Mission Spurs Charitable Giving More than Taxes
YOUNGSTOWN, Ohio -- It’s a straightforward question: Why do people give to worthy causes? The answer is not so straightforward and sometimes complicated by tax considerations.
Whether it’s the widow’s mite or several hundred thousand dollars, “People give to causes they’re passionate about,” says Julie Scarsella, vice president of the Community Foundation of the Mahoning Valley.
“Most people are generous and give for the right reasons,” says John Donchess, a certified public accountant and head of Packer Thomas’ tax practice in Canfield. “They have a cause that means something to them.” Donors give little thought to tax considerations until they plan their estates, the CPA has found. Then they want to navigate the tax code to maximize their contributions.
“Donors want to [be remembered] by creating a legacy that will outlive them,” says Paul McFadden, president of the Youngstown State University Foundation. They want to do good. “They want to see their money used wisely,” he says.
“People have charitable inclinations,” attorney Neil H. Maxwell has found over the course of his practice. “Most clients are not tax-driven.” Maxwell, a partner at Harrington, Hoppe & Mitchell Ltd. Most of his practice focuses on estate planning.
While minimizing their estate taxes is a concern, it’s not the overriding concern, agrees Thomas Lodge, partner at Roth Blair Roberts Strasfeld & Lodge. “They have charitable institutions they feel deeply about. They always [his emphasis] have one that they have a personal connection to.”
Lodge’s practice also focuses on estate planning. For his clients, “The tax motivation is always the icing on the cake,” he says.
The most common gifts are to are colleges and universities,” Lodge continues. Second are “child-centric” charities. Third are donor-advised funds (such as the Youngstown and Community foundations) and houses of worship come in fourth.
JoAnn Stock, director of development for Akron Children’s Hospital the Mahoning Valley, can vouch for people wanting to help causes involving children, especially children in need of health care. In her five years at Akron Children’s, Stock has “watched donations grow to $9 million.”
The gifts are relatively small but many to Catholic Charities, says its executive director, Brian Corbin. For him, fundraising is secondary to the $3.8 million contributed annually through the bishop’s annual appeal as he goes after matching funds from private foundations and government grants. The $3.8 million leads to a $7 million budget for the six counties that comprise the Diocese of Youngstown.
“Every year, $75,000 to $100,000 comes to us out of the blue,” Corbin says. “It’s a wonderful surprise” but something he knows can’t be relied upon.
At the Humility of Mary Health Partners Foundation, Gina Marinelli, major gifts officer, finds that most who donate have been touched directly or indirectly by the St. Joseph or St. Elizabeth health centers, that is, either they or a member of their families or close friends were treated at an HMHP hospital. Beyond that, she elaborates, “People give for altruistic reasons. They love this community.”
In her five years at the foundation, she has found, “Philanthropy runs in families” and “Our donors find us.”
The vehicle through which people give is also changing, the executive director of the Youngstown Foundation, Jan Strasfeld, relates. While most people still write checks to make sizeable gifts and use a credit card or cash to contribute smaller sums, “Online giving is showing significant growth,” she reports. Her observation tracks with a series of surveys commissioned by Dunham+Co. based in Dallas.
The largest gifts, all interviewed for this article agreed, come from people in their late 50s and older, if only because they tend to have more wealth. Regardless of a family’s income or the age of the donor, Rick Dunham, president and CEO of Dunham+Co., reports, all ages have increased their “giving through a charity’s website,” especially older Americans. Online giving by donors 60 and older went to 47% this year from 37% in 2010.
The majority went to a website after receiving an appeal from the charity, usually a direct mail letter. Only 2.7% responded to an email solicitation, Dunham found.
The Youngstown Foundation has enjoyed a 12% increase in donations to its website and those of the funds it administers, Strasfeld says.
How and why people give is as varied as the accountants, lawyers and philanthropic executives interviewed. And for obvious reasons, they rarely meet with people who don’t give but could. The most common response as to why people haven’t given, Scarsella has found, is, “I was never asked.”
“People give to people,” Scarsella says. A personal meeting is what transforms potential donors into donors.
Another reason people give for the first time is “an improvement in their financial situation,” she says.
Those whose finances preclude a large sum volunteer their “time and talent, especially younger people.”
At the Community Foundation, Scarsella says, people are more apt to give while they’re still alive than provide in their wills for a cause they care about. She also finds an increasing number of the gifts to the Community Foundation are “unrestricted,” that is, the donors leave it to the discretion and judgment of the foundation board to direct their generosity.
The YSU Foundation’s McFadden couldn’t agree more with Scarsella about the value of developing relationships. “Development is a process,” he begins. The obvious base is alumni, about half of whom live within a 50-mile radius of the university. But many who are not graduates or moved here after graduating elsewhere “see the value of YSU in the community,” McFadden says, “and want to strengthen that and see it continue.”
At St. Mary’s University of Minnesota, McFadden wrote his master’s thesis on why people give. Among his findings, only one-third of donors who intend to benefit a nonprofit in their wills notify the recipient while they’re still alive. He also found, “Tax considerations do play a role in the amount of the bequest” as donors seek to maximize the impact of their gifts.
Most donors “endow scholarships that are discipline-centric,” as McFadden puts it, rather than based on geography, nationality, sex or religion.
And most donors want to be recognized by having an endowed chair, scholarship, building, classroom, auditorium, stadium, gymnasium or other structure named after them. Like other universities, YSU has a list of suggested donations for naming rights.
Also helping donors open their wallets or purses wider or writing a bigger check is a university’s success on the athletic fields, McFadden says. Often such success resulted in greater funding for training areas – weight rooms, film rooms, resurfacing playing fields – than for the university as a whole. “It makes alumni proud,” McFadden says, “when a team makes the playoffs.”
Corporations and alumni still living give more when they can spread the payments over five or 10 years. And the vast majority honor their pledges.
The attorneys who help their clients plan estates, Maxwell and Lodge, work closely with the foundations, hospitals and universities in the region. Donors’ primary concern, Maxwell says, “is that their gift be used wisely. Most make a general gift” because they appreciate they won’t be able to direct the funds.
Bequests to establish or sustain scholarships are the most common and the bulk of such giving goes to donors’ alma maters. Giving to colleges or universities from which the donor did not attend happens but a larger fraction of an estate is directed to one’s alma mater.
While few want their gifts to go unnoticed after they die, even fewer want the recipients of their generosity to learn of their intentions while they’re alive, Maxwell and Lodge say. A donor might get upset at something the organization has done, Lodge explains, or he might have a financial setback that reduces what he intended to leave. Or he might want to keep his options open and not feel pressured about having changed his mind.
Lodge tells of a client so upset at a nonprofit that he instructed the attorney to revoke the $25,000 he planned to leave it. “Six months later, he put it back in,” Lodge relates, the nonprofit none the wiser because it doesn’t know it is a beneficiary.
Most people who have accumulated a level of wealth can leave more to nonprofits because they see their children are either successful or well on their way to financial success, the lawyers say.
Children or not, many well-to-do donors buy life insurance policies and name the nonprofit the beneficiary (with the nonprofit’s knowledge). This, explains Lodge and Maxwell, provides funding one day for the nonprofit with the policyholder taking a charitable deduction on his income tax.
At the HMHP Foundation, Marinelli admits it took a while to become comfortable asking for money. It’s not as challenging as she feared at the outset, she explains, “because people want to give. They want to do good.”
Many have been patients and benefited from the care they received. Others, especially those who give to the Joanie Abdu Comprehensive Breast Care Center, have been inspired by her husband’s efforts. “Many hold fundraisers for us [the Abdu center] unbeknownst to us,” Marinelli says.
One fundraiser told Marinelli as she handed her the proceeds, “I’ve never done this before. I’m a survivor.”
A small number Marinelli approaches inform her she’s asking too little, that they can and want to give more.
“They do,” she relates.
As a percent of their income, less wealthy people contribute more of their income, “7%-plus,” says the Youngstown Foundation’s Strasfeld, “than the upper class, about 4%.”
Persuading people to give, Strasfeld says, is based on “telling stories that need to be retold” about the work of the nonprofits her foundation supports and stressing, “Your money stays here.” Donors are also persuaded by the low overhead or administrative expense the Youngstown Foundation incurs and that she and her small staff “will do all the administrative and legal work for them.”
Being able to vouch for the integrity of the nonprofits the foundation supports and the transparency of the procedures also convinces people to donate to the Youngstown Foundation, she says.
Catholic Charities enjoys the financial support of members of other religions as well as Roman Catholics, Corbin says, because it takes to heart Matthew 25:35-36, “For I was hungry and you gave me food. I was thirsty and you gave me drink …”
As mentioned, the vast majority of its contributions are small, in the range of $5 to $100, but each is acknowledged with a letter of thanks sent through the U.S. mail. (So do other nonprofits cited in this story.)
The need is greater here, Corbin says, citing a recent Brookings Institute report that found those 65 and older in the Mahoning Valley “are one of the Top 25 in food insecurity.” Thus, he leveraged Catholic Charities funds to obtain a matching from the Wal-Mart Foundation.
The nonprofit holds an annual Men Who Cook barbecue that raised $40,000 last year.
And at the Caritas Café in Ravenna, a former Woolworth’s run by Catholic Charities, the staff serves street people free coffee, other hot beverages and food.
They ask the patrons for a free-will offering, whether it’s a dime, quarter or more. But no one is turned away, Corbin says, and “It’s spotless because the people take care of it. It works. It’s a place where people can be safe from the elements.”
Editor's Note: First published in the MidNovember edition of The Business Journal.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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