IRF Update - May 13, 2011

New Hawaii Law Exempts IRFs and Alumni Associations from Charitable Solicitation Registration Requirements

Institutionally related foundations and alumni associations are now exempt from charitable solicitation registration and reporting requirements in Hawaii.

The Hawaii Legislature passed and Gov. Neil Abercrombie recently signed Hawaii Senate Bill 1233 (pdf), legislation that updates the state's charitable solicitation law. CASE and the Direct Marketing Association Nonprofit Federation successfully urged the Hawaii Attorney General's Office to support an amendment to the bill that would exempt IRFs and alumni associations from the state's charitable solicitation and reporting requirements. CASE President John Lippincott also submitted testimony (pdf) to the Hawaii lLegislature in support of the change.

The new law now reads (CASE suggested language underlined and in bold):

467B-11.5 Charitable organizations exempted from registration and financial disclosure requirements. The following charitable organizations shall not be subject to sections 467B-2.1 and 467B-6.5 if the organization submits information as the department may require to substantiate an exemption under this section:

 (3) Any educational institution that is licensed or accredited by any of the following licensing or accrediting organizations:

(A) Hawaii Association of Independent Schools;
(B) Hawaii Council of Private Schools;
(C) Western Association of Schools and Colleges;
(D) Middle States Association of Schools and Colleges;
(E) New England Association of Schools and Colleges;
(F) North Central Association of Colleges and Schools;
(G) Northwest Association of Schools and Colleges;
(H) Southern Association of Colleges and Schools;
(I) The National Association for the Education of Young Children;

and any organization exempt from taxation under section 501(c)(3) of the Internal Revenue Code expressly authorized by, and having an established identity with, such an educational institution; provided that solicitations are primarily directed to the students, alumni, faculty and trustees of the institutions and their respective families.

CASE thanks the Hawaii Attorney General's office and DMA Nonprofit Federation for their assistance in this endeavor.

CASE will continue to encourage states to exempt IRFs from charitable solicitation registration and reporting requirements. The CASE whitepaper on charitable solicitation laws will be updated soon to reflect Hawaii's new law. For additional information and resources on state charitable solicitation laws, visit the CASE website.

Foundation Leaders Discuss Managing Expectations at 2011 IRF Conference

More than 150 foundation leaders discussed how to manage expectations and strengthen their executive teams at the 19th annual CASE Conference for Institutionally Related Foundations in Phoenix, Ariz.

During his opening keynote address, Robert Glidden, president emeritus of Ohio University, talked about the reality of declining state support for public higher education and the pressure that foundations will face to increase private support.

"Part of managing expectations is helping people to realize that it would be very difficult for us to make up the cuts we're experiencing entirely with private funds," said Glidden, who also suggested that foundation leaders need to be creative in using private dollars to enhance the quality of education for students.

During a session led by R.J. Valentino of the Napa Group, attendees divided into work groups to tackle questions facing foundation executive teams, including how to get a consensus on their campuses that investing in development should be a high priority and what can foundations do to recruit and retain key executive team talent.

And community college foundation leaders participated in a panel discussion on how foundations can support their colleges meet the national goal of 5 million additional community college graduates by 2020. The panel, moderated by CASE President John Lippincott, included Jim Larrimore, deputy director for empowering student success at the Bill & Melinda Gates Foundation, Cassie McVeety, executive director of the Mount Hood Community College Foundation and chair of the CASE board, and E. Ann McGee, president of Seminole State College of Florida and CASE board member.

CASE thanks its 2011 conference chair, Tiffani Shaw (University of Iowa Foundation) and the other members of the conference planning committee-Laura Brehm (University of Montana Foundation), Ginny Foltz (Arizona State University Foundation), Glenn Kaufhold (GKollaborative Inc.) and Keller Young (University of Colorado Foundation)-for putting together a strong program.

Save the Date: 20th Annual CASE Conference for Institutionally Related Foundations, April 17-20, 2012, Chicago

Mark your calendars and plan to join CASE as it celebrates 20 years of the annual CASE Conference for Institutionally Related Foundations in Chicago, April 17-20, 2012. The theme for this landmark conference will be "The Basics, The Best, The Next" as CASE plans to reflect on two decades of helping to build the IRF field and to look 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. If you have questions about the conference or topic suggestions, please contact Brian Flahaven at flahaven@case.org or 202-478-5617.

See you in Chicago!

Deficit Reduction Plans Could Involve Charitable Deduction

As members of Congress continue debating the budget deficit, lawmakers could look to proposals aimed at reducing the value of or eliminating the charitable deduction to help raise revenue.

In an April address on deficit reduction, President Barack Obama continued to advocate for a charitable deduction cap proposal. Currently, taxpayers making more than $200,000 annually ($250,000 for married couples) can take itemized deductions for charitable donations at the 33 or 35 percent rate depending on their tax bracket. This means that a taxpayer gets a tax benefit of 33 or 35 cents for every $1 he or she donates to educational institutions.

Under the charitable deduction cap proposal included in the president's fiscal year 2012 budget, the value of the charitable deduction would be capped at the 28 percent rate for high-income taxpayers. If enacted, taxpayers in the 33 or 35 percent tax bracket would get a tax benefit of just 28 cents for every $1 dollar donated.

Another proposal from President Obama's National Commission on Fiscal Responsibility and Reform would eliminate the charitable deduction altogether and replace it with a 12 percent tax credit for all donations, regardless of tax bracket. While a credit would equalize the benefit that all taxpayers receive, it would significantly decrease the benefit to high-income taxpayers under the current deduction. Since high-income taxpayers account for 65 to 70 percent of all individual giving and give the most to education, the credit proposal could lead to a significant decline in the size of gifts to colleges, universities and independent schools.

Both the charitable deduction cap and charitable credit proposals will likely be discussed during the coming months as lawmakers grapple with how to reduce the deficit. Two negotiating groups are meeting to develop deficit reduction legislation based on recommendations from President Obama, House Republicans and the National Commission on Fiscal Responsibility. It is unclear if either group will recommend proposals affecting the charitable deduction.

CASE opposes efforts to reduce the value of or eliminate the charitable deduction. Members are encouraged to share updated talking points and background information with their institution's government relations staff and donors. Also, subscribe to CASE's legislative RSS feed for the latest developments on efforts to reduce the value of the charitable deduction.

Survey: More Institutions Developing Social Media Policies

More schools, colleges and universities are developing policies to guide their use of social media, but few are measuring how social media impacts institutional goals, according to the results of a study on the use of social media in advancement.

The results of the second annual CASE/mStoner/Slover Linett social media survey, conducted in February and March 2011, indicate that most institutions-96 percent-are actively using social media tools to engage constituents, but many are struggling to adequately staff and evaluate their efforts.

Among the other findings:

• Nearly all institutions are using Facebook, while 75 percent are using Twitter, 65 percent are using LinkedIn and 65 percent are using YouTube.
• Use of Twitter is growing.
• The top goals for using social media are to engage alumni, create and sustain brand image, engage current students and increase awareness.
• About 25 percent of institutions have at least one full-time staff person fully dedicated to social media; the remaining 75 percent have staff members who work part-time on social media initiatives.
• Primary barriers to successful deployment of social media are inadequate staffing, lack of administrative support and lack of expertise and funding.
• Factors contributing to success in social media include having specific goals and plans, having institutional buy-in and support, ability to manage activities with a department, and having internal expertise.
• About 37 percent of institutions indicate that they plan to develop formal social media policies in the coming year.

The results of the survey, which attracted more than 950 respondents, were initially presented at the CASE Conference on Social Media and Community. Download copies of the conference presentation and initial survey results. 

Headlines

When the Well Runs Dry
Inside Higher Ed, May 9, 2011
A new report by the New America Foundation provides data on how states spent education funds from the State Fiscal Stabilization Fund, a $48.6 billion fund included in the American Recovery Act (federal stimulus bill). Most of the stimulus money from the fund went to K-12 education (79 percent) versus higher education (21 percent). However, Colorado, Louisiana and Nevada put most of their stimulus money toward higher education to make up for cuts each state made in public higher education funding. As federal stimulus money begins to run out, states are no longer able to use federal dollars to cover their spending cuts to higher education.
Full Article 

Changing the Charitable Deduction Could Discourage the Most Generous Donors
Chronicle of Philanthropy, April 29, 2011
In this opinion piece, Robert Sharpe, president of the Sharpe Group, offers a strong defense of the charitable deduction and says that efforts to change the tax treatment of charitable gifts would be harmful to the nation's nonprofits. Sharpe points specifically to President Obama's proposal to cap the charitable deduction at 28 percent for high-income taxpayers, which he says would lead these donors to give less to charitable organizations. He also suggests that the charitable deduction, which benefits society as a whole, should be treated differently than other itemized deductions that tend to benefit the individual.
Full Op-Ed (subscription required)

City Sends ‘Tax' Bills to Major Nonprofits
Boston Globe, April 24, 2011
To help offset cuts in state financial aid, the City of Boston is asking major nonprofit organizations, including colleges and universities, to make Payments in Lieu of Taxes (PILOTs) to the city based on the value of their property. Nonprofits are being asked to pay roughly 20 percent of what they would owe if they had to pay property taxes. While reactions by nonprofits have been mixed, some organizations feel that the requests could be the first step in eliminating the exempt status of their institutions.
Full Article

Americans Gave a Lot Less in the Recession than Experts Predicted
Chronicle of Philanthropy, April 22, 2011
Data from the Internal Revenue Service suggest that American donors dropped their donations by a total of 20 percent from 2008 through the end of 2009, a much more substantial reduction than experts predicted. The IRS finding differs substantially from the annual Giving USA surveys, which found a decrease in giving of 2.4 percent in 2008 and no change in 2009. A number of philanthropy experts believe that Giving USA's methodology underestimated the downturn's impact on giving.
Full Article (subscription required)

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Contact Brian Flahaven, director of legislative, foundation and recognition programs, at flahaven@case.org.