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Six easy ways public radio, or any nonprofit, could raise more money

I love National Public Radio and Iowa Public Radio.

Wait, let me amend that:  I LOVE NPR and IPR!

NPR and IPR provide the soundtrack to our lives. I’m a constant listener, Monica even more so.

On this date in 1971 — May 3 — the afternoon drive-time newscast All Things Considered first aired.

So this seems a good day to help NPR and IPR raise more money.

There are six easy ways NPR and IPR could raise more money. All six ways could be implemented with little or no cost, and not even that much time.

Reader, please take note: these helpful hints apply to any nonprofit. Almost any nonprofit could use these tips to raise more money and grow.

 

Tip one: NPR and IPR should urge listeners to consider all their assets for potential gifts.

To give smart, donors and potential donors need to consider all their assets. Don’t consider cash, and cash only, but look at your entire basket.

Allow me to illustrate with three real-world examples.

A farmer generally doesn’t have a lot of cash on hand – we’ve all heard the phrase, “land rich, cash poor.” But farmland itself can be a very tax-savvy gift, and so can gifts of grain.

A young person who is self-employed doesn’t have a lot of cash on hand. But this young person inherited an IRA from a relative, and must make annual required minimum distributions [RMDs].

IRA RMDs can be a tax-wise gift.

A married couple, recently retired, own three life insurance policies. This made lots of sense when their kids were younger, but now their kids are all grown up and successful on their own.

It may be that a paid up life insurance policy could be signed over to their favorite charity.

NPR and IPR should let their donors know everyone’s individual facts and circumstances are unique. Donors should consider seeking personalized counsel to look at their whole basket of assets.

 

Tip two: NPR and IPR should educate listeners about the value of the federal income tax charitable deduction.

For a discussion of tax brackets, see my post called bracketology. In short, as of May 2015, there are seven federal income tax brackets: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.

The charitable deduction can result in significant tax savings.

For example, assume a donor in the 33% tax bracket gives to her favorite qualified charitable organization a donation of $100.

The charity still receives the full gift of $100. But, for the donor, the actual out-of-pocket cost of the gift is only $67, and the donor saves $33.

Let’s make these assumptions for all tax brackets and see the savings which result:

Bracket              Donation                        Savings                                 Cost
10%                     $100                               $10                                      $90

15%                     $100                               $15                                      $85

25%                     $100                               $25                                      $75

28%                     $100                               $28                                      $72

33%                     $100                               $33                                      $67

35%                     $100                               $35                                      $65

39.6%                  $100                              $39.60                                $60.40

 

NOTE: ABOVE TABLE IS FOR ILLUSTRATIVE PURPOSES ONLY. ONLY YOUR OWN FINANCIAL OR TAX ADVISOR CAN ADVISE IN THESE MATTERS.

 

As can be seen, significant tax savings can result. The charitable deduction is valuable.

 

Tip three: NPR and IPR should broadcast the record keeping requirements for the charitable deduction.

The charitable deduction requires you to be organized in your giving and maintain records. Generally speaking, the greater the deduction, the more detailed the records you are required to keep.

For example, to receive a charitable deduction for gifts of more than $5,000, you need a “qualified appraisal” by a “qualified appraiser.” These two terms have very specific meanings to the IRS.

NPR and IPR should let people know about these requirements. And let folks know they need to engage the right professionals to be sure all requirements are met.

 

Tip four: NPR and IPR should urge listeners to consider gifts of long term capital gains property [like stocks].

Gifts of long-term capital assets, such as publicly traded stock and real estate, may receive a double federal tax benefit.

First, donors can receive an immediate charitable deduction off federal income tax, equal to the fair market value of the stock or real estate.

Second, assuming the donor owned the asset for more than one year, when the asset is donated, the donor can avoid long-term capital gain taxes which would have been owed if the asset was sold.

Let’s look at a concrete example to make this clearer. Pat owns stock with a fair market value of $1,000. She wants to use the stock to help her favorite causes, which include NPR and IPR.

Which would be better for Pat – to sell the stock and donate the cash, or gift the stock directly to public radio?

Assume the stock was originally purchased at $200 (basis), Pat’s income tax rate is 39.6%, and her capital gains tax rate is 20%.

 

Donate cash proceeds after sale                                                Donate stock

Value of gift                                           $1,000                                      $1,000

Federal charitable deduction               ($396)                                        ($396)

Federal capital gains tax savings         $0                                               ($160)

Out-of-pocket cost of gift                      $604                                         $444

NOTE: ABOVE TABLE IS FOR ILLUSTRATIVE PURPOSES ONLY. ONLY YOUR OWN FINANCIAL OR TAX ADVISOR CAN ADVISE IN THESE MATTERS.

 

 

Again, a gift of long-term capital assets, such as stocks or real estate, made during lifetime, can be doubly beneficial.

The donor can receive a federal income tax charitable deduction equal to the fair market value of the asset. The donor can also avoid capital gains tax.

 

Tip five: NPR and IPR should ask listeners to consider the Endow Iowa Tax Credit program.

In Iowa, there is even more potential tax benefit. Donors can receive a 25% state tax credit for gifts made during lifetime, lowering the after tax cost of charitable gifts even further.

Under the Endow Iowa Tax Credit program, gifts made during lifetime can be eligible for a 25% tax credit. There are three requirements to qualify.

First, the gift must be given to, or receipted by, a qualified Iowa community foundation (there’s a local community foundation near you).

Second, the gift must be made to an Iowa charity.

Third, the gift must be endowed – that is, a permanent gift.

Under Endow Iowa, no more than 5% of the gift can be granted each year – the rest is held by, and invested by, your local community foundation.

Clearly, this final requirement is a major restriction. Still, in exchange for a 25% state tax credit, it must be seriously considered by Iowa donors.

 

Tip six: NPR and IPR should engage listeners to combine all these tips!

Let’s look again at the case of Pat, who is donating stock per the table above. If Pat makes an Endow Iowa qualifying gift, the tax savings are very dramatic:

 

Tax benefits of a donation of long-term capital gain asset with Endow Iowa Tax Credit

Value of gift                                          $1,000

Federal charitable deduction                ($396)

Federal capital gains tax savings          ($160)

Endow Iowa Tax Credit                          ($250)

Out of pocket cost of gift                     $194

NOTE: ABOVE TABLE IS FOR ILLUSTRATIVE PURPOSES ONLY. ONLY YOUR OWN FINANCIAL OR TAX ADVISOR CAN ADVISE IN THESE MATTERS.

 

Note well Pat’s significant tax savings.

In this scenario, Pat receives $396 as a federal charitable deduction, avoids $160 of capital gains taxes, and gains a state tax credit for $250, for a total tax savings of $806.

Put another way, Pat made a gift of $1,000 to her favorite charity, but the out of pocket cost of the gift to her was less than $200.

Of course, all Iowans are unique and have unique legal and tax challenges. Consult your own professional advisor for personal advice.

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