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Practicing Significance Glorifying God by fulfilling your own unique purposes through the never-ending action of acquiring, using, and sharing diverse resources. |
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Giving To Nonprofit Organizations
“To give away money is an easy matter and in any man’s power. But to decide to whom to give it, and how large, and when, and for what purpose and how, is neither in every man’s power nor an easy matter.” Aristotle
“If anyone has material possessions and sees his brother in need but has no pity on him, how can the love of God be in him? Dear children, let us not love with words or tongue, but with actions and in truth.” Apostle John
“Nobody would remember the Good Samaritan if he’d only had good intentions. He had money as well.” Margaret Thatcher
“First you do well, then you do good.” Papa Joe Chevalier
Introduction
Americans give over $200 billion dollars annually to more than one million nonprofit organizations (NPO’s). NPO’s include churches, national organizations, and local organizations which qualify under the IRS rules. These gifts are given by the vast majority of Americans, not just the wealthy. A companion to this lesson on financial giving is the Practicing Significance lesson on Volunteering.
Reasons to Give
· Obedience to Religious Teachings: In Old Testament times, the Jewish people were instructed to contribute to God one-tenth of everything they owned, plus make many sacrifices and give other gifts. It is estimated that total giving in the name of religion for the Jews was in excess of 20% of their gross income. In the New Testament, as demonstrated in Appendix 1, Christians are not given such specific guidelines about amounts to give, but are taught to give in a spirit of sacrifice and out of love for God and their neighbors. Based on those concepts and the Old Testament guidelines, 10% would seem like a minimum guideline for Christians. Most of the other major religions have guidelines for giving, too.
· Kindness and Love: A good cause or reason can cause us to be moved enough to give money with little or no previous thought or future obligation. Surveys show a lot of money is given for this reason.
· Social Acclaim: Many people and corporations are interested in receiving social recognition for their giving activities. These people may be less interested in the recipient than in the recognition.
· Quid Pro Quo: Gifts given for this reason are based on “I give to your charity and you give to mine”. These gifts are generally given in a spirit of trusting a friend or associate to have chosen a good cause.
· Obligation or Guilt: A particularly effective advertisement or plea from a friend may cause us to grab a pen or reach in our pockets. These gifts are generally rather small in nature and non-repetitive. However, in total, a lot of money is given for this reason.
· Philanthropy
Philanthropy
You are probably a philanthropist if you are reading this treatise. Philanthropy means “love of humanity”. If you give out of love for humanity, you are a philanthropist! Even though philanthropy has taken on the notion of large gifts by rich people, it actually has nothing to do with the dollar amount of the gift or the financial status of the giver. In fact, some of the world’s greatest philanthropists have not given much money, but have given their time, efforts, and even lives. Philanthropy means giving in such a way as to show love for our fellow human beings – wherever they may live. This showing of love should provide deep satisfaction and enthusiasm for the giver. In her book Don’t Just Give It Away, Renata J. Rafferty says philanthropists are “optimistic, determined, energized, and creative…entrepreneurial. Philanthropy demands results. Philanthropy is a calculated investment made with the expectation that humankind – or some small part of it – will be profoundly, measurable, and permanently changed for the better as a direct result of the contribution.”
Philanthropists believe that the more wisely the gift decisions are made, the more valuable and effective are the gifts. Again, these decisions are not just monetary, but include the giving of our time, efforts, and other resources. These gift decisions include:
· The recipients’ needs versus other potential recipients’ needs
· The cost efficiency of any organization involved
· How to say “no” without feeling guilty, and “yes” without pride
· A plan for all current and future gifts to meet goals and find opportunities
· A vision for going beyond the ordinary
· Focus gifts on fewer organizations and develop a relationship with the recipients. Demand accountability from the recipients.
· How to help our family members in the process instead of damaging them or our relationships with them.
In order to accomplish your philanthropic goals, whether the total cash amount is a little or a lot, it may be helpful to develop a written personal financial philosophy. The process would strengthen your convictions about the most effective way to use your resources and will make your decisions quicker and more comfortable. This written philosophy could also be used to guide the executor of your will, the trustees of a foundation, or your children about your intentions. After you write your philosophy, it would be good to have a family meeting to discuss it. In your written philosophy it would be good to talk about such things as:
· How does giving fit in with being the Christian you aspire to be, and how does giving help you fulfill your purposes and meet your goals.
· How your wealth was acquired.
· How you would like your wealth to be preserved or spent.
· What obligations you feel.
· How you want your children to be involved.
· How you feel about leaving money to family members instead of donating it or paying estate taxes. Include the psychological effects on family members.
· What kind of organizations you want to help.
A currently popular idea is to start or join a “giving circle”. These are people who join together to use their resources as a group. These are often formed to meet a particular need in a community. The organization Giving New England has a starter kit available. Their phone number is 617-426-2606 x-38, and e-mail is giving@giving-newengland.org.
Another idea which is gaining popularity is “microloans.” People are joining together, or investing through existing organizations to provide small loans to individuals in third-party nations. Some of these projects are working well, others not so well. See Practicing Significance lesson on Microfinance.
Information on NPO’s
It is the giver’s responsibility to choose legitimate and efficient NPO’s so that scarce resources are not wasted. Most givers are shocked when they learn how much NPO’s spend to just raise money – usually between 10 and 30%, and as high as 70%! Large organizations usually spend a smaller percentage of their income on overhead than smaller organizations, but do not necessarily get “more bang for the buck”. Statistics can be misleading since donated labor and gifts-in-kind are not included and fund-raising requirements vary dramatically among organizations. Certain groups can provide information, including:
Better Business Bureau Wise Giving Alliance (www.give.org)
American Institute of Philanthropy (www.charitywatch.org)
Evangelical Council for Financial Accountability (www.ecfa.org)
Wall Watchers (www.ministrywatch.org)
Types of Gifts and Ways of Gifting
There are many types of gifts and ways to give to an NPO, including:
· Time
· Talent
· Clothing
· Food
· Cash
· Property, including stocks, real estate, art, and jewelry
· Life insurance and pension plans
· Make the NPO a beneficiary under your will or revocable trust
· Donor-advised fund: Contributions to a donor-advised fund are deductible in the year made, but payments from the fund to NPO’s are made when desired by the donor. These are becoming very popular because of their flexibility and low administrative cost.
· Charitable Remainder Trust: Pays a designee yearly income for a certain number of years and donates the remainder to an NPO.
· Charitable Lead Trust: Makes annual payments to an NPO for a certain number of years, then pays the remaining assets to designee.
· Purchasing a gift annuity from an NPO. This concept is becoming more popular, but it does carry risk. Check the website www.acga-web.org.
· Private or Public Foundations.
· Work with groups doing microcredit loans, i.e. $50, to a family in India. To learn more, try www.gfusa.org or www.unitus.com or www.calvertfoundation.com.
Tax Aspects of Giving
Charitable contributions can be a valuable deduction for taxpayers who itemize. Only contributions to qualified organizations can be deducted. Deductions are limited to contributions made during the tax year. For deductions of $250 or more, you’re required to obtain a written acknowledgment from the organization. On property donations of $5,000 or more, you should obtain an appraisal. You generally may deduct up to the full fair market value of donations to NPO’s from your federally taxable income, subject to certain limitations. Further, certain deductions may be made for costs involved in making donations. Limitations on giving appreciated property can be especially complex. Charitable giving will also reduce your taxable estate. Favorable tax treatment for giving to NPO’s is a great incentive. For cash gifts, the after tax cost may be only $0.60 for every dollar donated. For appreciated property, the after-tax cost of giving appreciated property may be as little as $0.40 for every dollar donated.
A Word of Warning
In times of economic prosperity many people become very generous to nonprofit organizations. Some may make large pledges that they fully intend to fulfill. Then, if their individual economic situation changes, they find they are unable or unwilling to fulfill their pledges. In 2003, there was a long list of these people including Ted Turner. Because these pledges were not fulfilled, many nonprofits have been unable to provide services, meet obligations, and many times had to waste partial investments in projects which could not be completed. Most of us do not realize that a gift pledge is usually a binding commitment which is legally enforceable! Before making any pledge, seriously consider the long-term stability of your financial resources. Like any situation, it is better to under promise and over perform.
Conclusion
Americans are very generous. As individuals we give generously to various nonprofit organizations. It is our responsibility to do it wisely.
Additional Resources
IRS Publications 526 and 561
Don’t Just Give It Away, by Renata J. Rafferty
Guide to Charitable Giving, by PriceWaterhouseCoopers
You’re Fifty – Now What, by Charles Schwab
Wealth in Families, by Charles W. Collier
Women’s Philanthropy Institute www.women-philanthropy.org, 248-651-3552
Washington Women’s Foundation www.wawomensfoundation.org
206-340-1710
Forbes www.forbes.com/charities
DISCLAIMER: The content presented herein is presented as general information and is not intended to be a comprehensive overview of all of your financial options. Nor is it meant to imply any endorsement of any type of financial plan, product or service. Investing and spending money is a complicated and serious process that is constantly affected by conditions in the marketplace and changes in tax law and government policies. There is no guarantee that an investment product bought today will perform the same from year to year. You should research your choices as thoroughly as possible and, when in doubt, consult a trusted professional advisor.
APPENDIX 1 – SCRIPTURES ON GIVING
Luke 6:30, 31 – “Give to everyone who asks you, and if anyone takes what belongs to you, do not demand it back. Do to others as you would have them do to you.”
Luke 6:38, 39 – “Give, and it will be given to you. A good measure, prssed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you.”
Luke 12:33, 34 – “Sell your possessions and give to the poor. Provide purses for yourselves that will not wear out, a treasure in heaven that will not be exhausted, where no thief comes near and no moth destroys. For where your treasure is, there your heart will be also.”
Luke 21:1-4 – As he looked up, Jesus saw the rich putting their gifts into the temple treasury. He also saw a poor widow put in two very small copper coins. “I tell you the truth,” he said, “this poor widow has put in more than all the others. All these people gave their gifts out of their wealth; but she out of her poverty put in all she had to live on.”
2 Cor. 8:3-15 - Out of the most severe trial, their overflowing joy and their extreme poverty welled up in rich generosity. For I testify that they gave as much as they were able, and even beyond their ability….see that you also excel in this grace of giving…for if the willingness is there, the gift is acceptable according to what one has, not according to what he does not have.
2 Cor. 9:6-8 – Remember this: Whoever sows sparingly will also reap sparingly, and whoever sows generously will also reap generously. Each man should give what he has decided in his heart to give, not reluctantly or under compulsion, for God loves a cheerful giver. And God is able to make all grace abound to you, so that in all things at all times, having all that you need, you will abound in every good work.
1 John 3:16-18 - …we ought to lay down our lives for our brothers. If anyone has material possessions and sees his brother in need but has no pity on him, how can the love of God be in him? Dear children, let us not love with words or tongue, but with actions and in truth.