PLANNED GIVING UPDATES FROM MARK HEFTER, NATIONAL ATS PLANNED GIVING DIRECTOR Contact: mark@ats.org (212) 407-6313   Check this site for news that can affect your estate planning. Here you can find information about planned giving as well as legislative proposals and changes in tax law. June 17, 2008 Time is Running Out for the Best CGA Rates A Charitable Gift Annuity (CGA) is a popular gift option for donors over 65 because a CGA pays an income (in the form of an annuity) to the donor and supports a charity, like the American Technion Society (ATS). If you act before July 1 you and people you know still have the opportunity to lock in CGA annuity payments at higher rates. These rates are scheduled to drop as of July 1, so you must act now to maximize your annuity payments through a CGA. With only about 2 weeks left to lock in a higher annuity rate, we encourage you to spread the word to family, friends, and clients. There is enough time to contact us to establish a CGA, but you must act soon. So what exactly is a CGA and why is it the gift of choice for so many older adults? A CGA is a life income gift established by execution of a simple agreement between you and the issuing organization. In exchange for a gift of cash or marketable securities, the issuing organization will pay you a fixed income for life, based on your age. Annuity payments, once established, are guaranteed and will not be affected by inflation, financial market corrections, or fluctuations in the economy. By establishing a CGA, you will also enjoy an immediate income-tax deduction, which will provide you tax savings. Upon your passing, the assets of the annuity revert to the charity for its use. When you establish a CGA with the ATS you will not only enjoy all of the financial benefits described above, but you will also have the satisfaction of knowing that you are contributing to Israel's well being and the good of all humanity. The Technion is Israel's premiere science and technology university and one of the major research centers in the world. The Technion leads the world in groundbreaking research from counter-terrorism to finding cures for diseases like cancer and Alzheimer's disease. To see the current annuity rates for a one-life or two-lives CGA, go to http://support.ats.org/site/R?i=LgHqlK_dSV_AZZsf4URjrg For more information about this gift option or other planned giving opportunities with ATS, please contact me, Mark L. Hefter, Esq., at mark@ats.org or at (212) 407-6313. May 22, 2008 Gift of the Month: Charitable Gift Annuity (CGA) Why is the CGA our “Gift of the Month”? Because the suggested annuity rates from the American Council on Gift Annuities (ACGA) will decrease on July 1 -- the first decrease in five years. What does this mean? People who wish to make a philanthropic gift while locking in a guaranteed income for the rest of their lives should act before July 1. The ATS, like most non-profits that offer CGAs, follows the suggested rates from the ACGA. As a result, now is the time for people to consider establishing a CGA. Here is a link to the ACGA suggested annuity rates: http://www.tigertables.com/CgaRates.htm For more information please contact me at mark@ats.org or at (212) 407-6313 Legislative Update Charitable Lead Trusts (CLTs) are extremely favorable in current economic conditions because the Sec. 7520 Applicable Federal Rate (AFR) is at a historic low. As a result, the IRS calculation of tax benefits assumes that the CLT will earn a low rate of return. If, however, the return exceeds the low AFR, the earnings pass tax-free to the trust’s beneficiaries. But as more and more people recognize the current favorable use of these trusts, some have found methods for abusing the tax benefits. These abuses can leave little reward to the charitable beneficiary and big tax breaks to the non-charitable taxpayers. Last month, the Senate Finance Committee heard testimony about the importance of CLTs as well as suggestions for reform to deter abuse. Here is a link to the informative testimony of Diana Aviv, President and CEO of Independent Sector, a leadership forum for charities and foundations: http://www.independentsector.org/programs/gr/20080403_Aviv_Oral_Testimony.pdf Have you seen a recent increase in the use of CLTs? What is your opinion about their efficacy in estate planning and charitable giving? We’d like to know. Please mark@ats.org or at (212) 407-6313 April 30, 2008 Legislative Update The Tax Technical Corrections Act of 2007, signed into law by President Bush on December 29, 2007 contains at least two items of interest to charitable gift planners: 1. The Act corrected a potential estate and gift tax anomaly for gifts of partial interests in art works to several charities created by the Pension Protection Act of 2006. Donors of fractional interests in the same work to multiple charities will be able to deduct the entire value of the work. 2. Effective January 1, 2008, whenever a charity disposes of gifted tangible personal property, an officer of the charity must certify that the charity's use of the property was not only related to its exempt purpose, but that such relation is substantial. Failure by the charity to comply results in the donor having to limit his/her deduction to the cost of the property. Here's a link to the Joint Committee on Taxation's explanation of the new law: www.house.gov/jct/tx-119-07.pdf or http://support.ats.org/site/R?i=u6XNArcEr1fZtJ46uHqp9g.. Subjects of Future Legislation? Two recent news stories are likely to draw a regulatory response. The Los Angeles Times reported that half of all art donations audited over the past 20 years by the IRS were appraised at almost double their actual value. Sen. Charles Grassley (R-Iowa), the ranking Republican on the Senate Finance Committee, has asked the IRS to study this issue further and is considering new legislation to curtail this abuse. Here is a link to the article: http://support.ats.org/site/R?i=blyJAjGAmmHxiAziemGGiw.. Also widely reported was a study by a New York University finance professor that posits that corporate CEOs may be taking advantage of inside information to maximize charitable deductions for company stock transferred to their own private foundations. According to the study, such gifts are often followed by sharp declines in the price of the donated stock. He even suggests CEOs may be backdating their gifts in a way similar to recent stock option backdating practices in collusion with the charitable donee and others in order to increase their personal deductions. Here's a link to an article about the study that originally appeared in the New York Times: http://support.ats.org/site/R?i=wr8xqqoMOTaYG8ze4Q1UdA.. Gift of the Month-Retirement Assets While proposals to extend or expand the Charitable IRA Rollover provisions of the Pension Protection Act of 2006 continue to languish in Congress, other gifts of retirement assets remain an effective means of supporting the ATS while providing personal benefits to our donors and their families. Do you know that simply naming the ATS as beneficiary of your IRA, 401(k) or 403(b) account will allow you to make a gift of those retirement assets to the ATS at a tax cost of as low as 30 cents on the dollar? Did you know that you could save up to 40 percent on taxes associated with owning retirement assets and provide your heirs with a substantial income for a period of years? Please contact me at mark@ats.org or at (212) 407-6313 if you'd like more detailed information or a confidential personal gift proposal. As always, we would love to hear from you. What topics would you like us to cover in future updates? What interesting item would you like us to share with other list members? Please feel free to contact me at mark@ats.org or at (212) 407-6313. April 4, 2008 BREAKING NEWS: NEW CHARITABLE GIFT ANNUITY RATES ANNOUNCED Today, the American Council on Gift Annuities released its revised CGA rates for one-life CGAs, which will take effect July 1, 2008. The new rates are 0.2 to 0.8 percent lower than those currently used. Nearly all of the steepest reductions will affect older donors. In sharing this information with your clients, we suggest stressing the following four main points: 1. If they do a CGA now, their rate will be higher than if they wait. 2. Once they do the CGA, their rate cannot decrease. 3. The current rates offer returns 2-3 times higher than those available from other investments. CGAs also provide givers with a substantial income tax deduction. 4. This is a great way to support the Technion, Israel and themselves. A full CGA rate table is available upon request. Feel free to contact me at mark@ats.org or at (212) 407-6313 for this or any other information that would be helpful for your clients. March 8, 2008 Gift of the Month-Charitable Gift Annuities In this period of economic uncertainty, our Charitable Gift Annuity (CGA) program is quite popular with ATS supporters. The CGA program permits you to make a gift to ATS and earn a high guaranteed income at the same time. For example, if you're 75 and you have a $100,000 CD, you're probably earning $2000/year in interest, after taxes. If you give the ATS that CD and establish a CGA, your gross interest will increase to $7100 per year, and your after-tax income will be about $6100 per year. This income is payable for your life, and cannot go down, regardless of changes in the financial markets. You also earn a substantial income tax deduction for your gift, and you remove the amount of your gift from your taxable estate at a savings of up to 45% of the gift amount. What better way to support the Technion and triple your income, while saving on taxes at the same time? If you'd like more information on our CGA program for yourself or for a client, please contact me at mark@ats.org or at (212) 407-6313. I'd be happy to take the necessary information in confidence and prepare a personalized proposal for you. Focus on Interest Rates The IRS recently announced its March discount rate for determining the tax benefits of charitable gifts will be 3.6%. Since 1989, when the IRS began computing discount rates under Internal Revenue Code Section 7520, the rate has been this low only once, in 2003-04. March's rate is more than 2.5 percentage points below what it was in August 2007. This trend is reflective of a general decline in market interest rates since the middle of last year. When the discount rate is this low: 1. Individuals age 70 and under may find it difficult or impossible to structure a CGA or Charitable Remainder Trust (CRT) that meets the requirements of federal tax law. (CGAs and CRTs still may remain attractive to those over 70). 2. Any CGA or CRT proposal that has been sent out to a donor or prospect more than two months ago needs to be recalculated. 3. Charitable lead trusts become more attractive to donors who want to make a gift and pass assets to heirs at lower estate and gift tax cost. It is uncertain whether the downward trend in discount rates and interest rates will continue. The American Council on Gift Annuities (ACGA) meets in early April to fix recommended CGA rates for 2008-2009. After decreasing the recommended rates by an average of almost 200 basis points in 2004 and 2005, the ACGA has left CGA rates alone. The recent drop in rates to near historic lows would suggest a further reduction is in the cards. However, problems in the credit markets and a possible resurgence of inflation lead some economists to think that interest rates will rise dramatically by the end of this year, and ACGA may follow suit. We are watching these developments closely. Again, stay tuned. Legislative Update It has been a very quiet month in Washington. There has been no action at all on the legislation of interest to the charity community, notably the reinstatement of the IRA rollover under the Pension Protection Act of 2006. Will we have any major tax legislation this year? If it passes, we plan to report it as soon as it happens. Check our website often for the latest news. I'd love to hear from you. Please feel free to contact me at mark@ats.org or at (212) 407-6313. February 11, 2008 Recent U. S. Supreme Court Decision Regarding Trust Investment Advisory Fees The Supreme Court recently put an end to the long-standing circuit split among the federal appeals courts as to whether investment advisory fees paid by a trust are fully deductible for income-tax purposes. The Supreme Court ruled “no.” Instead, in interpreting Section 67(e) of the Internal Revenue Code, the Court held that such fees are subject to a 2% floor for miscellaneous itemized deductions. Oral arguments were heard in the Rudkin case in November 2007, and Chief Justice John Roberts wrote the unanimous decision that was handed down on January 16, 2008. A report on the decision by CCH can be found at: http://www.centerfortaxstudies.com/blog/taxnews/2008/01/17/p4950 Gift of the Month: Donate Your Appreciated Stock; Sell Your Loser Stock Although we celebrate the generosity of many philanthropic Americans, a recent study estimated that donors who make their charitable contributions via check, are forfeiting collectively over $2 billion of tax savings. This was reported in the January 16, 2008 issue of The Boston Globe, “Donating Stock Can Help a Charity and Save You A Lot at Tax Time.” Gifts of appreciated stock provide the donor with an income tax charitable deduction and the donor may also save on capital gains tax. The donor could pocket these savings or increase the gift amount. Either way, it is a win-win situation. But the reverse is true for stocks that have decreased in value. Now may be the time for people to sell their stock to take a capital loss, which, in turn, can offset capital gains. As much as the ATS would like to encourage charitable giving, we often say, “don’t donate loser stock.” But it does not have to be all bad news. Instead, the donor can sell loser stock, take the loss for tax benefits, and donate the sale proceeds to the ATS or another qualified charity. Please contact me at mark@ats.org or (212) 407-6313 if you would like a copy of the Boston Globe article. ATS Planned Giving Programs. Mission to Israel and the Technion. The Planned Giving missions program attracts estate and financial planning professionals to help the ATS with planned giving efforts. This past November, ten top quality participants traveled with the ATS to the Technion and Israel. During the two days at the Technion participants met with students, faculty and visited labs and classrooms, seeing first-hand the Technion’s ongoing world-class academic and research activities. The next Planned Giving mission is scheduled for November 8-14, 2008. Experts discuss estate and gift tax reform. Another ATS program that helps educate estate planning attorneys, accountants, and financial advisors is sessions with top government staff members. In January 2008, professional advisors from the Chicago area met with Russell W. Sullivan, Democratic Staff Director of the US Senate Committee on Finance, and Tiffany P. Smith, Tax Counsel for the US Senate Committee on Finance and members of the ATS Planned Giving department to “brainstorm” about current estate and gift tax issues subject to legislative reform. Please contact me at mark@ats.org or (212) 407-6313 if you or someone you know may be interested in participating in either of these programs. What’s on your mind? What topics are you interested in? What would you like to see covered in future PG Updates? We’re interested in hearing from you. Please send your suggestions to my attention at mark@ats.org or (212) 407-6313. January 16, 2008 Happy 2008! The American Technion Society Planned Giving Department is pleased to welcome you to another year of PG Updates: a monthly email that provides newsworthy information related to planned charitable giving and relevant tax issues. We invite those of you not on the subscription list to join. Please click here and we'll add your name to the list of savvy ATS friends and supporters who receive planned giving updates. Current subscribers will continue to receive the monthly updates and there is no need to take further action. Please contact me - Mark Hefter, ATS Director of Planned Giving - at (212) 407-6313 or Mark@ats.org with any questions or comments. In this issue… GIFT AND ESTATE EXCLUSIONS FOR 2008 LEGISLATIVE UPDATE CREATIVE REAL ESTATE CHARITABLE GIVING Federal Gift and Estate Tax Exclusions and Exemption for 2008 There are no changes in 2008 for the federal annual exclusion amount for gift tax, applicable exclusion amount for estate tax and generation-skipping transfer tax exemption amount. The amounts are as follows: - Federal annual exclusion for gift tax: $12,000 per donor and per recipient. (A married couple can “gift split” and give up to $24,000 to any number of individual recipients). - Unlimited exclusion for gifts for medical and tuition expenses when payments are made directly to health care providers and educational institutions. - Federal applicable exclusion amount on estate tax: $2 million (scheduled to increase to $3.5 million in 2009). - Federal generation-skipping transfer tax exemption: $2 million (scheduled to increase to $3.5 million in 2009). Individual Retirement Account Contribution Limits for 2008 In 2008, the following contribution limits apply to Roth and Traditional IRAs: - Under 50 years of age: $5,000 - 50 years of age or older: $6,000 Legislative Update Charitable IRA Rollovers: The ATS is happy to report that it received nearly $2 million in IRA rollover gifts in 2007; this represents a 120 percent increase compared to 2006. There has not yet been an extension of the Charitable IRA Rollover provision of the Pension Protection Act of 2006. Therefore, as of January 1, 2008, the option to give up to $100,000 directly from one’s IRA to a charity has expired. Nevertheless, the ATS (along with many other charities) remains hopeful that the law will be reinstated for 2008. Perhaps the scope of the law would even extend to allow rollovers larger than $100,000 and from IRA owners younger than 70.5 years old. Alternative Minimum Tax (AMT) and Sub-Prime Relief: On December 18th, Congress passed an AMT “patch,” and the President signed this bill on New Year’s Eve. The Tax Increase Prevention Act of 2007 extends the AMT patch for the year 2007 and is predicted to save up to 25 million taxpayers an average $2,000 tax increase. Also passed and enacted in December, the Mortgage Forgiveness Debt Relief Act of 2007 is part of the Treasury Department’s sub-prime mortgage relief plan. The law provides foreclosure relief in the form of mortgage debt forgiveness from homeowner’s income, and other provisions of the Mortgage Relief Act provide additional real estate-related benefits. Legislative Questions & Answers With Senate Staff: More than 200 people joined the ATS Chicago Chapter for its annual Planned Giving Breakfast, co-sponsored by La Salle Bank and Bank of America. Our keynote speaker, Russell W. Sullivan, congressional staffer of the Senate Finance Committee, spoke candidly as he shared his opinions and answered questions from the audience about ongoing legislative issues and the forecast for the future of charitable giving and estate planning. We would be happy to work with you to bring professional advisors together for a similar program to help promote the Technion and the ATS. If you would like to sponsor or coordinate a meeting of professional advisors in your area, please contact me at Mark@ats.org or (212) 407-6313. Gifts of Real Estate Despite recent softening in some markets, real estate remains a valuable investment because of long-term average gains in market values. Charitable gifts of real estate also remain attractive for this reason. A gift of real estate enables the donor to help a cause like the ATS while saving on taxes and perhaps receiving income in return. As reported in The New York Times, “Giving To Charity Through Real Estate,” November 11, 2007, there are many creative ways to use real property to make gifts of full or partial interests of property. For example, if an owner leaves the ATS a vacation home in his or her will, he or she can save on capital gains taxes or receive an estate tax deduction. Alternatively, a person can make a gift today and maintain a life estate, which would allow the owner to continue living in the home for the remainder of his or her life. A retained life estate can reduce capital gains and estate taxes, and generate current income and tax deductions. Charitable remainder trusts and charitable gift annuities provide income streams for a fixed period of time or the remainder of a person’s life, and can be funded with real estate, thereby reducing capital gains taxes. Also, these income-producing vehicles offer the comfort of a return on the gift. Donors have a great deal of flexibility when it comes to estate planning, charitable giving, and real estate. Please contact one of our planned giving experts in the ATS national office; we can help you develop a personalized plan that best suits your personal financial and philanthropic needs. Please send me any comments or questions. I can be reached at (212) 407-6313 Mark@ats.org. I look forward to hearing from you. December 3, 2007 As another calendar year draws near, many people review their investments and financial portfolios in an effort to reduce their tax bills. For many, year-end is also a time to make charitable gifts to the causes they hold dear as a way to further minimize their 2007 taxes. We hope that the American Technion Society (“ATS”) is in your thoughts during this season. Below we have outlined some of the common giving methods that could help you save on taxes, enjoy other financial benefits, and generously support the Technion Israel Institute of Technology (“Technion”) and Israel. 1. Gifts of Cash The easiest way to generate a charitable deduction for 2007 – and support the Technion at the same time -- is simply to write a check! Just make sure your envelope is postmarked by December 31 – so that your gift qualifies for a deduction this year. You may designate how the ATS should use your gift at a later date without affecting the status of the charitable deduction earned for the 2007 tax year. Please note: you can also make a secure donation online and qualify for the tax deduction. Visit us at www.ats.org/donationonline.php 2. Life Income Gifts Life Income Gifts include Charitable Gift Annuities and Charitable Remainder Trusts. If your goals include making a tax-deductible gift to the Technion, receiving income payments from the gift, and reducing capital gains, life income gifts may be your best choice. Moreover, life income gifts may offer a higher income return than other investments. 3. Gifts of Real Estate If you own real estate, it is easy to make a gift of a portion of or your entire real estate. Gifts of real estate may provide you with significant tax benefits because these gifts often allow income tax deductions as well as reduced capital gains. There are three basic ways to make a gift of real estate. You can make an outright gift. A second option allows you to make a gift of your home (primary residence or vacation home) today but continue to live there for the rest of your life by retaining a “life estate,” and, at the same time, take a charitable income tax deduction on your 2007 taxes. Under a third option, you can make a gift of real estate even when the real estate is worth more than the gift amount you would like to make. With this type of gift you would “sell” your property to the ATS at a price significantly below the fair market value. The difference between the sale price and the fair market value is your charitable gift to the ATS. As with other gifts of real estate, you would be entitled to an income tax deduction in 2007 and, possibly, reduce your capital gains tax. 4. Gifts of Securities If you make a gift to the ATS of securities, you would be entitled to an income tax deduction. Moreover, if your securities are highly appreciated, you may save significantly on capital gains taxes. 5. Rollover Gifts From Your Individual Retirement Account (IRA) If you are or will be 70.5 years old in 2007, you can make a gift directly from your IRA to the ATS under a new law enacted in August 2006. Under this law, your rollover gift would not be included in your gross income. Thus, the entire gift amount (including the deferred income and its interest) would be free of income tax. Moreover, the gift would count in satisfying the required minimum distribution. This law is a terrific opportunity, but because the law is only in effect until December 31, 2007, we encourage you to consider taking advantage of the tax benefits immediately. 6. Including ATS in Wills or Estate Plans By including the ATS in your estate plans now, you will be taking advantage of an historic opportunity to help guarantee the Technion's future and the continued prosperity and security of the State of Israel. The ATS Mission To Israel An additional benefit for making a year-end gift is that a cash gift for at least $25,000 or a life income gift or other deferred gift for $100,000 or more (including a bequest) makes you eligible to travel with us as our guest on the upcoming 2008 spring mission! For questions regarding these giving opportunities, please contact the ATS Planned Giving Department, at (212) 407-6300 (or toll free at (1-866) 824-2409, or call your local ATS office. October 31, 2007 With only nine weeks before the IRA charitable rollover, provided under the Pension Protection Act of 2006 (PPA), is scheduled to expire, House Ways and Means Committee Chairman Rep. Charles Rangel introduced a proposal to extend the rollover provision on Oct. 25. If passed, this legislation would extend for one year the option for those over age 70.5 to make a tax-free charitable rollover of up to $100,000 from an IRA to a public charity like the American Technion Society. Other provisions of the bill would further benefit charitable organizations. The extension provision is part of a sweeping tax-overhaul bill that would permanently repeal the individual alternative minimum tax and reduce the top corporate tax rate by 15 percent. Rep. Rangel‘s bill also appears to permit a phase-out of income and estate tax cuts signed into law by President Bush in 2001 and 2003; these cuts are set to expire in 2010. We have previously reported about efforts to pass an expanded form of charitable IRA rollover, the Public Good IRA Rollover Act. The Act would make the rollover provision permanent, allow taxpayers over age 59.5 to make rollovers, eliminate the $100,000 ceiling on rollovers, and permit rollovers to fund split-interest gifts such as charitable remainder trusts. The ATS, along with other charitable organizations, remains hopeful that the expanded rollover provision will ultimately be approved. The ATS, along with the National Council on Planned Giving, also supports an extension of the current PPA provision as a stopgap until the expanded rollover bill becomes law. The PPA has proven to be an incentive to taxpayers to make charitable gifts. Indeed, many people have taken advantage of the IRA charitable rollover to support the ATS since the law was passed in August 2006. We will continue to watch the congressional response to the legislation over the next few weeks and will keep you posted. For a full story, please see “Major Tax Bill Includes Key Charity Measures,” in the Oct. 25 Chronicle of Philanthropy. We also encourage you to visit the NCPG Web site. For further information, please contact Mark L. Hefter, Esq., ATS Director of Planned Giving, at (212) 407-6313 or mark@ats.org. August 17, 2007 At the American Technion Society (ATS), we keep a close eye on legislation related to charitable giving. Of course, we are also interested in the point of view of the Senate. We thought you might be interested in the article below, published on August 13, in the Chronicle of Philanthropy. It is the Chronicle's "Senate Forecast" focusing on the position of Sen. Max Baucus. We are pleased to read of Sen. Max Baucus' positions related to tax-exempt organizations and legislation encouraging charitable giving. We thought you might be pleased as well. Please send any comments to me at mark@ats.org. We enjoy hearing your point of view. "Key Senator Has No Plans for Legislation to Curb Charitable Abuses" By Suzanne Perry Missoula, Mont. Sen. Max Baucus, the Montana Democrat who took over the reins of the Senate Finance Committee in January, said that he does not give high priority to cracking down on charitable abuses or imposing new regulations on nonprofit groups such as hospitals. “That’s not at the top of my list,” he said during a brief interview on the sidelines of a conference on rural philanthropy held here this week. “I haven’t got time.” Mr. Baucus also said he favored extending a law that allows people to give money from their individual retirement accounts to charity without paying any taxes, which expires at the end of this year. But he is not sure that expanding the provision to allow more types of groups to accept such gifts and increasing the amount donors can give — ideas advocated by nonprofit and foundation leaders — is politically feasible given Congress’s vow to rein in the budget deficit. “I’d like to extend it as far into the future as we can, but recognizing the limitations that we have,” he said. The nonprofit world has been wondering whether Senator Baucus, as chairman of the Senate committee that regulates tax-exempt organizations, would give as much priority to highlighting alleged charitable abuses as his predecessor, Sen. Charles Grassley, Republican of Iowa. While the two senators are known for having a cordial relationship, Mr. Baucus suggested that his priorities will be different. “Senator Grassley and I work very closely together,” he said. “It’s a relationship that we both treasure and we agree far more than we don’t on policy,” he said. “But I also have to look at the calendar.” Mr. Baucus said his top priority now is getting legislation enacted to extend and expand the State Children’s Health Insurance Program, which provides health care to children from low-income families. While both houses of Congress have passed such legislation, President Bush has threatened to veto it. He said he will also give priority to other issues related to health care — including the high cost to business of providing insurance, which he said is hurting U.S. competitiveness — as well as to various trade and taxation issues. Mr. Baucus expressed doubts about a specific proposal, issued in July by aides to Republican lawmakers on the Senate Finance Committee, to require nonprofit hospitals to spend at least 5 percent of their annual budgets on charity care or lose their tax-exempt status. The proposal aims to ensure that the hospitals do more to serve the uninsured and justify the estimated $40-billion the federal government loses each year in taxes. But Mr. Baucus said he questions a solution that would apply an “across-the-board rule that applies to all nonprofit hospitals in all part of the country.” “What does 5 percent really mean?” he said. “Some hospitals do far more than 5 percent, some do far less than 5 percent,” he said. “In some areas, it’s very hard to do 5 percent. It depends on the community that you’re in.” He said that the discussion about nonprofit hospitals, which Mr. Grassley has been raising for several years, has been useful, however, because it has encouraged many hospitals to develop guidelines for offering free health care and other services. He specifically praised the Catholic Health Association, which has developed guidelines that require hospitals to publicize financial aid they offer to uninsured patients, follow uniform methods for reporting the benefits they provide to the public, and make hospital leaders accountable to their boards for providing adequate benefits. Nonprofit and foundation leaders have been lobbying to get Congress to expand the IRA provision — which allows people at least 70-1/2 to donate up to $100,000 a year to a charitable organization tax-free. Lawmakers in the House and Senate have both introduced legislation to allow people to donate as much as they want each year and to give to groups that are now not allowed such as private foundations and donor-advised funds. But Mr. Baucus noted that Congress has adopted a “pay as you go” rule requiring any tax cuts or increased spending on programs such as Social Security and Medicare to be offset by spending cuts or tax increases elsewhere. That will make it difficult for anyone who wants to extend a tax break, he said. “I want to look at the extension [of the IRA benefit] first because I just know it’s going to be difficult to extend very far,” he said. And expanding the provision could cut into the length of time it would be extended, he said. Mr. Baucus also said the Internal Revenue Service needs more money to do its job, but not only to monitor charitable organizations. An IRS official testified last month at a House Ways and Means subcommittee hearing — which highlighted the failure of some nonprofit groups to pay payroll and other taxes — that his office did not have enough resources to properly monitor all charities. “I think IRS personnel is stretched,” Mr. Baucus said. “They need some help, generally, in all areas. I don’t know that one area should be singled out [over] others.” When he spoke to the conference on rural philanthropy held here this week, the senator again urged foundations to double their grants to rural areas like his home state within five years. Mr. Baucus first issued that challenge at the Council on Foundations’ annual meeting in Pittsburgh last year, saying rural areas were being shortchanged when it came to philanthropic dollars. The council then worked with him to set up the Missoula conference to get foundation leaders together to plan ways to get more money to those regions. “I understand that each foundation has particular funding guidelines, regions of focus, and priorities,” Mr. Baucus told the conference participants. “But I encourage foundations to work hard to make rural places a priority.” The senator asked foundations to do four specific things: * Work on rural projects with other foundations, nonprofit groups and associations, and government bodies. He said foundations could, for example, help nonprofit groups identify children without health insurance who would be eligible for the Children’s Health Insurance Program. * Give money to community foundations in rural areas to help them hire staff and build strong organizations. “Localized grant-making means grant-making by decision-makers who are familiar with the local need, local conditions, and local resources,” he said. * Offer grants to help rural nonprofit groups build up their infrastructure — for example, for programs in nonprofit management, programs to help nonprofit groups design internship opportunities for “top-notch” students, and state nonprofit associations. * Remove the barriers that hinder national foundations from making grants to rural nonprofit groups. “Funding guidelines are too often written in a way that requires programs or organizations to have already achieved a high level of development, including sophisticated partnerships and alliances,” he said. “But rural programs often need funding to navigate these crucial developmental stages.” Steve Gunderson, president of the Council on Foundations, told Mr. Baucus that the group’s members would follow through in all four areas. August 1, 2007 "Donor Advised Funds and Prohibited Benefits" Recently, we have been receiving letters from donor advised funds (DAFs) describing a new law that affects donors (who contribute to DAFs), charities and DAFs. This law prohibits anyone from receiving a benefit in connection with a grant from a DAF. An excerpt from one such letter reads: “As a result of the new law, effective July 1, 2007, [this DAF] may not pay the charitable (deductible) portion of a grant when there is an associated nondeductible portion, such as tickets to an event or membership. Of course, [a donor] may recommend grants from a fund if [the donor is] not attending an event and [has] refused the tickets . . . or other benefits related to the event . . . . The [DAF’s] transmittal letter will include language advising the grantee that all benefits are declined. As you may know, severe penalties – 125% of the benefit amount – are now imposed as part of the recent legislation if a donor, advisor, or related party receives more than incidental benefits from a donor advised fund grant. The penalty can be imposed on any person who recommended the grant or the donor, advisor or related party who received the benefit, as well as on the [DAF] lay leadership and/or the [DAF] staff who approve such a grant.” We want you to be aware of this in case it affects you or your clients. Please send us any comments, as we are interested in feedback and your reactions. Very truly yours, Mark L. Hefter, Esq. June 27, 2007 The following article recently appeared in the LA Times. It reports on the increase in philanthropic contributions of real estate: Donating real estate offers gift-giver a double tax advantage By Lew Sichelman, United Feature Syndicate June 10, 2007 WASHINGTON — "If I could just burn the place down," many a frustrated seller might think, "my troubles would be over." Luckily, few people act on such a felonious impulse. And why should they when the fire department would torch the house for them lawfully? Local fire officials gladly accept houses or other structures as donations. Of course, there's a drawback to giving your house away to Sparky and his friends: You won't get any cash for it. Consequently, if the warm-and-fuzzy feeling you'd get from doing a good deed isn't good enough, you'll have to find another way to unload your white elephant of a house. If, on the other hand, cash isn't your primary objective, donating your property to a tax-exempt charity may be an avenue worth considering. Actually, people give away real estate all the time. The Giving Institute in Glenview, Ill., estimates that $260 billion was contributed to schools, museums, the Scouts and other groups in 2005, the last year for which such information is available. Roughly 25% of that was in real estate. Some came from corporations donating real estate they no longer used or needed. But almost $9 of every $10 contributed to charity or other public entities came from individuals. "Right now, vacation properties and rental properties are the most common real-estate gifts offered to us," said John McKee, director of gift planning at the University of Maryland in College Park. "With diligence, these properties can be a great way to fulfill charitable goals," he said. Donors can give property either outright or by retaining life-tenancy rights. Why give your real estate away? Because you can deduct the full value of the property, including appreciation, on your income-tax return. Yet you don't have to report the appreciation as capital gains. In other words, you get two benefits in one. "It's hard to imagine a better tax-savings device," said Mackenzie Canter III, a Washington, D.C., attorney who specializes in philanthropy law. Consider this possibility: You're in the top-tier, 35% tax bracket. You own free and clear a house worth $150,000, but you paid only $75,000 for it 20 years ago. Because you've owned it for more than a year, it's considered a long-term capital asset. If you sold the place outright, you'd have a capital-gains tax liability of $75,000 (assuming it was not your primary residence), and your tax liability would be 15% of $75,000, or $11,250. So the real liquid value of your property is $138,750, or $150,000 less $11,250. Now suppose you donate the house to a college. You'd be entitled to a charitable-tax deduction of $150,000, and there would be no tax on the $75,000 gain. In your 35% bracket, the tax savings would be $52,500. So the net cost of making a charitable gift of your $150,000 property would be only $86,250 ($150,000 less your $11,250 tax liability less your $52,500 tax savings). Your gift is deductible only up to 30% of your adjusted gross income in the year it is made. But any contribution above that amount may be carried over for up to five more years. Furthermore, donating real estate also avoids the hassles involved with selling: no sales commission, no fix-up costs, no prospects traipsing through your place at all hours and, perhaps best of all, no haggling. If you need at least some cash out of the deal, consider what's known as a "bargain sale." With this type of gift, instead of donating the property outright, you sell it to the charitable organization for something less than its full market value. That way, both parties win. You not only get a deduction, you also get some cash, and the charity can sell the place and pocket the difference between what it gave you and what it eventually gets for the house on the open market. Before signing over your property talk first with an expert in philanthropy law. Not all organizations qualify as tax-exempt charities eligible to receive deductible contributions. For a complete list of qualified so-called Section 501(c)(3) groups, request Publication 78 from your local IRS office. Also, ask the group you are considering for a copy of its IRS exemption letter. March 13, 2007 Public Good IRA Rollover Act of 2007 With support from many non-profit organizations and philanthropic individuals, Senator Byron Dorgan (D-ND) along with Senator Olympia Snow (R-ME) and five other senators, introduced a bipartisan bill on March 8th called the "Public Good IRA Rollover Act of 2007." If passed, this Bill would make permanent the opportunity for an individual to support a charity with a tax-free rollover from an Individual Retirement Account (IRA). Currently, the option for a charitable IRA rollover, as stated in the Pension Protection Act of 2006, is scheduled to expire on December 31, 2007. In addition to making the charitable IRA rollover a permanent option, this new Bill would accomplish the following: remove the $100,000 annual limit on IRA rollovers; permit individuals to take advantage of the rollover option beginning at age 59 (rather than waiting until age 70); and allow the IRA rollover to fund split-interest gift vehicles (such as charitable trusts or charitable gift annuities). Moreover, a companion bill from the House of Representatives will be introduced soon. On February 27th Congressmen Earl Pomeroy (D-ND) and Wally Herger (R-CA) distributed a letter to fellow Congressman seeking collegial support for the upcoming Public Good IRA Rollover Act that Pomeroy and Herger will introduce. As Congressmen Pomeroy and Herger state: the Act "is a simple piece of legislation that gives older Americans a straightforward way to give something back to society while providing much needed funding for [charities]." The American Technion Society (ATS) is hopeful that this Bill will pass. Like many other non-profits, the ATS has benefited greatly from the charitable IRA rollover in 2006. For a copy of Senator Byron Dorgan's press release or a copy of the Senate Bill, please contact Susan Hecht at Susan@ats.org or (212) 407-6322. February 6, 2007 Efforts to Extend the Charitable IRA Rollover Efforts by President Bush and several charity groups are underway to make IRA rollovers to charities a permanent option for charitable giving. The law, which permits people over 70.5 to give up to $100,000 tax-free from an IRA, went into effect in August 2006 and is scheduled to expire in December 2007. 2006 showed great positive results -- a large number of taxpayers have taken advantage of the tax benefits offered by making a charitable IRA rollover. Now there is an effort to extend the law. By including a provision in the new budget proposal to be submitted to Congress, President Bush has expressed his intention to make the law a permanent tax break. Moreover, several charitable groups have banded together to propose legislation that would make the law permanent and would extend the scope of the law to allow charitable IRA rollovers to fund charitable trusts and pooled income funds. The effort is underway to extend the law, but only time will tell whether 2007 is the last year for taxpayers to take advantage of the benefits. More information is reported in The Wall Street Journal on January 27, 2007, (Charities Love IRA Rollovers: Groups Push for Permanent Expansion of New Law), and The Chronicle of Philanthropy on February 4, 2007 (President Bush Promotes Charity Tax Breaks). For copies of these articles please contact Susan Hecht susan@ats.org or 212-407-6322. January 12, 2007 Greetings and Happy 2007! As we begin this New Year we can recall the old saying, �some things change and some things stay the same.� Below is a summary of some of the recent relevant changes and non-changes as well as new guidance on the IRA charitable rollover: CHANGES Tax Relief and Health Care Act of 2006. On December 20, 2006, just days before the end of the year, President Bush signed into law H.R. 6408, the Tax Relief and Health Care Act of 2006. The law extends several tax breaks, including both deductions and credits. These tax breaks include: deduction for college and higher education tuition, credit for research and development, deduction for business investment expenses in research and development, and credit for renewable (alternative) energy sources. In addition, the Act brings the Health Savings Accounts within the reach of more people by making it easier to contribute to the plan. Inflation Adjustments. The dollar amounts for numerous tax provisions are revised each year to keep up with the pace of inflation. In 2007, because of these inflation adjustments, personal exemptions and standard deductions will rise, tax brackets will widen, and income limits for IRA contributions will increase. For example, the personal exemption increased $100 and the standard deduction increased $400 for married couples filing jointly and $200 for singles and married individuals filing separately. A complete analysis of inflation adjustments can be found in Revenue Procedure 2006-53. Maximum Estate Tax Rate. As part of the phase down of the maximum estate tax rate, the maximum rate of tax imposed on an estate for decedents dying in 2007 is 45%, a change from 46% for decedents dying in 2006. NON-CHANGES Applicable Exclusion Amounts. For 2007, the lifetime exclusion amount for gift tax purposes and the applicable exclusion amount for estate tax purposes remain the same as they were in 2006: that is, $1,000,000 lifetime exclusion for gift tax purposes and $2,000,000 for estate tax purposes. Annual Exclusion Amounts. The annual gift amount that a person can receive from any one donor remains at $12,000. The amount paid for health care and tuition expenses remains unlimited. NEW NOTICE ON IRA CHARITABLE ROLLOVER The New Year brings new guidance from the IRS on the new Pension Protection Act IRA charitable rollover in the recently released Notice 2007-7. The notice did not come to us in time for 2006 gifts, but there is valuable guidance for those thinking about an IRA charitable rollover in 2007. The full text can be found at: http://www.irs.gov/pub/irs-drop/n-07-07.pdf Thanks to our good friend Joel Rothman of Chicago, who sent us the following summary of the charitable portion of the notice: 1. Yes, charitable IRA distributions can satisfy pledges without violating the self-dealing prohibited transaction rules. "The Department of Labor, which has interpretive jurisdiction with respect to section 4975(d), has advised Treasury and the IRS that a distribution made by an IRA trustee directly to a section 170(b)(1)(A) organization (as permitted by section 408(d)(8)(B)(i)) will be treated as a receipt by the IRA owner under section 4975(d)(9), and thus would not constitute a prohibited transaction. This would be true even if the individual for whose benefit the IRA is maintained had an outstanding pledge to the receiving charitable organization." 2. Yes, a person over age 70.5 who is the beneficiary of an inherited IRA can take advantage of the charitable IRA exclusion. 3. The prohibition of using an SEP IRA or a SIMPLE IRA for the charitable exclusion only applies to an "ongoing " SEP IRA or SIMPLE IRA. Such an IRA is an ongoing IRA only if a contribution was made to it during the year. Thus, a retired individual who had an SEP IRA or a SIMPLE IRA to which contributions were made during a working career but who is now retired can make charitable distributions from that IRA since no employer contributions were deposited in the same year. 4. No withholding of income taxes -- A qualified charitable distribution is not subject to withholding under section 3405 because an IRA owner that requests such a distribution is deemed to have elected out of withholding under section 3405(a)(2). 5. The exclusion applies to any such charitable distribution made during 2006, even those made before the law was enacted on August 17, 2006. This may be advantageous to people who have "IRA checkbooks" (typically at brokerage houses) where they can write checks directly from an IRA. A person over age 70.5 who wrote such a check to a qualifying charity early in 2006 can take advantage of the exclusion. Of course there are additional tax law changes for 2007. This email merely summarizes those more relevant to charitable giving and estate planning. Please feel free to call us at (212) 407-6322 or email info@ats.org for further questions or discussions. December 15, 2006 Year-End Is Approaching FAST!! With less than two weeks left to 2006, now is the best time for you to make a gift to the American Technion Society (ATS). By doing so, you can minimize your 2006 taxes and support. Here are some of the best ways to make an impactful year-end gift: 1. Gifts of Cash. Always the easiest way! 2. Life Income Gifts. � Charitable Gift Annuities and Charitable Remainder Trusts �may provide partially tax-free income payments, may qualify for income tax deduction, and may save capital gains. 3. Gifts of Real Estate. Four basic choices: (i) make an outright gift; (ii) use real estate to fund a Life Income Gift; (iii) make a gift today of your residence but retain a �life estate� and continue to live there for the rest of your life; or (iv) make a gift of the real estate�s partial value by �selling� your property to the ATS at a price significantly below the fair market value. 4. Gifts of Securities. May qualify for income tax deduction, and, if the securities have appreciated, may save capital gains. 5. Rollover Gifts From Your Individual Retirement Account (IRA). If you are 70.5 years old in 2006 or 2007, make a gift directly from your IRA to the ATS: your entire gift amount (including the deferred income and its interest) is free of income tax, and the gift counts in satisfying the required minimum distribution. 6. Including ATS in Wills or Estate Plans. Include the ATS in your estate plans and help guarantee the Technion's future and the continued prosperity and security of the State of Israel. We hope that the ATS is in your thoughts during this season, and we wish you a Happy New Year. For further information, please contact Susan G. Hecht, Assistant Director of Planned Giving, at (212) 407-6322 (or toll free at (1-866) 824-2409). November 29, 2006 The Impact of the Recent Election on the American Technion Society (ATS) It is no surprise that the Democrats now have the majority in both the House and the Senate � this outcome was widely predicted. It is also no surprise that voters did not base their choices on the candidates� positions on charity and philanthropy. Indeed, many people voted based on their disapproval of the ongoing situation in Iraq. The outcome of the election, however, will likely impact the non-profit sector. What that impact will be, we are not quite certain. The Association of Fundraising Professionals reported (Nov. 13) that the non-profit sector has lost two key advocates: Sen. Rick Santorum (R-Pa.) who was instrumental in assuring that the IRA Rollover provision was included in the Pension Protection Act, and Rep. Harold Ford (D-Tenn.) who advanced the House version of the CARE Act. We anticipate that initiatives unsuccessfully debated on the legislative agenda before the election will reappear on the agenda in the near future. For example, attempts to modify or repeal the estate tax and to extend tax cuts initially passed in 2000 or 2001 did not come to fruition before the election. The fate of these initiatives now remains uncertain. However, if the Republican party was unable to gain the necessary votes when it held the majority, it is unlikely that the party will be successful as the minority. Rick Cohen of the PhilanthropyJournal.org recently reported that because many new congressional members are experts in non-profit accountability, the public can expect a tougher stance on accountability from non-profit organizations and charitable foundations. The ATS adheres to the highest standards of ethical practice. We welcome the stringent requirements and strict scrutiny because we rely on the public�s confidence in charitable giving. While we are delighted with the new options brought about by last year�s legislative branch (most recently those afforded by the Pension Protection Act), we also look forward to the changes and advances that will come from the new legislative classes. The full article by Rick Cohen, which details his analysis of the non-profit expertise of the new congressional members is included below: ************************************** 11.22.2006 - PhilanthropyJournal.org By Rick Cohen The mid-term elections will give Congress new members with experience in regulating nonprofits, and new committee chairs who might be expected to be tougher in demanding accountability from nonprofits and charitable foundations. FORMER ATTORNEYS GENERAL At least two of the six new Democratic senators are former state attorneys general with hands-on experience in nonprofit accountability issues. Rhode Island's Sheldon Whitehouse and especially Missouri's Claire McCaskill bring an attorney general's experience to nonprofit accountability issues. If New Mexico Attorney General Patricia Madrid wins her cliffhanger election, that would be a third former attorney general entering Congress in 2007. And don't forget that Eliot Spitzer joined the landslide as New York's new governor. These are the people whose departments investigated nonprofit hospitals for their frequently dubious charitable activity and nonprofit telemarketers for their minimal charitable benefit. They should get the need for more muscular government oversight and enforcement. WAYS AND MEANS U.S. Rep. Charles Rangel of New York has been waiting for this moment for decades and now it's his replacing retiring Republican Bill Thomas as chairman of the House Ways and Means Committee. While Rangel has questioned why nonprofit hospitals and foundations have delivered so little of their tax exempt largesse to the low-income households of his Central Harlem district, he has been generally reluctant in the past to push for major charitable accountability reforms. He even authored a letter much like those of the Republican Study Committee and outgoing Sen. Rick Santorum of Pennsylvania asking that the Senate Finance Committee cool its regulatory reform ardor. That move may have been a response to his own experience with an investigation by the state attorney general of the Apollo Theater during his time as the Apollo's board chair. But he might be more interested in what foundations and organizations with big endowments actually deliver to disadvantaged constituencies like his, an issue of substantive rather than procedural accountability. Nonprofits can especially look forward to one aspect of Rangel's Ways and Means leadership: He has long opposed making permanent any of the Bush administration's tax cuts, including the estate tax. GOVERNMENT REFORM While Charles Rangel might not be the top champion of nonprofit accountability, California's Henry Waxman might be, especially since he replaces Virginia's Tom Davis as chairman of the Government Reform Committee. Davis' committee turned a blind eye to Jack Abramoff's lobbying only until long after Abramoff was convicted and sentenced for his lobbying practices involving Davis' political allies such as Ohio Congressman Bob Ney. Forced to resign just before the election, Ney's downfall included indulging himself in funds from Abramoff's tax-exempt Capital Athletic Foundation. Waxman is an investigative bulldog, ready to jumpstart the kinds of congressional oversight that should occur around Katrina relief and reconstruction aid, Iraq reconstruction contracting, and much more. His hard-wired government-performance ethic might get his House peers to look at the nonprofit dimensions of his investigations. SENATE FINANCE Under Iowa Sen. Chuck Grassley, the Senate Finance Committee was quite up to the task of investigating nonprofit and philanthropic scandals, from Abramoff to the National Capital Area United Way and The Nature Conservancy. As ranking minority member, Max Baucus worked collaboratively with Grassley on these issues. In the days before the election, Baucus took the initiative by issuing a devastating critique of the nonprofits that played ball with Abramoff and risked their tax-exempt status, an indicator that he won't drop charitable accountability issues when he takes the committee's helm in January. Having shaken up the Council on Foundations this past May with an address calling for foundations to double their rural grantmaking (to states like his own Montana) in five years, Baucus would be hard-pressed to explain why he wouldn't continue and increase his attention to charity and philanthropy as chair of the Senate Finance Committee. BALLOT INITIATIVES Nonprofits have to be heartened by a non-federal aspect of the November 7th election results. The TABOR initiatives to cap state government spending and the regulatory takings proposals generally bit the dust. Voters defeated the well-funded campaigns for these initiatives that would have gutted government activities that much of the nonprofit sector depends on. CRITICAL MASS But many of the newly-elected Democrats didn't campaign on progressive issues other than strident opposition to the Bush Administration's implementation of the ever-deteriorating Iraq war. A number look more like Heath Shuler, the former Washington Redskins quarterback who unseated North Carolina's Charles Taylor. Although Taylor was among the most reliable supporters of the Bush administration's economic and social policies, Shuler and several others in the freshman class appear not much less conservative. Originally sought by the Republicans to run under their banner, Shuler is a leader of the Fellowship of Christian Athletes, and several other new members are active and vocal in local and regional church efforts, making them unlikely candidates to raise issues about the role of religious organizations in government programs. Limited government oversight and the lack of a requirement for transparency on the use of tax-exempt resources by thousands of churches, mosques and synagogues will probably continue to go unaddressed in the 110th Congress. Many new members may be loathe to take on the questions about the Bush administration's faith-based program raised by former White House aide David Kuo in his new book, Tempting Faith: An Inside Story of Political Seduction. The result of November 7th is two barely-Democratic houses of Congress arrayed against two more years of lame-duck Republican control of the executive branch and domination of the judiciary. Unless there's a sudden flowering of bipartisan cordiality, not much legislation is going to flow. But there is a critical mass of new members of Congress who should be approachable for the nonprofit sector. This is the time for nonprofits to stop sitting on their hands and laurels. November 14, 2006 A study conducted by The Center on Philanthropy at Indiana University and sponsored by Bank of America, found that only 7 percent of wealthy donors would dramatically reduce their charitable giving if the estate tax were repealed. The study was reported in the November 9th issue of The Chronicle of Philanthropy. The American Technion Society (ATS) is happy to learn that slightly more than half of those surveyed said their giving would not change even if all charitable giving tax incentives were repealed. This strong commitment to charitable giving is likely due to factors other than tax incentives. In fact, only 15 percent of the respondents cited significant tax savings as a principal motive behind their giving. Eighty-one percent who focused on the �giving� element of philanthropy cited key motivators such as meeting critical needs, giving back to society, and social reciprocity (the feeling that those who have more should help those with less). Only a quarter of respondents said that �leaving a legacy� spurred their giving. Other results of the study show: �High net worth households, those with incomes of more than $200,000 or assets in excess of $1 million represent more than 3 percent of the total households in the United States. This small percentage of households is responsible for approximately 2/3 of all household charity in the country. �Nearly 98 percent of high net worth households contributed to charity in 2005 (compared to 67 percent of U.S. households overall). With the future of the estate tax and other charitable giving tax incentives uncertain, the results of this important study will likely receive much attention and inspire spirited discussion. The ATS Planned Giving Department would like to k   Copyright © 2001 - 2007, American Society for Technion-Israel Institute of Technology. All Rights Reserved.