane Creek – here he is doing his best imitation of Dug (“squirrel!”) from the Pixar movie, UP! – and then over the ridge and back down again along Deer Park Creek (these out-the-door hikes being yet another reason I love this town…).

Squirrel!

Squirrel!

Those creeks got me thinking about today’s report from the conservative Philanthropy Roundtable (paid for by the Ewing Marion Kaufman Foundation), which disputes the right of “governmental authority to regulate the activities of American philanthropists.” (h/t to @sharonschneider – you can read her stuff here). This is but the latest salvo in a spitting war ignited by a recent report from the National Committee for Responsive Philanthropy, which had the audacity to suggest that foundations ought to straighten up and fly right or risk greater scrutiny from the federales. Imagine that: a watchdog organization that committed the inexcusable philanthropic faux pas of being impolite! Quel horror!

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MoJo v the IRS and what it might mean for non profit newspapers

15 June 2009

Update 15 June 09: Rich Schmalbeck (who is on the Duke law faculty, btw) emailed me his comments on my post re MoJo v. IRS. With his okay, here’s what he said:

The Technical Advice Memorandum that turned the tide in your case has almost certainly been published, though I didn’t look to verify that.  These are documents prepared by the IRS Chief Counsel’s Office, at the request of either a taxpayer or a field office of the IRS, in the context of an audit that raises difficult legal questions.  They had long been completely private, but a Freedom of Information Act suit sometime in the 1970s compelled their disclosure, but with information that might identify the taxpayer redacted.  They are typically not reviewed at the highest levels of the IRS or Treasury, and so are specifically not intended to establish precedent, but are merely supposed to resolve the issues with respect to a particular taxpayer.  But now that they are routinely published, lawyers do consult them, and do sometimes cite them, though with the understanding that a court may not accord them much weight.

I think the Mother Jones Tech Advice is helpful in this issue, but I’m not as sanguine as you seem to be in this piece that it answers all the questions the IRS might raise about a regular, full-service daily newspaper.  Mother Jones is more like Harpers, Commentary, and the like, than it is like the Chicago Tribune.  And my sense from talking with people in the industry is that while they would like to continue publication of at least some newspapers within a nonprofit framework, they would like nearly every other aspect of publication to remain the same.  And that’s where the IRS may say that the operation is not sufficiently distinguishable from an ordinary commercial enterprise to justify tax-exempt status.  But we’ll see.  In the long run, I think the IRS is going to lose on this question of exempt purpose.  But you are quite correct in thinking that no single newspaper wants to head down a road that might involve an IRS audit, followed by litigation in the Tax Court, and ultimately perhaps up to the Court of Appeals level.  So it would certainly make things easier if Congress would simply enact legislation clarifying that newspaper publication was a suitable exempt purpose, period.  But my understanding is that the bill that would do that isn’t making much progress.

A few days ago, I said I would come back to one specific item from the Duke conference a while back on non profit media, so here goes. It’s triggered by an issue raised in a paper prepped for the conference by Rich Schmalbeck, “Financing the American Newspaper in the Twenty-First Century.” Turns out that a battle royale Mother Jones went through with the Reagan-era IRS has some relevance today. It might point to a way to deal w/the IRS for newspapers and other publications looking to convert to non profit status.

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More on Rick Cohen and the charitable deduction fight

6 May 2009

As I reported the other day, Rick Cohen at the Cohen Report took the NGO trade associations to task for their resistance to – and in some cases outright opposition to –  the Obama administration proposal to help pay for expanded health care by capping charitable deductions at 28% for households earning $250,000 and up:

Though the comments CR [Cohen Report] received here for posting have been uniformly supportive of issues raised in the article, I suspect that the majority of readers is staunchly opposed. Or are we wrong? In at least two forums I’ve been in recently, when I raised generic concerns about the shortcomings of foundation grantmaking, the audiences were pretty much in agreement.  But when this issue was broached, one could feel the change in the rooms.  It as pretty remarkable.  I guess I’d be curious regarding follow-ups about:  (1) the extent of pro and con discussion this proposal is getting versus either strident opposition or, as my article described, public reticence in favor of behind-the-scenes opposition; and (2) how people feel about Brooke’s point that for the very wealthy, the tax incentives is really of little consequence. I’d love to hear feedback from CR readers on these issues and more.

Re the first question: no idea. If anyone out there has thoughts/knowledge on this, would be really interesting in hearing about it.

Re the second question: I’m inclined to agree with Brooke, pretty much. My experience working with wealthy donors is that if it factors in at all the tax deduction plays into the amount they’ll donate but not into the more fundamental decision about giving in the first place.

And that’s for the most part the exception, not the rule: what’s much more important is the value of the pile of assets they’re sitting on, and (just as importantly) their perception of relative wealth at the time the gift is made. The tax deductibility – or in this case, a modest reduction in the amount of that deduction – is a second or even third level factor in a philanthropic decision making process.

I’m not sure about this, but I can imagine one big exception to this, which is when a donor is deciding to set up a donor-advised fund at one of the big firms like Fidelity, or at a communitiy foundation. Only because (and please let me know if I’m completely off base here) this seems to me to be a much more transactional relationship, where the calculus of tax benefits could be seen as a much more important factor. . .