Community Connection
Professional Advisors Edition - April 2021
Beyond the tax deductions:
Selecting a vehicle to celebrate and support a family's culture of philanthropy 
For many donors, the importance of a multi-generational family philanthropy plan is high on the radar, especially in the wake of 2020’s eye-opening events highlighting the importance of rallying around important social and community priorities.
 
How do you know when a client’s family is a strong candidate for more formal philanthropic planning, beyond simply budgeting for annual gifts to charity? Watch for these candidates among your client base:

  • Families who have started to ask you about multi-generational participation in the family’s favorite causes but do not yet have any formalized plans.
  • Families who have publicly demonstrated a long-term charitable commitment to at least three charitable organizations.
  • Families who own a multi-generational family business, creating the opportunity for corporate giving and values to serve as inspiration for the family’s charitable plans, even beyond the family’s ownership of the business. 
  • Families who have the capacity to give more than $25,000 per year to charity and have expressed or demonstrated enthusiasm and willingness to do so.
  • Families in which at least five family members across two or more generations have shown an interest in philanthropy.

A comprehensive philanthropy plan often starts with establishing a structure, typically in the form of either a donor-advised fund or a private foundation. Although there are benefits and advantages of each, the donor-advised fund option has become increasingly popular because of its favorable tax treatment, simplicity of administration, and flexibility. By contrast, private foundations typically appeal to families who want to engage directly in charitable activities, hire family members as employees to operate the foundation’s day-to-day business and receive salaries, run their own grant programs to support individuals, and grant directly to international efforts. 

A common myth, however, is that families who wish to collaborate across generations on grant making and impact are better suited for a private foundation. The reality is that families can work together to determine and execute a philanthropic vision, mission, and grants from the family’s charitable structures, whether a donor-advised fund, private foundation, or both. When a family establishes a donor-advised fund at the Community Foundation of Central Illinois, for example, staff can support the family in areas of expertise well beyond the administrative duties that are built into donor-advised fund services provided through CFCI. 

Here are examples of comments you may hear from families who may be excellent candidates to work with the community foundation alongside you as their key advisor: 

  • “We are interested in engaging the next generation of our family in philanthropic conversations, but we are at a bit of a loss as to how to go about it.” 
  • "We are concerned that families today--including our family--are less community centered than they used to be. So we don't want to ignore global issues, but we want to ensure that we make a difference locally. We thought about working with our children and grandchildren on community priorities and deploying philanthropy as a way to communicate our concerns and dreams for the region we all love, but we aren't sure where to find tools and best practices.” 
  • “As a member of my family foundation’s so-called 'next generation,' I am worried that our older generation has been directly involved with just a handful of organizations, so they tend to support only those organizations. As younger donors, we aren't necessarily going to want to be directly involved with these particular organizations, and at the same time we don't want to shut off support. We want to respect and engage with our older family members while also charting our own course.” 
  • “As a thirty-something, I have a young family and it is really important to me to be able to engage my kids in the family’s philanthropy, working right alongside me, my parents, siblings, nieces and nephews, and grandparents.”

If you’re hearing these and similar expressions of interest from your clients, please don’t hesitate to reach out. The team at CFCI is your partner to serve your clients’ philanthropic endeavors.
Tax tips: Qualified appraisals, 2020 tax changes, and holiday parties (not)
Here are three of our favorite tax tips:

  • For yet another reminder about the importance of obtaining a qualified appraisal for transactions in order to secure a charitable deduction, as well as evidence that the IRS will continue its scrutiny of conservation easements, see the opinion in Sells v. Commissioner of Internal Revenue, a Tax Court decision issued earlier this year. (Bonus: On the positive side for the taxpayer, this ruling is an illustration of the type of case where the IRS may agree to abate penalties, even those related to the taxpayer’s misevaluation.) 
  • If you’re having trouble keeping up with changes to the tax laws, you are not alone! If you are a subscriber to the Wall Street Journal, we highly recommend its recently-released tax guide. For a guide that does not require a subscription, Kiplinger offers a helpful summary of the changes effective for tax year 2020.  
  • Finally, we suggest skimming the examples in Private Letter Ruling 202107012, released on February 19, 2021, as a reminder of what types of activities are deemed to go beyond the Internal Revenue Service’s definition of “charitable and educational” for qualification as an exempt organization under Internal Revenue Code Section 501(c)(3). (Hint: Holiday parties, outings to restaurants and bars, car shows, and other social gatherings can tip the scales against exemption, even if those activities are conducted in connection with fundraising and collecting in-kind donations for charitable causes.) 
Giving together:
Factors to consider when representing couples
The Community Foundation of Central Illinois can help as you work with a couple to design a charitable giving plan that will create rewarding philanthropic experiences for both partners. Indeed, in Giving as a Couple, Rockefeller Philanthropy Advisors reinforce the tenets we maintain as a team at CFCI when we are working with a couple to develop and activate a charitable giving strategy that matches the couple’s goals and values.


For example:

  • Our team strives to understand why your clients want to give together as a couple, rather than “dividing and conquering” as individuals. 
  • Our team seeks to deeply understand your clients’ perspectives on roles and control so that we can help structure a process that will allow both partners to be active decision-makers. In certain cases, from time to time, a couple will ask us to act as a mediator, or even a tiebreaker, in the event that the partners are in the midst of an amicable debate about a particular community impact strategy or charitable gift.
  • Our team helps couples decide on financial levels of current and legacy giving that will achieve the couple’s philanthropic goals in harmony with their goals for children and grandchildren’s personal inheritances and involvement in the family’s legacy philanthropy.

Especially if you are representing couples that include women, it’s worth checking out Women Give 2021: How Households Make Giving Decisions, a study released last month by Women’s Philanthropy Institute at the Indiana University Lilly Family School of Philanthropy. The authors of the study observed notable trends in how partners--not just women--approach giving. For example, according to the report:

  • More than 61% of couples make charitable giving decisions jointly.
  • When decisions are made by one member of a couple, and that couple includes one woman, the woman is more likely to be that decision maker.
  • Couples tend to agree on the amount and recipients of their philanthropic investments.

As always, we look forward to supporting you as you help your clients achieve their family philanthropy goals.
In sync on giving: Lawmakers from both parties support expansion of CARES Act
Four Republican Senators, four Republican Democrats, a House Democrat, and a House Republican have introduced legislation to expand the increased charitable deduction cap for non-itemizers to up to one-third of the standard deduction. The Universal Giving Pandemic Response and Recovery Act (S.618/H.R.1704) also extends this temporary $300 deduction, which was included in the original CARES Act, through 2022 and enhances the provision to include gifts to donor-advised funds.  

Preliminary reports suggest that the so-called “universal charitable deduction” is already showing signs of success in encouraging more people to give to charitable organizations. For example, AFP’s Fundraising Effectiveness Project reports a 28% increase of $300 gifts made on December 31, 2020. Considering that $300 is the precise amount of the maximum a non-itemizer can deduct, this does not seem to be a coincidence! AFP also reports that gifts of $250 or less increased by more than 15% in 2020 compared with 2019. 

The inclusion of donor-advised funds as qualified recipients of universal charitable giving is an important breakthrough and recognition that donor-advised fund vehicles are powerful tools to increase effective charitable giving. Especially when paired with the expertise and resources uniquely available through CFCI, a donor-advised fund can be a critically important component of the philanthropic strategy for an individual, family, or business. 
April showers: Puddles to avoid as you navigate
tax deadline extensions
Your clients are surely aware that the Internal Revenue Service and the Treasury Department have extended the federal income tax filing and payment deadline for the 2020 tax year from April 15, 2021 to May 17, 2021. Be aware, however, that clients might overlook the fact that this extension applies only to individual taxpayers. And although the May 17, 2021 deadline does apply to individuals who pay self-employment tax, it does not apply to estimated tax payments (still due on April 15) or withholding. The extension also does not apply to nonprofits and business entities, so it’s business as usual on April 15 for entities filing Forms 1120 and 990. In addition, individuals still must comply with state filing deadlines, to which an extension may or may not apply.
3625 North Sheridan Road
Peoria, IL 61604
309-674-8730