U. hoping renewed tax law aids donors’ giving

Friday, December 5, 2008

Correction appended.

As the economic downturn worsens, raising questions about the University’s financial prospects, a recent move by legislators may encourage donors to use different methods of giving.

Planned giving – a type of deferred giving – raises money that the University will use only in the future and takes advantage of the tax code to benefit both the recipient and the giver, according to Executive Director of Planned Giving David Coon. Roughly one out of every six dollars of the $1.272 billion raised by the Campaign for Academic Enrichment so far is a result of planned giving, he said.

A tax extension provision from the federal government’s October bailout package encourages retirement plan donations, one type of planned giving, Coon said.

Known as the Individual Retirement Account Charitable Rollover, it allows IRA owners over 70-and-a-half years old the option of donating tax-free charitable funds directly from their IRA account for contributions under $100,000. Congress first passed this tax advantage in 2006 and renewed it in 2007. It has now been extended for the 2008-09 fiscal year.

Between July 1, 2006 and July 30, 2007, Brown received 128 gifts taking advantage of this plan, totaling $1.5 million. During the same period one year later, Brown received 99 such gifts, totaling $1.156 million.

“My supposition is that (the rollover) probably doesn’t increase who the donors are, but it may increase how much they’re willing to give us,” Coon said.

According to Coon, Brown’s database contains roughly 10,000 potential donors who qualify for this tax advantage, though there are possibly more because the database lacks dates of birth for some older alumni.

The campaign office has publicized the renewed policy with announcements on its Web site and in e-mail newsletters to alumni.

Though he has recently found it harder to schedule appointments with potential donors, Coon said planned giving is “particularly attractive right now” because it can provide stable options in the uncertain financial climate.

One strategy allows donors to entrust money to an investment firm working on Brown’s behalf and in return receive a yearly income, he said. This income can be in the form of a fixed percentage of the fair market value of trust assets – a portion of the donation based on the current market situations – for gifts above $100,000 or a fixed amount for gifts above $10,000.

Coon said one potential donor was considering adding money to a trust because “he feels (Brown’s) endowment can do better than anything he can do.” Another donor expressed interest in making a $100,000 contribution to the endowment for similar reasons, Coon said.

Meanwhile, economic trends are unlikely to affect one common type of planned giving, donations through bequests, Coon said.

“Brown has one of the strongest histories of receiving bequests in the Ivy League,” he said, adding that in the last four years the University has received an average of $34 million per year through these bequests.

Even with the current financial climate, Coon said, “people are still willing to put Brown in their wills.”

A recent Herald article (“U. hoping renewed tax law aids donors’ giving,” Nov. 20.) stated that a $10,000 gift to Brown could be invested in the university’s endowment. These smaller donations are actually held by a company called State Street Global Advisors.