Thanksgiving for county’s nonprofits? Think again!
Fourteen months have passed since 9/11. Many of us have inadvertently or by choice modified our social, emotional, spiritual and financial virtues. For a majority, I think this time of introspection has helped us focus inward toward our families and those around us. Somehow, life and the American Way seems more precious.
This inward focus has indirectly created a few causalities along the way. With a sharp downward spiral of the stock markets, a war on terror, economic challenges, increasing unemployment, business closures, and an overall slowdown of the economy, several worthy nonprofit organizations, churches, and community support programs have suffered. Many of us read in horror as several noteworthy Nevada County nonprofits reduced their services or simply discontinued their services this past year due to funding shortfalls.
Even with the outpouring of gifts to the many 9/11 funds last year, our total national giving did not keep up with inflation. Also, it appears that a large portion of funds directed to the 9/11 programs (although a tragic event and worthy of our support) were supported by donors who redirected their current giving from their home town nonprofits and churches to causes outside of Nevada County. Now that a year has passed, many of those local nonprofits we did not support, are in desperate need.
In an effort to help our community nonprofits, I offer the following suggestions to encourage “End of Year Gifts” to your favorite nonprofits. Please keep in mind this data is offered as an educational service, and you should always consult with a qualified tax advisor or attorney before you implement financial or legal transactions.
Gifts of cash
Cash contributions are deductible as an itemized deduction in the year you make the donation, up to a total of 50 percent of your income. Excess charitable deductions can be carried forward for up to five additional years.
Gifts of securities
The best types of stocks to donate are those that have increased greatly in value, especially those producing a low yield. In order to preserve tax advantages, it is critical that you transfer the physical securities to the charity first, rather than the proceeds from a sale. In many cases, your favorite nonprofits may not have a brokerage account to accept your gift of stock. In this case, simply inform the president or executive director of the organization of your intent. Most of the larger brokerage firms like Merrill Lynch, Paine Webber, or Solomon Smith Barney will establish a non profit brokerage account for little or no cost.
Appreciated securities. If you donate stock that has risen in value and you’ve held that stock for more than one year, you pay no capital gains tax on the transaction and you are entitled to a charitable deduction for the full fair market value of the stock. Your income tax deduction is limited to 30 percent of your adjusted gross income.
Depreciated Securities. If you have stock losses, generally you should not contribute the stock, but rather sell the stock yourself to realize the loss for tax purposes. You can then contribute the cash and take a charitable deduction for the gift of cash. For those of us who have done well picking highly “depreciated” securities, this may provide a less painful but philanthropically rewarding exit strategy.
Mutual Funds. A charitable contribution of mutual fund shares can provide similar tax advantages as a gift of appreciated stock. Due to the complexities involved in the transfer of mutual fund shares, I encourage you to begin that transfer well before Dec. 31.
Without doubt, meeting with your tax adviser prior to Dec. 31 is a smart decision. For those with varying income levels, transactions of real estate or securities, or possibly the sale of a business, you may find overlooked opportunities to reduce your tax liability. However, after Jan. 1, there are very few options available to positively effect your 2002 tax liability.
This holiday season, I encourage you to examine your heart, your discretionary income, your assets, and the nonprofits that support our great community. This past year has been very tough for Nevada County organizations. Many of their grants or funds from state, federal, corporate and private individuals have been reduced and in some cases, eliminated. Most will enter into 2003 with shortfalls and begin another tough year. With less than six weeks remaining for 2002, let your heart be your guide.
Edward W. Cotney of Penn Valley is executive director of Heritage Solutions, a nonprofit philanthropic consulting foundation.
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