IRF Update - June 17, 2011

Whitepaper: CASE Survey Finds Most IRFs Rely on Endowment Management Fees to Fund Operations

Management fees on endowed gifts are the most common and significant funding sources for institutionally related foundations, according to survey results outlined in a new CASE Whitepaper.

Emerging from the Recession: Results of the 2010 Institutionally Related Foundation Funding Survey (pdf) details how public college and university foundations are funding their operations and activities. A total of 184 foundations affiliated with four-year and two-year public colleges and universities participated in the survey.

Seventy-three percent of responding foundations assess a management fee on endowed funds, contributing an average of 27 percent to their operating budgets. Sixty-three percent of respondents also indicated that their foundations rely on unrestricted gift funds to fund operations.

Other findings include:

• Foundations appear to be taking a greater role in fundraising on behalf of their affiliated institutions.
• A majority of responding foundations with reserves do not plan on using reserves to cover budget shortfalls in fiscal year 2011.
• Foundations affiliated with master's and research/doctoral institutions were much more likely to assess gift fees than foundations affiliated with bachelor's institutions or commu¬nity colleges.

The whitepaper is available to CASE members with premier-level membership on the CASE website.

Register Today and Save: 20th Annual CASE Conference for Institutionally Related Foundations, April 17-20, 2012, Chicago

Have funds remaining in your FY2011 budget? Register by June 30 and take 10 percent off your registration for the 20th Annual CASE Conference for Institutionally Related Foundations, April 18-20, 2012 in Chicago, Ill.

The theme for this landmark conference is "The Basics, The Best, The Next" as CASE reflects on two decades of helping to strengthen the IRF field and looks ahead at what foundations and foundation leaders can expect in the future. The conference is designed primarily for executives at foundations affiliated with four-year institutions and community colleges.

CASE will offer CPE credit for particular sessions and the conference will again include special programs and sessions for community college foundation staff.

To receive the discount, enter the promotion code "TAKE10" during the online registration process. You must register by June 30 to receive your discount. Hotel information for the 2012 conference is available on the CASE website.

See you in Chicago!

CBO Report Outlines Options for Changing Tax Treatment of Charitable Giving

In a May 2011 report, the Congressional Budget Office outlined options for changing the tax treatment of charitable giving.

At the request of former House Budget Committee Chairman John Spratt (D-S.C.), the CBO analyzed the following options in its report:

• Retaining the current deduction for itemizers but adding a floor - The CBO found that adding a contribution floor would reduce the federal tax subsidy (the government's foregone revenues) and charitable giving, though the reduction in the subsidy would exceed the reduction in giving. The effect of a floor on giving by high income individuals would depend on whether it was a fixed-dollar floor or floor equal to a percentage of an individual's income.
• Allowing all taxpayers to claim the deduction, with or without a floor - The CBO found that these proposals would increase the federal subsidy and increase giving, though the 13 percent increase in subsidy is higher than the 1 percent increase in giving. Adding a floor could increase donations and reduce the subsidy, according to the CBO.
• Replacing the deduction with a nonrefundable credit for all taxpayers, with or without a floor - The CBO found that replacing the charitable deduction with a 25 percent nonrefundable tax credit for all taxpayers would increase charitable giving and increase the federal tax subsidy. A 15 percent nonrefundable tax credit would decrease giving but would reduce the federal tax subsidy by a larger amount.

The full report is available on the CBO website. Note that the CBO report does not include an analysis of President Barack Obama's 28 percent charitable deduction cap proposal.

While the report highlights general effects of various policy options, the CBO acknowledges that it cannot be certain of the exact size of the effects. In particular, there is uncertainty around the extent to which taxpayers change their giving behavior in response to a change in the tax incentive.

It is unclear how and if the CBO options will be considered by lawmakers addressing the budget deficit. Lawmakers could potentially be interested in charitable deduction options that increase revenue while having little to zero impact on the level of giving. CASE will continue to urge Congress to protect the value of the charitable deduction.

IRS: 275,000 Organizations Lose Tax-Exempt Status

On June 8, the Internal Revenue Service announced that 275,000 tax-exempt organizations have automatically lost their tax-exempt status for failure to file required annual information returns for three consecutive years. The list includes local alumni association chapters, institutionally related foundations and fraternities and sororities. The IRS also announced steps that these organizations can take to apply for reinstatement of their exempt status.

 In 2006, Congress passed and President George W. Bush signed a law that requires nonprofit organizations with gross receipts less than $25,000 to annually file the Form 990-N, commonly known as the e-Postcard, with the IRS. Prior to the law's passage, nonprofit organizations of this size were not required to file a return with the IRS. The law provided a three-year window, which closed on May 17, 2010, for organizations to file the Form 990-N.

A full list of organizations that have lost their exempt status is available on the IRS website. Organizations that wish to be reinstated must complete an application and pay a user fee.

Donors Optimistic About 2011 Giving

Fundraisers have the power to increase donor retention and gift value by communicating measurable results of giving, reports a new survey on donor giving in North America.

The "Cygnus Donor Survey: Where Philanthropy is Headed in 2011" notes that the majority of respondents who have supported at least one cause for five or more years say reputation and trustworthiness are the primary factors that keep them loyal. However, more than 50 percent say nonprofits that achieve and report measurable results also earn their long-term support. In fact, according to the survey, donor retention and gift value tend to rise when "communications to donors prioritize measurable results and are written in a compelling manner."

The survey reports that donors are optimistic with respect to their giving in 2011 with nearly 80 percent saying they expect to give the same or more to charitable causes. Donors under the age of 35 were most likely to say they would increase their giving, while 23 percent of the study's most generous donors-those giving $10,000 or more last year-plan to give more in 2011.

Other highlights of the survey include:

• 41 percent of U.S. donors gave more money to charity in 2010 than in 2009, while 39 percent gave about the same amount in both years.
• More than 40 percent of U.S. respondents and 37 percent of Canadian respondents say they stopped giving due to a shift in priorities to other causes; over-solicitation was the primary reason donors in Canada cited to stop giving while over-solicitation was the second most-reported reason by U.S. donors.
• Less than 20 percent commented favorably on receiving premiums; nearly 65 percent of U.S. donors and 73 percent of Canadian donors do not want to receive token gifts of any kind.
• Online giving is on the rise among all age groups. In the United States, 86 percent of young donors, 69 percent of donors between 35 and 64, and 53 percent of those 65 and older say they will make an online gift in 2011.
• Donors say a request by a board member or other volunteer leader influences them more than anything else to "give and give generously."

Finally, the report notes that fundraisers may be leaving money on the table. Nearly 50 percent of survey respondents say they could have given more to charitable causes last year and that they were holding their philanthropy back. Separate reports on donor findings in the United States and Canada are available.

Headlines

3-Year College Degree Programs Not Catching On
Washington Post, June 16, 2011
Few students are taking advantage of accelerated three-year college degree programs at colleges and universities. The programs are designed to help reduce the cost of college by helping students complete undergraduate degrees in 36 months. While initially interested, most students are not eager to rush their college experience. Some college leaders predict that the programs will not gain traction unless they become a standard offering at most institutions.
Full Article 

Whose Money Is It, Anyway?
Inside Higher Ed, June 8, 2011
Dartmouth College's decision to increase the percentage it takes from endowment returns to cover administrative costs has angered some faculty members. The fee increase is part of a plan to help the college close a $100 million budget gap. Some Dartmouth faculty question whether increasing the fee goes against donor wishes that their gift be directed for a specific purpose. Administrators respond that the fee covers only a portion of the costs associated with the endowed gift and helps ensure that the institution can meet the goals of the gift. Gift fees at institutionally related foundations are referenced.
Full Article 

Court Wants Fuller Release of ESU's Donor Info
Pocono Record, June 7, 2011
A Pennsylvania Commonwealth Court judge has ruled that East Stroudsburg University and its foundation must provide the Pocono Record with all of its donor records going back to 2000. Donor names, addresses and other potential identifying information can be redacted. The ruling clarifies an earlier ruling by the court that under the state's Right-to-Know law, the public is entitled access to records from private entities that carry out work on behalf of public entities.
Full Article

Land Used by BSU, Foundation Not Tax-Exempt, Court Rules
Brockton Enterprise, June 7, 2011
A Massachusetts state appeals court has ruled that property owned by the Bridgewater State University Foundation is not exempt from taxes because the foundation allows the university to use the property for free. For the property to be tax-exempt, the court argued that the property must be used by the foundation itself. The law, according to the court, does not allow the foundation to claim tax-exemption if its property is used by another organization, including the university.
Full Article

UC, CSU Drop Opposition to Leland Yee's Transparency Bill   
Sacramento Bee, May 25, 2011
The University of California and California State University systems have dropped their opposition to state legislation (Senate Bill 8) that would require institutionally related foundations to comply with the California Public Records Act. The university systems negotiated a deal with Sen. Leland Yee (D) that amends the bill to protect donor anonymity. Similar legislation introduced by Yee in 2009 and 2010 were vetoed by former Gov. Arnold Schwarzenegger, who argued that the bills did not do enough to protect donor privacy.
Full Blog Post

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