DATE: November, 2002

NEWS SOURCES | ARCHIVES OF PAST MONTHS

CARE Act Sidelined for Now, May Return in Lame-Duck Session

Despite significant momentum near the end of October, the CARE Act was not considered by the Senate before it adjourned for the November elections. However, the prospect of a lame-duck session after the elections holds out the possibility that the legislation may see action later this year.

The most significant obstacle has been a handful of Senators who wanted to use the CARE Act as a vehicle for civil rights legislation. A proposal was developed to allow a series of amendments during consideration of the bill that would address these concerns, and this agreement seemed to have picked up steam in the closing weeks of October.

However, because of the continued objections of a handful of Senators led by Jack Reed of Rhode Island and an increasingly crowded agenda that includes homeland security, Iraq war resolutions and annual budget and appropriations items, the Senate was never able to move to consideration of the bill.

It has been reported that some business lobbies were quietly working against the CARE Act because parts of the bill would be funded through penalties against corporations that established headquarters overseas to avoid certain taxes.

The possibility of Congress returning after the elections (a "lame-duck session") continues to grow, and several Senators have indicated they would be surprised if they weren't in Washington, DC, in the fall. The CARE Act could be an item of consideration for the Senate if this lame-duck session occurs.
Taken from AFP eWire - Oct. 25, 2002

ACGA Board Approves Reduction in Gift Annuity Rates

At a special meeting on October 16, 2002, the Board of the American Council on Gift Annuities approved a reduction in suggested gift annuity rates, effective January 1, 2003. The new schedule of rates can be found on ACGA's web site: www.acga-web.org.

The effective date is deferred until the first of the year to give software vendors, publications companies, and charities time to incorporate the new rates in their programs and literature. Some charities, concerned about the current rates, may choose to implement the reduction immediately.

Even though the rates will be lower, they should continue to be attractive to donors because interest rates on fixed-income investments have also gone down. For instance, the ACGA rate for a 70-year-old will decrease from 7.2% to 6.7%, but in the course of the year the 10-year Treasury bond has decreased from 5.25% to approximately 4.75%, and the 5-year-CD at many banks has decreased from about 4.6% to less than 4.0%.
Taken from 10/16 Memo from the American Council on Gift Annuities

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Endowments touted for stability

While it can make fundraising tougher, the sluggish economy also underscores the urgency for many nonprofits to gear up for the future, charitable experts say.

Some nonprofits simply are struggling to operate, they say, and may not be ready for endowments or planned-giving programs, which can tap wealth being transferred between generations, and generate income to support programs and operations.

"An endowment can help ensure the viability of your organization," says Holly Welch, vice president for development and legal affairs at the $240 million-asset Foundation for the Carolinas in Charlotte. Historical trends show long-term investments pay off, says Phillips M. Bragg, a principal at Bragg Financial Advisors, a wealth-management firm specializing in charitable planning.
Taken From The Philanthropy Journal by Todd Cohen

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Charitable Giving and Taxes

Charitable giving can be helpful to you financially when it comes to taxes. The amount you can reduce your taxes depends, of course, on how much you contribute as well as the tax bracket you're in.

For example, a single person earning $75,000 a year pays about 39 percent of his income in federal, state and local taxes. If that person gives $5,000 to charity, he can expect a tax savings of nearly $2,000.

There are several ways you can cut your 2002 tax bill now by making charitable donations:

Keep in mind that charitable contributions are only deductible if you itemize on your tax return, and there are limits to how much you can deduct. But the limits are very high - typically more than 20 percent of your adjusted gross income.
Taken from the New York Post by Donna Rosa

Excess Land Ruling of Interest to Charities

A recent IRS ruling could be very interesting to charities with excess land they received by donation. In this case, the charity has about 15 acres not suitable for campus facilities (the organization is a religious school) and wants to dispose of the land as surplus property to be used for residential building purposes.

The charity has obtained approval for the division of its surplus land into three residential building lots. As a condition for this approval, the charity has been required to enter into a Subdivision Agreement requiring the charity to make several improvements, including building roadways and utilities providing access and services to the three lots, installing drainage and landscaping, building a pedestrian/equestrian trail, and granting the town an open space easement over a parcel of land. The charity also was required to post a bond to guarantee the improvements would be made.

The charity will hire a contractor to make the improvements and sell the lots to one or more third parties. The charity does not intend to advertise or market the lots for sale, but if the lots are not sold within a reasonable time period, the charity may hire a local real estate broker to sell the lots.

The Service ruled that the charity's real estate acquired by bequest is not property held primarily for sale to customers in the ordinary course of a trade or business within the meaning of section 512(b)(5)(B) and therefore the gain the charity will realize on the sale of the surplus land is excludable from unrelated business taxable income and will not be subject to UBIT under section 511(a).

The fact that the property was received by bequest and held for 15 years; the small number of lots and acreage to be sold; the fact that improvements were mandated by the Town of P and its local ordinances, and the lack of marketing efforts and advertising of the property differentiates this situation from that of a taxpayer which holds property for sale to customers in the ordinary course of a trade or business.
Taken from GiftPlan.org

Bequest Language Ruling Illustrates Need to Word Carefully

In Estate of Marion P. Bradford, et al. v. Commissioner; T. C. Memo 2002-238; No. 4659-00 (23 Sep 2002), the Tax Court sided with the IRD and reduced a charitable bequest in order to pay estate tax.

All debts, expenses and death taxes were to be paid from the residuary estate, with the balance divided between an individual beneficiary and a charitable foundation. However, while North Carolina law exempts the qualified charitable foundation from bearing any portion of the estate tax, the Tax Court determined that the language of the will and trust required payment of estate tax prior to $1.3 Million being distributed to Northbrook Methodist Church and deducted as a charitable transfer. With that interpretation, Treasury determined that the actual distribution to the church should be $800,752. This resulted in a threefold increase in the federal and state death taxes payable.

The Court determined that the taxpayer position would have been correct under North Carolina law. However, since the terms of the will and the trust stated that the taxes were to be paid and the balance divided, he ruled that the language of the will and the trust overruled the North Carolina statute.

This ruling underscores the importance of wording that explicitly relieves the charitable portion of an estate from the burden of estate taxes, if that is the intent of the donor.
Taken from Giftlaw