It’s a top priority to spend your valuable time with donors and prospects at any time of the year.  That’s doubly true at year end, when closing gifts quickly can be crucial.   PG Calc can help.

Tax-free IRA Gifts

The Pension Protection Act of 2006 signed into law in August creates a narrow window of opportunity for donors to make gifts from their individual retirement accounts (IRAs).  The Act allows otherwise taxable distributions of up to $100,000 from a traditional IRA or a Roth IRA to be excluded from gross income for tax years 2006 and 2007.  Therefore, you can create a sense of urgency to take advantage of this unique giving opportunity.

To qualify for the special tax treatment, the donor must be at least age 70½ and the donee must be a tax-exempt organization to which deductible contributions can be made.  Donor advised funds and supporting organizations are not eligible.  The gift must be outright; rollovers to a planned gift, such as a gift annuity or a charitable remainder trust, do not qualify. The amount rolled over will count against a donor's minimum distribution requirement.  Since the contribution is excluded from gross income, it does not earn a federal income tax deduction.  The provision expires on December 31, 2007, after which these distributions will once again become taxable.

Here is a sample letter you might send to targeted prospects over the age of 70½. 

Dear Bob,

Recent changes in Federal tax law may be of interest to you.  The new Pension Protection Act of 2006 allows you to make distributions directly from your IRA to charity without the distributions being included in taxable income and subject to withholding.

Previously, if you wanted to use IRA funds for a charitable contribution, you had to withdraw money from your IRA and then contribute it to charity.  The amount you withdrew was taxable, but the deduction for the contribution may or may not have offset the tax.

Certain limitations apply to these non-taxable charitable distributions from an IRA:

You must be age 70½ at the time of the distribution.

They cannot exceed $100,000 per year.

They must be made to a public charity like our organization.

The gifts must be outright.  For instance, they cannot be used to establish a gift annuity or fund a charitable remainder trust.

These tax-free distributions can be made only in 2006 and 2007.

If you would like more information about a charitable contribution from an IRA, please contact me.

With warm regards,

Bob Swenson

Vice President of Development

Help donors help themselves

There’s very little time left before the end of 2006 to inspire indecisive donors to make gifts, but one fast method is to send an e-mail with a link to your online GiftCalcs planned giving calculator. Were you aware that GiftCalcs clients can have as many links throughout their sites as they want?  If you have created a special year-end giving page, it literally takes only minutes to add a GiftCalcs link to that page if you haven’t done so already.  If you are not a GiftCalcs client, we have a free sample GiftCalcs page on our site that you are welcome to use. 

To see how a year-end e-mail could work, here's a sample message that includes a link to our sample GiftCalcs calculator page:

Dear Barbara,

Thank you, as always, for keeping the State Hospital Foundation in your thoughts during the holiday season.  The loyalty of donors like you makes it possible for us to continue providing excellent healthcare to everyone in our community.

As we've spoken about a charitable gift annuity several times this year, I want you to know that there is still time to complete a gift annuity in 2006.  Please visit our special year-end giving page and try our planned gift calculator to see how a gift annuity can work for you!  Then give me a call if you have any questions or if you’d like to move ahead with making a gift.

With warm regards,

Bob Swenson

Vice President of Development

We’ve set up our sample calculator so that gift annuities are the only gift vehicle offered.  If you are a GiftCalcs client, it’s a good idea to review your own settings in the GiftCalcs Administration Center before you make a push to send donors to your calculator.

Revisit your donors

Repeat donors are an important source of new gifts, yet it is difficult to make personal visits to all your planned gift donors.  Consider sending these key donors a revised proposal with a current gift date.  If you’ve been storing your gift illustrations, it’s simple to retrieve the Planned Giving Manager (PGM) input file that contains the donor’s most recent gift annuity information and revise the illustration simply by entering a new gift date.  Mail the new proposal with a personal note or use PGM’s one-click export to MS Word to put the proposal in a form that can be included in an e-mail. 

Gift Annuity Partial Payments

You are probably looking to simplify administration as the year draws to a close.  Many charities find that they close more gift annuities in the month of December than any other month.  That puts pressure on your gift annuity administrator to generate lots of checks for partial payments at the end of the year.  One way to ease the crunch is to roll those partial payments to the first full payment period in 2008.

Therefore if the donor wants quarterly payments that would normally make a partial payment on December 31, 2007, simply add that partial payment to the first quarterly installment on March 31, 2008.  If the contract specifies that the first partial payment is due in 2008, the donor will not have any taxable income from the annuity until 2008.  However, the donor can take the charitable income tax deduction in 2007.

Let’s say you close a gift on December 28, 2007.  Your gift administrator doesn’t have enough time to make the first quarterly payment on December 31.  You want the first partial payment to be made on March 31, 2008 instead. 

To make PGM reflect this change, open the Gift Options screen, click on Open, select Charitable Gift Annuity and then click More.  You will be looking at the screen used to compute a gift annuity’s first partial payment.  The only field to edit is the “Date payment period begins.”  Change that date to 1/1/2008.  Click on Done and Done and view the Taxation of Gift annuity payments. 

Your Taxation of Gift Annuity Payments chart will now show the date of first payment as March 31, 2008.  That first payment will include the full quarterly amount for the first quarter of 2008 plus the partial payment for the period from December 26 to December 31, 2007. 

Let PGM do the paperwork 

If you’re closing planned gifts, you can’t avoid paperwork entirely, but our software cuts the preparation effort to a minimum so you can spend more time with your next prospect.  Most of you know the shortcuts PGM provides, but perhaps there’s one you have missed.

It’s no secret that the state-specific gift annuity agreements produced by PGM are an amazing time-saver.  Sample gift agreements prepared along with an initial illustration give your prospect plenty of time for review. Then it’s quick business to revise and finalize the agreement when the gift is made.   PGM can round out your paperwork by producing an official acknowledgment letter for the donor and a complete gift information summary for your own records.

Where called for, PGM can also create an IRS Discount Rate Election Statement or a Gift Annuity Disclosure Statement.  These documents won’t win points for excitement, but they do fulfill federal requirements with which the donor and charity must comply in order to preserve the deduction or the gift annuity itself.  When time is of the essence, it is especially important to get the paperwork done quickly, but also correctly, for this year's happy donor may be next year's repeat donor.

Conclusion

The year is almost over, but it's not too late to close more planned gifts.  Consider some of the techniques outlined here to make 2007 a successful year for your organization.  PG Calc is here to help you in any way we can.