Posts Tagged ‘philanthropy’

Dear Nonprofiteer, Is the banquet deductible?

March 5, 2013

Dear Nonprofiteer,

I am the Development Manager for a small nonprofit that operates on a budget of around $500,000 a year. Something came up this year for the first time, and I’d like your opinion.

The ticket price to our annual benefit is $100, and we routinely send acknowledgements to guests that $50 of their $100 ticket is deductible. This is a fairly accurate estimate of the value of the food, drink and entertainment cost, and according to our business manager and auditor, standard best practices (as well as the way benefit tickets have been handled at every nonprofit for which I have ever worked, during the past 20+ years).

This year, we got an RSVP from one guest with a note saying, check to follow. When the check arrived, it was from a donor advised fund with a letter stating that endorsement of the check would confirm that the full amount was tax-deductible and that no goods or services had been received in exchange. My Executive Director and I felt that to treat this differently from all other benefit ticket purchasers would be inappropriate, and compromise the integrity of our nonprofit. I contacted the donor advised fund representative, and explained the situation. I made it clear that the woman would be welcome at our event, but that we would not deposit the check without further instruction from him.

At the benefit, the woman handed me a check for $50. She was very kind, but basically said, these things are done all the time, there’s a fine line, you are on the wrong side of it, but “you’ll learn.” She also told me that the board member who invited her will be speaking with me about this.

I realize this is a relatively small amount, but it’s a larger principle. One of the reasons I value my job at this particular nonprofit is that there is a strong commitment to integrity, consistency and transparency here. My ED and I both feel that we made the right call; but this is very likely not the end of it, as we haven’t heard yet from the board member.

What do you think?

Sincerely, Just Following The Rules

Dear Following:

It’s not a matter of what the Nonprofiteer thinks; it’s what she knows, and you know and your Executive Director knows.  There’s nothing at all “fine” about the line between deductible and non-deductible payments: the IRS permits deduction of the amount that goes to the charity, and not of the amount that goes into a guest’s belly.  It’s what any lawyer would refer to as “a bright-line rule.”  So maybe the banquet guest just got her lines mixed up.

Seriously, this isn’t even a close call.  What this person has asked you to do is to lie to the IRS on her behalf.  Let’s leave aside ethics, integrity, all those mushy things.  Lying to the IRS is a really bad idea–just ask Al Capone.

Now, is your agency likely to be audited for breaking the rules (also known as “the law”)?  No.  Nor is the guest likely to be audited for misreporting her charitable contributions.  But that’s not a reason for you (or her) to pretend that she received no value for the money she handed over.  You were wise not to endorse the donor-advised fund’s check embodying such a pretense, and you will continue to be wise by not issuing a tax-deductibility receipt for the $50 personal check she ultimately forked over.

If and when the Board member comes at you, you will reiterate what we all know to be true: that the IRS does not permit you to certify the food, drink and entertainment costs as tax-deductible contributions, and that you’re sure she wouldn’t want an agency she governs to participate in such a dangerous and false maneuver.  If she presses, observe that the guest may make any use she pleases of her cancelled $50 check.

If the Board member continues to press, turn the matter over to the Board president.  It’s her/his responsibility to make sure no one member of the Board in any way tarnishes the reputation of the whole group.  If s/he resists addressing the issue, try using the words “tax evasion,” and if s/he continues to resist, try using the word “fraud.”

You don’t have to be in the business of judging or disparaging the guest (though she richly deserves it. Wealthy enough to have a donor-advised fund and wailing about $50?).  But you likewise don’t have to be in the business of abetting her dishonesty.  And if anyone argues, “Well, it’s only $50,” make sure to agree.  “Our agency’s good name isn’t for sale,” you’ll say.  “But if it were, it would cost a hell of a lot more than $50.”

Keep on abiding by the law, and may the Force be with you.

If only this were the last word on “venture” philanthropy!

January 26, 2013

This is the smartest, ballsiest response I’ve seen to the omnipresent nonsense about how what’s wrong with philanthropy and charity is that they’re too soft-hearted and how all the problems of the world could be solved if they were just more rigorous and did their “due diligence” and brought other failed concepts and consultant buzzwords over from the for-profit sector. What refreshing thoughtfulness and appropriate humility. Bravo, Mr. Scanlan!

Translation Services: What Does Venture Philanthropy Really Provide?

January 10, 2013

The Nonprofiteer threw a bit of a bomb at a meeting today.  (“Now, dere’s a bolt from da blue,” as Andy Sipowicz would say.)  Perhaps she should be sorry—but she’s not.

After a group of young “venture philanthropists” described their efforts to help expand a small number of poverty-fighting nonprofits and to attract other philanthropists to support them, she had a few thoughts which she generously shared.

  • Their analysis of Return On Investment in this context was very exciting, comparing the dollars spent to the dollars added to the projected lifetime earnings of program participants as a result of whatever intervention the nonprofits provided.
  • Their goal of “Scaling Up What Works,” while admirable, had challenged many other institutions.  Did they have a template for determining which nonprofits would continue to succeed after significant expansion?  (Not really: they look for leadership and give it management support; but management support can’t clone inspired leaders.)
  • Their main achievement was to have assembled a group of white people (staff and Board) to whom other white people would give money.  White people are reluctant to give money to black and brown people (she observed).  But this group, by virtue of its comfortingly familiar MBA-speak upper-middle-class front, is able to overcome that reluctance. 

Afterward, the meeting’s host suggested to the Nonprofiteer that her last comment had been both off-putting and dismissive.  On reflection, she concluded that, while she was sorry to have embarrassed her host in front of his guests, she was glad to have given voice to the Subject That Dare Not Speak Its Name: the gap between the resources available to white people and those available to nonwhites.  We’d like to think that philanthropy responds to need, but most donors actually respond to being asked by those who look a lot like they do.

If these people can level that tilted playing field, more power to them.  And if some of them can make a career out of doing so, mazel tov.  But while the advice and management training and analysis and for-profit perspective on nonprofit problems are all very well, let’s not fool ourselves about what’s really useful in this model: the ability to look and sound like the sort of people who should be entrusted with a lot of money.     

That’s not a critique of pale people who want to help.  It’s just a plea for frankness about how racism plays out in our sector.

In other words

January 4, 2013

Another day, another idiotic Top 5 list, this one purporting to identify marketing trends in philanthropy. As it turns out, the list actually identifies what its author believes to be methods of fostering planned giving. Faced with this basic lack of clarity, the Nonprofiteer refrains from making snarky comments about the content. Instead, she translates it into English.

[N]onprofits in the new year [are] advised just to be themselves. “People expect exaggeration in marketing. They don’t expect a matter-of-fact voice that addresses people’s reservations about buying or donating,” says [someone getting paid for spouting content-free advice, who]. . . . calls this first trend “humanvertising” . . . . [and] suggests a pitch might go like this: “Your gift won’t be used to pay the utility bills or marketing expenses. It will be used to advance our important mission through remarkable programs such as…” “Humanvertising,” as opposed to the messages nonprofits so frequently direct at paramecia and ferns. From context the word appears to mean, Sound like every other agency; pretend not to have any operating expenses.

Story Superpowers: “Nothing can generate emotions or stimulate behavioral responses like stories,” [genius] says. And, he says, these stories need to be not only educational, but also inspirational. Mention that you serve people and they benefit.

Photo Assembling: “Photos are an evolutionary preference for consuming information in a short amount of time[.]” A picture is worth a thousand words.

Crowdsourced Inspiration: “For 2013, you should ask more of your dedicated supporters,” [he] says. “Ask them for their voice.” When you want money, ask for advice and pretend to listen.

Stigma-Free Singledom: A record 100 million Americans are not married. . . . So why are singles almost ignored in the [planned giving] world? People without families are losers but they also have nowhere else to leave their money.

Now, aren’t you better off for knowing all that?

Really bad advice about year-end giving, and some really obvious responses

December 31, 2012

The Nonprofiteer just received an e-mail entitled “Five Things You Need to Know About Year-end Giving” which was distinguished primarily by the utter wrongness of each and every one of the items identified.  Names have been omitted to protect the guilty, but commentary appears in bold.

1. Background Check….[B]efore you reach for your wallet, take the time to look into how charities spend their money. It is important know how much of your money actually reaches those in need. A rule of thumb is around 7% to 9% for administrative costs, though some online outlets with low overhead structures are able dip below that.  First clue that this is wrong: the imaginary precision of “7% to 9%.”  Second clue: use of the term “overhead” without definition.  “Overhead” includes such profligate expenditures as electricity and health care for employees.  The last thing we need is for donors to make it a condition of their gifts that nonprofit employees live in poverty. Rather than spend time trying to divine a charity’s wastefulness, donors should work on ascertaining its effectiveness.

2. Beware of dogs….Check the IRS database of more than a million charitable organizations to make sure the one you’re giving to is legit. The IRS database will not tell you which organizations are legitimate, only which organizations have filed appropriate paperwork.  Yes, of course, don’t give your credit-card number to any random jerk who calls; but more important, don’t give money to any agency about which you know nothing but a name and a 501(c)(3) designation.

3. Target the Need. If you see a specific need you want to affect, specify where your donation should go by adding a note, writing an email or by designating it on your check…. Money is fungible: whatever you give to a nonprofit inevitably supports its entire range of purposes and activities.  All that happens if you “designate” a spot for your money is that the recipient nonprofit shifts preexisting funds to another program.  If you don’t trust the charity to use your money wisely, don’t give it money; if you do, get out of its way and let professionals do their jobs.  The Red Cross responds to all sorts of disasters; if it gets more money than it needs for the victims of Hurricane Sandy, it will use that money for the victims of Hurricane Tom, or the house fire around the corner from you.  If you object to that, you’re more concerned with being trendy than with helping, so don’t bother to support the Red Cross.

4. Get More Than a Good Feeling….Be sure to get receipts for large donations above $250. Many non-profits are now accepting direct deposits and can accept funds with the click of a button.  Be aware of the tax deductibility of your contribution as not all non-profits can give you a tax-deductible receipt.  It’s true that donations to the NFL or the American Bar Association are not tax-deductible though  those agencies are nonprofit; but gifts to virtually anything you think of as a charity ARE tax-deductible.  Ask about it if you’re concerned but this is the least of your worries.

5. Simplify and Centralize Your Giving. Simplify your giving by using a one-stop-shop that makes finding and giving to charities easier. [Our company’s] users can give to any 501(c)(3) recognized by the IRS. [Our company] keeps a record of donations so you don’t have to and provides a year-end receipt for tax purposes.  Again, don’t be trolling around looking for charities in somebody’s data-base; give money to agencies in your community whose work you know, or to organizations active in the field (social services, the environment, the arts) with which you’re concerned.  It’s no easier to find the names of random charities in some commercial Website’s data-base than directly from the IRS (or from the phone book, for that matter), and if you’re worried about having a receipt you could always just write a check, which is perfectly adequate documentation for the Revenue agents.  Don’t be dazzled by announcements of great on-line services which can direct you to charity: there’s nothing difficult about making your own gift, and “research” in this field means nothing more than familiarity with an agency’s work. What’s being ballyhooed here is the equivalent of an offer to chew your food for you: sure, you could hire someone to do it, but that would eliminate not only all the fun but all the nourishment.

Don’t feel desperate about giving away your money before December 31: there will be plenty of need (and plenty of tax-deductibility) in the new year.  Take the time you need to find out about the mission, services and effectiveness of the organizations you want to support.  There’s no charitable fiscal cliff, so don’t bother searching for a charitable bungee cord; your personal sense of balance will be more than sufficient to support you.

What Price Democracy?

December 27, 2012

There’s an old joke about a man who asks a woman to sleep with him for $1 million. She agrees, whereupon he asks her to sleep with him for $1. “What kind of a girl do you think I am?” asks the woman indignantly. “We’ve settled that,” replies the man, “We’re just arguing about the price.”

This came to the Nonprofiteer’s mind in response to this story about the price of the Broad Foundation’s generosity to the schools of New Jersey. A recent Broad Foundation grant stipulates that it will be available only as long as Chris Christie remains governor.

The Nonprofiteer has often argued that private philanthropy in education (and other areas) is at best a mixed blessing, because it reflects approval of the notion that public assets should be run according to private preferences.   But she never imagined any philanthropy would go this far, offering its generosity only on condition that the public sacrifice its right to choose its own leaders. The question isn’t whether or not Chris Christie is a good governor; the question is whether the Broad Foundation—as opposed to the voters of New Jersey—should get to decide that.

Sure, you can say that no voter is likely to sacrifice his or her rights for a grant of $430,000, but then we’re just arguing about the price. And sure, in form, the voters of New Jersey still hold the power, but the Broad Foundation grant gives them to understand that the cost of exercising their power is losing a lot of money—or, put another way, that the cost of the money is their democratic rights. By comparison, “the vig” (excessive interest rates) charged by organized crime look like a bargain.

Not content with specifying the outcome of an election, the grant’s terms also exempt from disclosure anything having to do with the grant, purporting to provide it with immunity from application of the Federal Freedom of Information Act. Perhaps this was intended to minimize the impact of the grant on voters: What they don’t know can’t influence them. But when the subject of the grant is the most public of concerns—the education of the next generation—a commendable motive doesn’t excuse unacceptable means. Voters need to know on what basis decisions are being made about their schools so that they can change the decision-makers if they disagree. The grant terms are an effort to protect the foundation and its direct beneficiary, the current Republican government of New Jersey, from that straightforward democratic notion.

Defenders of charter schools and other forms of privatization of public schools argue that such restructuring attracts private philanthropy that would not otherwise be available to those schools. That’s probably true, but is that a cost or a benefit? It’s a slippery slope, from good-willed private philanthropy in support of public goals to a system in which private goals predominate—specifically the private goal of eliminating public input (or even public knowledge) from the governance of the public schools.

We could argue about whether the loss of public input would be worth it if the donation were $430 million. But under the current circumstances, just what kind of girl is New Jersey?

A cheap date, apparently.

Dear Nonprofiteer, If a Board member’s gift falls before year-end, does it make a sound?

November 30, 2012

Dear Nonprofiteer,

I serve on the board of a nonprofit. 100% of our board gives in some form monetarily throughout the year through event sponsorship, general giving, donations at events, etc. With all the year-round giving, many of us were not making a gift to the annual appeal. Recently, we were informed that funders look at what percentage of our organization’s annual appeal total comes from board members. This has the board scrambling to make sure everyone gives a significant sum here at year’s end. It also has many of us questioning the timing of our gifts for the next year. Do we not sponsor the gala or give to summer programs, but instead save that donation for the annual appeal? There is only so much to give for many of us.

While I know that funders want 100% of board members to give, the desire for that giving to come in the form of the annual appeal is new to me. I find it especially surprising that they would ask what percentage of the annual appeal comes from board members. Have you heard about this stipulation? Is it widespread?

Obviously we all want what is in the best interest for our organization to be positioned for future funding. However, I don’t want to lose the help and momentum the organization gets from year-round board giving if it isn’t necessary.

Signed, Surprised and Scrambling

Dear Surprised:

First, let the Nonprofiteer congratulate you on having a Board that gives 100%. It’s bizarre to imagine that some additional hurdle should be placed in the way of a Board which has already cleared that one. Institutional funders are notorious for always asking for one more thing; but this hoop is a brand-new one.

The Nonprofiteer suspects that what we have here is a failure to communicate*—that is, a misunderstanding of what the funder actually wants to know. If the program officer asks (or the guidelines say) “What percentage of your annual fund comes from your Board members?” the English translation is most likely, “What percentage of your annual donated income comes from your Board members?” NOT “Which appeal do your Board members respond to?”

The funder’s concern may be for institutions whose Boards donate 75% of the group’s contributed income, reflecting a failure to reach out into the broader stakeholder community. Conversely, the funder—which mostly doesn’t deal with Boards as generous and active as yours—wants to know if Board member donations are significant or merely pro forma: if every single member of the Board gave $1, that wouldn’t be the kind of Board participation the foundation wants to see, or intends to spark through its inquiry.

If in fact the funder cares about the Board’s response rate to the annual appeal, meaning the end-of-year solicitation letter, this is a classic example of a wider problem in the nonprofit community: the “it doesn’t count” syndrome. Oh, members of your Board buy and sell tickets to the benefit event? “It doesn’t count” because there might be something involved in the transaction beyond a straightforward check and tax receipt. “It doesn’t count” syndrome leaves Board members feeling unappreciated and nonprofit executives feeling unsupported; so repeat after the Nonprofiteer: money is fungible; IT ALL COUNTS.

And if the funder disagrees: so the funder is stupid! Having money is no guarantee of having brains, and that’s as true in the philanthropic sector as anywhere else, though it’s harder to remember when we’re spending all our time trying to please people with money.

The Nonprofiteer’s advice: call the program officer and say, “Do I understand you want to know what percentage of the response to our end-of-year solicitation letter—what we call the annual appeal—comes from the Board, or do you just want to know what percentage of our annual contribution income is donated by the Board?” If s/he really means the former, then yes, just shift the timing of your contributions in future years.

“Teach your funders well . . . . just look at them and sigh, and know they” don’t understand you at all.**

——————————–
*Cool Hand Luke
**Crosby, Stills, Nash and Young: “Teach Your Children”

Giving Tuesday: A Holiday Tradition Worth Creating

November 27, 2012

This is glorious: someone figuring out how to divert some of that pointless holiday shopping into social good.  Go bust some charity’s door today!

Dear Nonprofiteer, Can a donor dictate the use of her gift? How about if she’s the Executive Director? How about if she’s also on the Board?

October 11, 2012

Dear Nonprofiteer:

I was wondering if it is ethical for an Executive Director to donate to the organization she runs, designating her donation to bonuses or pay raises for the employees that work for her.  She is not paid, thus can remain on our Board.  Seems like a conflict to me.

Signed, Wondering

Dear Wondering:

The Nonprofiteer sees a conflict of interest in the situation you describe, all right, but it doesn’t have to do with the donation.  Any donor can specify the use to be made of his/her gift, and if those terms strike the recipient organization as too onerous it can simply refuse the gift.  A donation from a foundation restricted to paying the salary of a particular staff member—or to giving salary increases to staff members across the board—would be unexceptionable, and in fact would represent a refreshing understanding by the foundation community that people who work for nonprofits need to clothe their kids and pay mortgages, too.

But.

When the donor is the Executive Director, a gift of this kind might be seen as a way of buying (as opposed to earning) loyalty from the staff.  On the other hand, who’s in a better position than the ED to know that her staff members are overworked and underpaid?

But.

It’s the job of the Board to create and implement the agency’s budget, a budget which presumably includes a line item for staff salaries.  It isn’t really kosher for the Executive Director to unilaterally override this governance decision by whipping out her checkbook.

But.

If there’s a consensus on the Board that the staff is underpaid, and/or that it’s time for a raise if only there were money,  the Executive Director’s decision to alleviate that situation (and capacity to do so) should be as welcome as a similar decision by any other donor.

But.

The Nonprofiteer doesn’t understand “She is not paid, thus can remain on our Board.”  The Executive Director, regardless of her compensation status, should serve as an ex officio member of the Board—that is, a Board member by virtue of her position and not in her individual capacity.   If the Executive Director was on the Board first, she should have resigned when she took on the duties of Executive Director.  The Board’s power is concentrated largely in its ability to evaluate, hire and fire the Executive Director, and if necessary to go into executive session to do so—that is, to kick the ED out of the room.  But if the ED remains a Board member, she can’t be removed from the room, therefore she can’t be discussed frankly, therefore she probably can’t be removed, therefore the Board has no power at all.

So the conflict is between the ED-qua-ED and the ED-qua-Board member.  These two roles cannot coexist, and the balance of the Board should demand that the ED choose one or the other.  This is why it’s not even a good idea to permit a Board member to serve as ED on an interim basis—because the “interim” tends to become the “interminable” without anybody’s noticing.

So.

Now we’re back to the question of the gift.  If the ED remains on the Board, her contribution should be counted toward her mandatory give-or-get; but first the balance of the Board should vote on whether to accept the gift with the conditions she’s attached to it.  The ED-Board member, naturally, would recuse herself from this decision on the grounds that she—what?—has a conflict of interest, in this case between her role on the Board and her role as an individual donor to the agency.

By the same token, if the ED leaves the Board but remains at the agency, the Board once again has the right (and the obligation) to vote on whether to accept the gift she’s offered with the conditions she’s attached to it.  Naturally, this discussion would take place in executive session, with the ED excused from the room.  If Board members think this is a great opportunity to enhance compensation, they should accept; if they think this is a sneaky maneuver to undermine their budget authority, they should reject; but in any case the ED has no right to have her gift accepted unless and until the Board approves it.

To review: the question of the ethics of the donation doesn’t even arise unless the Board neglects its fiduciary obligation to evaluate gifts for unacceptable conditions.  The questionable ethics here are those of all concerned—Board members and ED/Board member alike—in permitting one person to fill two roles.

Once you’ve given someone a disproportionate share of power, you can’t be surprised when she makes a play for a further disproportionate share of power, in this case by brandishing a checkbook.  But the power to prevent the gift lies in the hands of the remainder of the Board, and if they fail to exercise it, they’re the ones whose ethics are questionable.

Existing forever versus doing some good

March 28, 2012

An op-ed piece a few weeks ago in the Wall Street Journal (behind a paywall)  argued that donors should construct their foundations to spend down assets as rapidly as possible, lest the foundations end up supporting causes their donors would revile.  This familiar argument comes with a familiar whipping-boy: the Ford Foundation, whose enthusiasm for assisting the poor and marginalized was certainly not shared by its eponymous founder Henry.  The op-ed piece, like many of its kind, focuses on the question of donor intent, arguing that only a brief payout period can assure that the donor’s intent is served.

The Nonprofiteer has never cared particularly about the intent of dead donors.  First of all, they’re dead, and while death may not extinguish intent as a matter of law it certainly does as a matter of common sense.   Second, how much better off do we really think the world would be if Ford’s foundation had spent all its money on Ford’s enthusiasms, such as promoting publication of the scurrilous anti-Semitic tract The Learned Protocols of the Elders of Zion?   Third and most important, the  tax-free status of foundations is supposed to encourage philanthropy, not the accumulation of permanently idle tax-free money.

The Nonprofiteer has long argued that the minimum expenditure required of foundations is way too minimum, and that setting up a structure to give away 5% of income shouldn’t entitle a donor to a 100% tax shelter–whatever his/her intent.  Most likely that intent was to escape from taxation, without too much more thought than that.

So let’s think about the issue not from the standpoint of donor intent but from the standpoint of social good.  Which is more useful for a philanthropy: remaining around in perpetuity, to grapple with issues that may arise a generation or three from now, or spending down in the present and relatively short-term future on issues the donor understands and cares about and which in any case are currently urgent?  From the phrasing you can tell the Nonprofiteer’s position: spend it down.

Julius Rosenwald saw the wisdom of this approach when he created a program of fellowships for African-American artists for their professional development.  Rather than keep the fellowships around in perpetuity, he ordered that the principal be awarded completely within 5 years of his death.  As a result, virtually every mid-20th-Century African-American artist you’ve ever heard of received a Rosenwald Fellowship: Ralph Ellison and Romare Beardon and Katherine Dunham and Gordon Parks and many others.   The value of what Rosenwald did, giving artists enough money so they could work without fear or distraction, is literally incalculable.

But also as a result, virtually no one remembers Julius Rosenwald, or at least not his fellowship program.  So that presents the question: are we in the business of fostering greatness, or memorializing it?  Is remembering a donor as important as creating work through a donor’s generosity?  Again, to the Nonprofiteer the answer is self-evident.  She’d rather be grateful for Ralph Ellison than to Julius Rosenwald.

Look, here’s the deal: people will make money in every generation, and in every generation some people will make a lot of money.  If we tax them properly they’ll look for the opportunity to shelter their money in philanthropy.  Why shouldn’t we tax them so that they’re motivated to spend it philanthropically, too?  Like the proverbial Fifth Avenue bus, another chunk of  money will be along any minute.

Sure, there’s a risk of spending too rapidly and with insufficient research (or “due diligence,” as people are fond of saying when they want to pretend that the nonprofit sector is really just like a business).  But the greater risk is the situation in which we find ourselves now, where philanthropies give out amounts insufficient to make any significant change.  No, philanthropy isn’t supposed to be society’s primary source of support, but while people are busy starving government so they can drown it in the bathtub, private wealth can and should step into the breach.

Consider the contributions of the Gates Foundations to the Global Fund to Fight AIDS, TB and Malaria. Can anyone really argue it would be better to hold back on eradicating those diseases, in case there’s some bigger plague later on?  If there is, as AIDS itself demonstrates, we’ll mobilize and raise money for it.  Meanwhile, in case of every ailment, time is our enemy: the later we provide resources, the harder it will be for those resources to have impact.  Thus wasting money is a less significant risk than failing to spend enough to make a difference.

Two things need to happen: philanthropists themselves need to organize their giving so that it ends within a reasonable time after their death, and Congress needs to modify the tax code to require philanthropies to pay out more each year to retain their tax-favored status.  A 10% annual payout–double the current rate–may end up causing philanthropies to dip into principal, maybe even until they’re empty.  But remember the words of Citizen Kane as he contemplated the financial difficulties of his newspaper empire: ” I did lose a million dollars last year. I expect to lose a million dollars this year. I expect to lose a million dollars *next* year. You know, Mr. Thatcher, at the rate of a million dollars a year, I’ll have to close this place in… 60 years. ”  Let’s take a Kane-like risk of running out of money.

One more story: Some time in the ’90s Joan Kroc stood up at a Ronald McDonald House benefit to announce her annual gift.  Rumor had it she was actually going to make a five-year pledge, and the Nonprofiteer’s table indulged in the parlor game of trying to figure out just how much that would be.   We figured the previous year’s gift ($5M) plus a little bump (so $6M) for each of 5 years, and settled on $30 million.  And then she rose to speak, a little woman holding a torn-off piece of yellow legal paper in her hand.  And she said, “I was going to make a 5-year gift, but then I thought: ‘The need is now.’  So tonight I’m giving $50 million to Ronald McDonald Children’s Charities.”  Everyone at the table fell back in her seat, literally knocked over by her generosity, and also by her insight: The need is now.

Aside from Ronald McDonald, Mrs. Kroc mostly supported causes her late husband disapproved of.  If only he’d given more in the present, he wouldn’t have had to contemplate a future in which his money went to places he despised.  So the donor’s intention and the sector’s need are in sync:

Spend it now.


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