Planned Giving News Magazine

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CPI posts biggest gain in 25 years - CNN Money 10/14/05
Consumer prices rose at the fastest pace in more than 25 years last month, spurred by a surge in energy prices to record highs after Hurricane Katrina. At the same time, though, a closely watched measure of so-called core inflation, excluding volatile food and energy prices, showed surprisingly little price pressure in September. The Consumer Price Index, the government's main inflation gauge, jumped 1.2 percent in September after rising 0.5 percent in August, the Labor Department reported. The department said energy costs were responsible for 90 percent of the rise. Record gasoline prices in September after Katrina sent energy prices soaring 12 percent in the month. The overall CPI number was the biggest monthly jump since March 1980, and it was quite a bit worse than expected. Economists surveyed by Briefing.com had forecast a 0.9 percent rise in the headline number.

Mortgage Interest Deduction Limitation? - LA Times 10/12/05
Bush's "tax reform commission [the President's Advisory Panel on Federal Tax Reform] tentatively agreed Tuesday to recommend a substantial reduction in the limit on mortgage interest that homeowners can deduct from their taxes."
"If a uniform nationwide cap was chosen to replace the current $1-million limit on mortgage debt eligible for deduction, it could be widely felt in California, which has some of the nation's highest home prices." But to account for the wide disparity in home values nationally, the panel considered recommending a ceiling based on local housing prices but left the issue open, to be decided later. Some panel members suggested basing the limit on the Federal Housing Administration's maximum on mortgages it will insure - currently $312,895 in Southern California.
The panel did not discuss Tuesday whether to recommend limiting the interest deduction on home equity loans or second homes, as had been previously suggested by some panel members.

Fed Worried Katrina Would Boost Inflation - Washington Post 10/12/05
Federal Reserve officials lifted their key short-term interest rate last month because most of them worried that Hurricane Katrina had done more to raise the risks of higher inflation than to threaten U.S. economic growth.
Members of the Fed's top policymaking committee also believed more rate increases would probably be needed to keep a lid on price increases, according to minutes released yesterday of the group's Sept. 20 meeting.
One Fed board member, Mark W. Olson, dissented at the meeting because he wanted to leave the rate unchanged until he had more information on the deadly storm's economic effects, the minutes state, providing the first public explanation of his vote.

Economy lost 35,000 Jobs - Much Less Than Feared - NYTimes 10/8/05
Employment contracted at an unexpectedly modest pace in September, underscoring the American economy's strength in the first broad snapshot since Hurricane Katrina hit Louisiana and Mississippi in August. The Department of Labor reported yesterday that the economy lost 35,000 jobs in September, the first contraction since May 2003. The unemployment rate rose for the first time in seven months, inching up to 5.1 percent in September from 4.9 percent in August. Job losses appeared to be concentrated in the disaster area. They were offset by strong employment growth in the rest of the country, which confirmed the continued strength of the economic expansion.

Energy Fuels Fears of Broader Inflation - NY Times 10/6/05
Oil costs are hitting a range of businesses. As some pass increases to customers, economists worry that prices will spiral upward. Rising energy costs are causing Americans to pay more for such diverse products as cat litter and express delivery services, sparking concerns that protracted inflation might be returning as a primary threat to the U.S. economy for the first time in more than a decade. Signs of higher inflation are beginning to multiply across the economy.

Oil Production Only Slowly Returning - MarketWatch.com 10/3/05
Over a month after Hurricane Katrina bore down on the Gulf of Mexico, less than 10% of the region's oil production has been brought back on line, worrying Wall Street and Washington," MarketWatch.com reports. "The offshore industry's painfully slow recovery, dealt a second devastating blow in late August by Hurricane Rita, is playing havoc with fuel prices and the economy, adding to the nation's trade deficit as foreign oil pours into U.S. ports to cover lost production offshore and at Gulf Coast refineries.

Manufacturing Posts Big Gain - CNN Money 10/3/05
Manufacturing growth surged in September, according to a closely watched survey of industry executives released Monday that came in much stronger than Wall Street expectations.
The Institute for Supply Management's manufacturing index came in at 59.4 for September, up from the 53.6 reading in August. It was the highest reading in the index in 13 months and came despite the shock of higher energy prices paid by many manufacturers in the month. Economists surveyed by Briefing.com had forecast the index would slip to 52 in September.
"While energy prices and the impact from Hurricane Katrina are major concerns, the manufacturing sector has regained significant momentum," said Norbert Ore, chairman of the Institute's Manufacturing Business Survey Committee. He estimated that the storm might have added as much as four to five points to this month's ISM index.

Greenspan Concern With Mortgages - Wall Street Journal 9/27/05
Federal Reserve Chairman Alan Greenspan, "drawing on new research he has personally supervised, said American consumers have become enormously dependent on borrowing against their homes to fuel their spending, and that a rise in mortgage rates could trigger a spending pullback," the Wall Street Journal reports. "Mr. Greenspan's new data show that borrowing against home values added a stunning $600 billion to consumers' spending power last year, equivalent to 7% of personal disposable income -- compared with 3% in 2000 and 1% in 1994."
Related Comments - NYTimes 9/27/05
With new evidence that the housing market remained red hot last month, Alan Greenspan said that the vast majority of homeowners are not yet stretched too thin. But Mr. Greenspan warned that the use of "exotic" mortgages could be pushing prices higher and inducing some homebuyers to take on too much risk.

New Home Sales, Consumer Confidence Dropped - NYTimes 9/27/05
New home sales fell sharply in August and consumer confidence dropped to its lowest level in more than two years this month, according to two reports released today, raising some concerns about the economy's health or at least consumers' perceptions of it in the wake of Hurricane Katrina . The latest data do not necessarily signal a worsening trend because both home sales and consumer confidence are volatile indicators that can fluctuate widely from month to month, analysts said. The large decline in new home sales, for instance, comes a day after another report showed a surprising increase in existing home sales in August.

CARE Act Reintroduced in Congress
The Charity Aid, Recovery and Empowerment (CARE) Act, S.1780, was reintroduced by Sens. Rick Santorum (R-Pa.) and Joseph Lieberman (D-Conn.) on Sept. 28, 2005. Reps. Roy Blunt (R-Mo.) and Harold Ford (D-Tenn.) introduced companion legislation, H.R. 3908, in the House.
The two bills are very similar to the CARE Act that was introduced in 2003 and include charitable giving incentives such as the IRA rollover and non-itemizer deduction. In the last Congress, the Senate passed the CARE Act by a vote of 95 to 5, while the House overwhelming approved its version by a vote of 408 to 13. However, the House and Senate were unable to resolve the differences between the two bills in a conference committee before the 108th Congress adjourned in December 2004.
Both of the new versions contains the IRA rollover provision, a proposal that AFP has strongly supported in the past, but the House and Senate provisions differ slightly regarding the age thresholds that would trigger the charitable incentive. There are also different giving incetives in the two bills. editor note - Of course, we need to wait to see if the CARE Act is passed and what the final version will include.
AFPNET Newswire 10/4/05

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Hurricanes Katrina and Rita Scam Alert
The Internal Revenue Service today issued a consumer alert about possible scams taking place in the wake of Hurricane Katrina and other recent natural disasters. Such fraudulent schemes may be perpetrated through the telephone, Internet, e-mail or in-person solicitations. The IRS cautions hurricane victims and people wishing to make disaster-related charitable donations to avoid unscrupulous scam artists by following these tips:

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Major Gift Opportunity Through 12/31/05
As part of the Katrina Hurricane Relief Tax Package (H.R. 3768), Sec. 301 permits charitable gifts up to 100% of income. This provision effectively permits unlimited IRA withdrawals and gifts to charity. Many major donors may make IRA withdrawal-gifts during the rest of 2005. When a person over 59 1/2 withdraws funds from his or her IRA, the withdrawal will be included in the IRA owner's taxable income. Under the new 100% of income charitable gifts option, the withdrawn funds may be given in full to charity. The full gift will then be deductible.
This bill is pending compromise committee review and the President's signiture.
Qualifying cash gifts must be made between August 28, 2005 and December 31, 2005. Make sure the withdrawal request allows time for processing. You must have the cash available by December 31 to qualify.
Public charities generally will qualify, but there are several exceptions -- no private foundation gifts, no supporting organization gifts, no donor advised fund gifts and no gifts of property such as stock or land.
www.iragift.org 9/23/05

Vehicle Donation Update
The IRS has just issued a new form 1098-C, which charities must provide to donors who donate cars, boats or airplanes. This form helps to implement the new law that prohibits a charitable deduction greater than the charity's sale price. You can view this new form at the IRS website here: www.irs.gov/pub/irs-pdf/f1098c.pdf. The charity must issue the form to the donor within 30 days of the date of the gift, and a copy must be forwarded to the IRS by February 28th of the following year.
Commentary: As we see time and time again, the misdeeds of the few cause more paperwork for everyone else. If a few charities had not stretched the rules and encouraged donors to claim deductions far in excess of what the charity actually received, there would have been no need for the new law or the new form. This new procedure will pose a significant additional burden for the business office of each charity that regularly accepts donations of cars, boats and airplanes.
John Ebare - www.pgcoach.com 9/12/05

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Delay In Estate Tax Vote
The U.S. Senate will delay voting on legislation to repeal the estate tax, Senate Majority Leader Bill Frist said after Democrats urged Republicans to make helping Gulf Coast hurricane victims the priority when Congress returns. "We want to address the urgent needs that relate to the people that are in such desperate shape down there," Senate Democratic Leader Harry Reid said Monday. Two hours later, Frist told reporters that the Senate is delaying the estate tax measure. Frist last week said that Republican lawmakers would pursue a vote on estate tax repeal as the first order of business when the Senate returned after the August recess, which ends tomorrow. Democrats long have argued that the estate tax, currently being phased out until 2010, when it will be repealed for one year, benefits the wealthy and deepens federal budget deficits. Reid, of Nevada, said Monday that a Republican push for a vote on the estate tax soon after the hurricane would be "a travesty on top of a tragedy."
Arizona Republic - 9/6/05

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