As we enter the “season of giving,” we asked Bob Fockler, President and CEO of the Community Foundation of Greater Memphis, to inform us about creating effective charitable giving strategies. Through the generosity of its donors, the Community Foundation granted $120 million to approximately 1,900 non-profit organizations in the Mid-South and throughout the nation last year. The Community Foundation’s mission is “to strengthen our community through philanthropy” and they consistently accomplish this goal efficiently by streamlining and optimizing their clients’ charitable giving.
Q. What tips can you offer our readers about establishing a charitable giving plan?
A: Even as charitably inclined as our neighbors are, relatively few of us have thought about developing an intentional charitable giving plan. We tend to give to causes when we are asked to give, not when it fits with our philanthropic goals. Developing a formal giving plan is relatively easy. It typically requires thinking about your own, personal values – what it is that you genuinely care about – and then doing the research on what organizations can actually deliver on the mission to serve those values.
Q. What are the important considerations when developing your list of charitable organizations?
A: The most important consideration is understanding your own personal values. What do you feel most passionate about? Is it enhancing the local arts community, helping to provide a critical safety net for those less fortunate, improving educational opportunities in the Mid-South or just about anything that seeks to make Memphis and the Mid-South a better place to live? Only you can decide what is most important to you.
After that, it is important to fully understand each organization that you might be interested in supporting. How successful are their programs? Who runs the agency – both staff and board? Are they financially secure, ensuring that your contribution will be wisely managed and spent? All of these are important to know before you write that first check.
I was talking with a donor recently who had been recruited to the board of what had been one of his favorite agencies. But once he got in and looked at their operations, he became less and less comfortable with his support. At the end of the day, it’s about an agency demonstrating its ability to deliver on its mission that counts.
Q. What are the benefits of earmarking gifts toward local organizations?
A: Our donors support non-profit organizations nationally, but 85% of their grants stay right here in the Mid-South. Investing at home not only allows you to see the benefits of your giving first-hand, it directly impacts the quality of life for your family, your friends and neighbors. That’s a powerful motivating factor.
Q. What are the important ways in which donors can maximize their tax benefits from charitable giving?
A: There are quite a number of tactics that have been proven to maximize the tax benefits and financial returns of a charitable gift. Working with a philanthropic advisor – like the Community Foundation – or with your financial, legal and tax advisors is the best way to ensure that you’re getting the best possible bang for your buck.
For instance, many of us think about writing checks when it comes to charitable giving. That will typically qualify you for a tax deduction in the amount of the check. But if you gift an appreciated asset – like a stock that you have held for some time that has significantly increased in value – you not only get to deduct the full market value of the asset, you also avoid paying capital gains taxes on the increased value.
Using a charitable account, like a donor-advised fund, allows you to strategically time your giving and the returns that you earn on the funds while they are invested in your account accrue tax-free. You never pay taxes on the earnings, which you would if those funds were invested in your taxable investment accounts.
Getting a little more in the weeds, the 2017 Tax Act dramatically increased the standard deduction for taxpayers. That means that the bar for charitable giving that needs to be reached to qualify for an itemized deduction is quite high. As a result, most taxpayers don’t itemize, limiting the value of their charitable giving. There is an interesting strategy, though, called “bunching” or “bundling” that provides additional tax benefits. To do this, a taxpayer pays out enough to qualify for the itemized deduction, usually more than they would contribute in one year. They qualify for the itemized deduction in that year and then in the following year(s), they contribute little or nothing, claiming the standard deduction. This strategy can be used directly with the charities that a donor wishes to support, but it works even better with a charitable fund at the Community Foundation. To do this, the extra dollars go into the fund in the first year. The donor’s normal annual grants are made to their favorite agencies, with the rest staying invested in the fund. The following year(s), the donor can use the remaining balance, augmented by investment returns which have accrued tax-free, to make their normal, annual grants (without having to pay in anything else out-of-pocket).
Q. Is the end of the year a good time for charitable giving? If so, why?
A: More giving happens at the end of the year. In our case, typically 40% of our annual granting takes place in December, but that is not necessarily because it makes the most sense for donors. It’s usually the result of agencies making a hard push to finish out their year strong. Donors may have a better idea of their tax situation at year end, but other than that, I don’t know that year-end giving is particularly advantageous. I think that donors should give wherever and whenever it makes sense for them, which could really be any time.
Q. How does Community Foundation work with donors? What are the benefits provided?
A: Since our founding in 1969, the Community Foundation has worked with donors to make their charitable giving easier, more powerful and better informed.
Tax advantage has always been an important part of that. We work with donors to ensure that their contributions qualify for maximum deductibility for income, gift and estate tax purposes.
Even beyond the tax advantages, though, many donors come to us first because of the convenience offered by having a charitable fund with us. A fund simplifies charitable giving and reporting and eliminates significant paperwork and administration. We are also able to offer donors access to their funds 24/7 through our secure online portal.
We talked about appreciated assets. In addition to cash and marketable securities, we have extensive experience with all kinds of assets, including complex gifts involving real estate, complicated business interests (such as limited partnership interests and closely held stock), art and collectibles, and others. Perhaps most importantly, we work with our donors to help them deliver customized giving strategies that meet their unique, individual needs, whether that involves simple current giving or more complicated long-term giving and estate-planning strategies.
Q. How does Community Foundation encourage philanthropy and the growth of charitable resources?
A: This last goal gets beyond our specific business model by advocating for and supporting initiatives that may not directly benefit Community Foundation.
For instance, several years ago we started GiVE 365, a dollar-a-day giving circle that offers a lower bar for Memphians to get involved with charitable giving and the non-profit world. Participants contribute $365 a year, half of which goes to build an endowed fund which annually produces grant dollars. The other half goes directly to the current year’s grant pool. Participants come together to determine an annual giving theme, review grant proposals and ultimately vote for which agencies get funded.
Two years ago we chartered the Next Gen Philanthropic Initiative, which works closely with young emerging philanthropists to provide philanthropic advising and education on community needs and the local non-profit landscape. Our staff and board are also active in local, regional and national organizations which seek to connect, educate, inform and support the work of philanthropy in and out of our region.