Ready to renew your major gifts?

If your charity was the fortunate beneficiary of a large donation in 2011 thanks to the popular IRA provision, allowing 70+ year-olds to make a contribution up to $100,000 dollars, then you’ll want to rethink your renewal strategy. “Now this benefit is gone, at least until Congress restores it,” according to the Wall Street Journal article by Laura Saunders this weekend.

While your typical donor incentives with traditional gifts (like a tax deduction) don’t apply here, seniors do appreciate not having to count IRA distributions as income if they give it to charity. This saves them higher taxes on Social Security payments or higher Medicare premiums, says Saunders. This Individual Retirement Account (IRA) rule was one of sixty federal tax provisions that expired in 2011.  Similarly in 2006, 2009 and 2010, the law expired but wasn’t re-enacted until December, leaving seniors scrambling with their charitable plans and nonprofits in reactionary mode.

The frustration for IRA donors stems from the fact that the law requires them to take an annual distribution from the account. Donors want to take as little as possible to maximize the annual growth of the IRA assets but also wish to donate some or all of the required payout. If the IRA owner makes a withdrawal and Congress doesn’t extend the law, he or she can’t redeposit the payout for a later gift when the government finally acts, according to Saunders.

“Fortunately, there are ways of working with the current system this year,” says Erica Crenshaw, CEO of Execute Now!, a nonprofit financial services firm. Nonprofits are uniquely positioned to target these IRA donors and prospects by explaining what the options are with the help of a financial professional.  When nonprofits consider the size of these donations, compared with the minimal investment of sound financial input, the return is remarkable. Crenshaw adds, “By leveraging our expertise and offering these donors a credible source of guidance, nonprofits can collectively strategize with donors, further cementing an alliance for future giving.”

See also:

Nonprofit Sustainability: Making Strategic Decisions for Financial Viability

Zone of Insolvency: How Nonprofits Avoid Hidden Liabilities and Build Financial Strength

The Cash Flow Solution: A Nonprofit Board Member’s Guide to Financial Success

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