Julie Jason's Your Money: Year's end brings thoughts of charitable donations

By JULIE JASON December 29. 2017 8:31PM
People donate to a Salvation Army collection bucket on Dec. 19, 2017, on Michigan Avenue in Chicago. (Brian Cassella/Chicago Tribune/TNS)

As we got closer to the end of the year, my mailbox started filling up with requests from charities for donations. It was, after all, holiday gift-giving season. Since we're at the last day of December, it's late, but better late than never.

Most charitable giving is done by individuals, and I would not be surprised if many are given at the end of the year when the holidays put us in a donative spirit. It is a fact, according to Giving USA, a publication researched by the Lilly Family School of Philanthropy at Indiana University, that most donations (72 percent) are from individuals (2016 data).

Foundations account for another 15 percent, with giving by bequest (8 percent) and corporations (5 percent) completing the picture. Thirty-two percent of charitable contributions were made to the religion category, 15 percent went to education, and 12 percent went to human services, according to Giving USA.

In a study by the Chronicle of Philanthropy completed in October using IRS data at the ZIP code level, 75 percent of itemized charitable giving in 2015 came from households earning $100,000 or more. This was up from a little more than half 15 years prior.

With the end of the year, we are reminded that charitable donations can be tax-deductible to some extent.

The new tax plan might dissuade some who are motivated by tax deductibility. Sean Parnell, vice president of public policy at The Philanthropy Roundtable, said in a statement following the passage of the Senate version of the Tax Cuts and Jobs Act that "95 percent of taxpayers will be unable to deduct charitable contributions from their income under the bill as a result of doubling the standard deduction." His organization estimated that this would cause charitable contributions to decline between $12 billion and $20 billion. Individuals donated $281.86 billion in 2016, according to Giving USA.

No matter what the incentive for a possible charitable gift, how do you know who is a worthy recipient of your largess? Assuming you are a researcher, let me tell you about a website called Charity Navigator (charitynavigator.org). The site lists and rates charities for what I call "exceptionalism."

While many charities are profiled on the site, Charity Navigator prominently lists its "Perfect 100," charities with perfect scores on the site's two main metrics, which I'll discuss shortly. These are charities that "execute their missions in a fiscally responsible way while adhering to good governance and other best practices that minimize the chance of unethical activities."

Sixty-five charities have perfect scores for "financial health and accountability and transparency," the two metrics that are reviewed for scoring.

Financial health is determined by assessing seven factors, four of which fall under financial efficiency performance metrics (program expense percentage; administrative expense percentage; fundraising expense percentage; fundraising efficiency) and three financial capacity performance metrics (program expenses growth; working capital ratio; liabilities to assets ratio).

These are numeric measures that are converted to a score ranging between 0 and 10.

Accountability and transparency metrics are shown as a checklist rather than a numerical result. A charity either has independent voting board members or it does not. Same with having a conflict-of-interest policy and a process for determining CEO compensation.

Here are a couple of examples from the list: The Rotary Foundation of Rotary International has a mission to "advance world understanding, goodwill, and peace." As one example of its programs, it is known for funding exchange-student programs around the world. Another Perfect 100 is the Greenville Humane Society, which operates a no-kill facility for animals in South Carolina.

Where can you turn to judge charities not rated by Charity Navigator? We'll talk about some resources next week.

One final thought: If you are over 70½, you might have received a solicitation this month from your favorite charity to make a gift to it directly from your individual retirement account (IRA). You may use your required minimum distribution (RMD) for this purpose, but be careful. You needed to follow the IRS' "qualified charitable distribution" (QCD) rules - and you had to withdraw your RMD by today. You can find more information on QCDs in IRS Publication 590-B, "Distributions from Individual Retirement Arrangements (IRAs)."

Julie Jason, JD, LLM, a personal money manager at Jackson, Grant of Stamford, Conn., and award-winning author, welcomes questions and comments to readers@juliejason.com.

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