Association of Fundraising Professionals
WASHINGTON CHAPTER
WASHINGTON STATE MEMBER E-NEWS UPDATE:
Winter 2007 edition
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Table of Contents
- From the Desk of the President
- Important Washington State Legislation
- Book Recommendations
- The Hot Tip: IRA Gift Distributions
- Plan for your CFRE Certification
- New Job Listings on AFP WA Website
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From the Desk of the President
Thea Kleiber, CFRE, Mount Baker Theatre
Dear Friends and Colleagues,
There has never been a more exciting time to be involved! The nonprofit sector is stronger, more vibrant, and more important to our communities than ever before. Charitable organizations raise an estimated $250+ billion annually, with more dollars flowing through our nonprofits every year. The total assets of the charitable sector exceed $1.76 trillion—a number that has doubled over the past 10 years (National Council of Nonprofit Associations).
These numbers are a powerful testament to the strong spirit of philanthropy that makes our work possible, and the talented dedication and commitment of the fundraising professionals who, every day, work to procure and steward those gifts to put the dollars where they are most needed.
As we dive headfirst into the new year, I encourage you to make a resolution to put yourself first once in awhile. We can’t be effective fundraisers when we are stressed and frazzled. Take time to come up for air and put your deadlines on the back burner, at least for a couple of hours every month.
AFP offers a great way to do this. We have a terrific set of programs lined up this year, aligned along three separate professional development tracks: leadership, major gifts, and donor engagement. I encourage you to make the most of your AFP membership by attending events on a regular basis. This is the best way to stay in touch with your colleagues, broaden your industry contacts, and brush up on your skills all at the same time.
When you expand your network of fundraising contacts, you’ll quickly realize that your development colleagues can be your best resource. But like your donors, these professional relationships need to be cultivated. Luckily, cultivating your colleagues is as easy as signing up for a luncheon, or joining an AFP committee. Committee work offers a fantastic opportunity to develop close working relationships with some of the best fundraisers in the state. So make time for yourself. Get involved. Come to a luncheon or join a committee. It could be the best career move you will ever make.
For a list of active AFP committees, please contact Alope Bennett in the AFP office at 206-367-8704.
Sincerely,
Thea Kleiber, CFRE
President, AFP Washington State Chapter
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Important Washington State Legislation
Lynn G. Schrader, CFRE, The Schrader Group
DRAFT LEGISLATION PROPOSES TO REVISE WASHINGTON'S CHARITABLE SOLICITATIONS ACT
Washington's Charitable Solicitations Act (RCW 19.09) was originally passed in 1987. Over the past 21 years, only minor technical revisions have been made to the legislation. Last year, Secretary of State Sam Reed planned to introduce legislation that would significantly update and amend the original law. Many leaders in the nonprofit community thought that the 2006 legislation was assembled in haste, with little input from the nonprofit community, and that it would have significant negative impacts on the sector. Fortunately, the Secretary of State was persuaded to withdraw the legislation and sought more input from the nonprofit community before drafting the 2007 proposal.
The 2007 version responds to the comments that were made at the six town hall meetings held last summer across the state and has benefited from detailed suggestions from the Advisory Task Force appointed by the Secretary of State in the fall of 2006.
Many people who have been following this issue for the past 15 months think the proposed legislation would, if adopted by the legislature, result in a more effective and less burdensome charitable solicitations program in Washington, improve accountability and transparency, and, ultimately, help further increase the public's trust in Washington's nonprofit sector.
Key provisions of the draft legislation include authority for the Secretary of State to adopt rules (following the Administrative Procedures Act RCW 34.05) that establish a set of tiered independent financial reporting requirements for charitable organizations. Rules adopted would include:
- Retention of the filing requirement for all charities that currently file an annual report with the Secretary of State (organizations with an annual budget of $25,000 or more)
- Require larger organizations covered by the act to secure an independent review of financial results. For organizations with more than $1 million in annual revenues, the rule may require that their normal IRS 990 filings be prepared or reviewed by an independent expert
- Organizations with more than $3 million in annual revenues would routinely be required to include a copy of an audited financial statement with their report to the Secretary of State
In cases 2 and 3, the calculation of the threshold is to be based on the gross revenue of the averaged over the past three fiscal years.
Boards will be required to review and accept financial reports to be filed with the Secretary of State under this act. A penalty may be imposed on an organization that files a financial report that is incorrect in "any material way."
The draft gives the Secretary of State the authority to operate an education program for charities, their boards and the general public, supported by an increase in registration fees - the first increase in over 20 years, and to appoint an advisory council to assist with the design of that program.
The draft also provides for reciprocal agreements with other states that set conditions allowing organizations that operate elsewhere to file with their home states in lieu of reporting under Washington's law.
The 2007 draft also clarifies several definitions and clarifies the types of organizations and charitable appeals that are excluded from its requirements. The effect of these changes is to make clear that "fundraising counsel" (i.e., consultants who do not conduct campaigns or receive charitable gifts from donors) do not have to register and that the act does not apply to an appeal for a named person (such as a family that has lost their home in a fire) so long as all the proceeds go directly to that person.
In the definitions section there are these changes and clarifications:
"Charitable purposes" are defined using language based on the IRS Code and regulations. The legislation explicitly includes the benefiting of persons who protect public safety such as law enforcement personnel and firefighters - historically an area requiring investigation and enforcement by the Attorney General.
"Church" and "religious organizations" are defined separately to allow greater clarity for the point that churches are excluded while faith-based social agencies are required to comply with the charitable solicitations act.
"Fundraising Counsel" and "Commercial Coventurers" (sellers who say that part of the proceeds of a sale will be donated to a named charitable organization) are excluded from the definition of "commercial fund raiser."
A major purpose of RCW 19.09 is, of course, to require Commercial Fund Raisers to register with the secretary of state and to file reports on the fundraising that they do on behalf of client charitable organizations.
To read the proposed legislation and a brief summary prepared by the Secretary of State, log onto: www.Secstate.wa.gov. In the left column, click “Charities,” then scroll down to “2007 Charities Draft Legislation.”
In late January, Secretary of State Sam Reed submitted his legislation that would update and amend the Charitable Solicitations Act (Senate Bill 5662 and the identical House Bill 1777). The AFP - Washington Chapter executive committee has endorsed the legislation and submitted a letter of endorsement into the public record. The bill will have its first committee hearing in the Senate on Feb. 8 and the House on Feb. 9. Subsequently, the bills should be voted on in both the Senate and House chambers and then reach the Governor's desk for signature. To follow the progress of the legislation, log onto: www.leg.wa.gov
Special thanks to Putnam Barber, Senior Consultant, Executive Alliance, who served as a member of the Secretary of State's Advisory Task Force, and to Jason Lee, Director of Government Relations, Association of Fundraising Professionals, for their contributions to this article.
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Book Recommendations
Jeanne Thorsen, King County Library System Foundation
If you're looking for new ideas to enhance your organization's planning, take a look at Retreats That Work: Everything You Need to Know About Planning and Leading Great Offsites. In this new and expanded edition, authors Merianne Liteman, Sheila Campbell, and Jeff Liteman provide you with a variety of tools to design and lead successful retreats, along with the "sins of omission" (the biggest mistakes commonly made, and tips on how to avoid them). This hefty tome (500 pages) comes with a CD that includes templates, handouts, checklists, and other materials you can reproduce for retreat participants. Highly recommended for your bookshelf. Published by Pfeiffer.
The Nature of Leadership: Reptiles, Mammals, and the Challenge of Becoming a Great Leader includes a unique combination of inspiring examples, cogent analysis, and practical advice. Written by B. Joseph White, President of the University of Illinois, the book challenges you to climb the leadership pyramid and achieve milestones in your professional and personal development. Whether you are a cold-blooded reptile (tough-as-nails decision maker with your eyes on the numbers and your focus on control) or warm-blooded mammal (compassionate creature who build success through mutual trust and open communication) - or - more likely, a combination of both types - you can transcend type and achieve real change in your organization. The book presents an interesting approach, but not a whole lot of new information. Suggest you check it out from the library before buying. Published by American Management Association.
The King County Library System offers a wonderful free service called Book Alert. You can sign up to receive an email announcement of new titles in subject areas or fiction categories. Every two weeks, you will receive a list of new titles available in the 43 libraries. If you live in the KCLS service area, you can then place a 'hold' on a title directly from the listing. One of my categories is Business and Investing, which provides me with a list of 10-12 items each time, several of which are relevant to philanthropy, fund development, board leadership, or other topics. For more information, visit kcls.org and click on Book Alert.
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The Hot Tip: IRA Gift Distributions
Carol Borgmann, CFRE, Lakeside School email
By now, your organization may have benefited from a donor gift distribution through their IRA. The list serve that I recommend to stay current on this legislation and many other issues about planned giving is GIFT-PL. Here is a recent posting specific to the IRA distributions. (To join GIFT-PL, click here. Gift-PL is provided by the National Committee on Planned Giving.)
Dear Colleagues:
Great news! We have new legal guidance from the IRS about “Charitable IRA Rollover” legislation – the ability for someone over age 70 ½ to have up to $100,000 distributed directly from the IRA to a qualifying charity and to have the distribution excluded from income. It is contained at the end of Notice 2007-7; 2007-5 IRB 1.
The full text appears at: http://www.irs.gov/pub/irs-drop/n-07-07.pdf At the end of this message you can see the full text of the portion of the notice that pertains to the charitable IRA exclusion.
Some of the rules we already knew are in the notice. Here are the new developments:
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 ½ 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 ½ who wrote such a check to a qualifying charity early in 2006 can take advantage of the exclusion.
Wonderful news all around! Hope that this is helpful to you.
Best wishes,
Chris Hoyt
Christopher R. Hoyt Professor of Law Univ. of Missouri (Kansas City) School of Law 5100 Rockhill Road Kansas City, MO 64110-2499
Voice: (816) 235-2395 [[fax: (913) 338-5276]] hoytc@umkc.edu
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Notice 2007-7; 2007-5 IRB 1.
Part III. Administrative, Procedural, and Miscellaneous
Miscellaneous Pension Protection Act Changes
I. PURPOSE
This notice provides guidance in the form of questions and answers with respect to certain provisions of the Pension Protection Act of 2006, P.L. 109-280 ("PPA '06"), that are effective in 2007 or earlier. The sections of PPA '06 addressed in this notice, which are primarily related to distributions, are section 303 (relating to interest rate assumptions for lump sum distributions), section 826 (relating to hardship distributions), section 828 (relating to early distributions to public safety employees), section 829 (relating to rollovers for nonspouse beneficiaries), section 845 (relating to distributions to pay for accident or health insurance for public safety officers), section 904 (relating to vesting of nonelective contributions), section 1102 (relating to the notice and consent period for distributions), and section 1201 (relating to distributions from IRAs to charitable organizations).
IX. SECTION 1201 OF PPA '06
Section 1201(a) of PPA '06 adds section 408(d)(8) to the Code, which is applicable to distributions made in taxable years 2006 and 2007. Under section 408(d)(8), generally, if a distribution from an IRA owned by an individual after the individual has attained age 70 1/2 is made directly by the trustee to certain organizations described in section 170(b)(1)(A), the distribution is excluded from gross income. The exclusion is only available to the extent that the distribution would otherwise have been includible in gross income, and section 408(d)(8)(D) provides a special rule for determining the amount that would otherwise be includible in gross income. In addition, the exclusion applies only if the contribution would otherwise qualify for a charitable contribution deduction under section 170 (without regard to the percentage limitations of section 170(b)). A distribution that is eligible for this exclusion is called a qualified charitable distribution.
Q-34. Is there an overall limit on the amount that may be excluded from gross income for qualified charitable distributions that are made in a year?
A-34. Yes. The income exclusion for qualified charitable distributions only applies to the extent that the aggregate amount of qualified charitable distributions made during any taxable year with respect to an IRA owner does not exceed $ 100,000. Thus, if an IRA owner maintains multiple IRAs in a taxable year, and qualified charitable distributions are made from more than one of these IRAs, the maximum total amount that may be excluded for that year by the IRA owner is $ 100,000. For married individuals filing a joint return, the limit is $ 100,000 per individual IRA owner.
Q-35. Is the exclusion for qualified charitable distributions available for a distribution made to any organization eligible to receive charitable contributions that are deductible by the donor for income tax purposes?
A-35. No. Qualified charitable distributions may be made to an organization described in section 170(b)(1)(A), other than supporting organizations described in section 509(a)(3) or donor advised funds that are described in section 4966(d)(2).
Q-36. Is the exclusion for qualified charitable distributions available for distributions from any type of IRA?
A-36. Generally, the exclusion for qualified charitable distributions is available for distributions from any type of IRA (including a Roth IRA described in section 408A and a deemed IRA described in section 408(q)) that is neither an ongoing SEP IRA described in section 408(k) nor an ongoing SIMPLE IRA described in section 408(p). For this purpose, a SEP IRA or a SIMPLE IRA is treated as ongoing if it is maintained under an employer arrangement under which an employer contribution is made for the plan year ending with or within the IRA owner's taxable year in which the charitable contributions would be made.
Q-37. Is the exclusion for qualified charitable distributions available for distributions from an IRA maintained for a beneficiary if the beneficiary has attained age 70 1/2 before the distribution is made?
A-37. Yes. The exclusion from gross income for qualified charitable distributions is available for distributions from an IRA maintained for the benefit of a beneficiary after the death of the IRA owner if the beneficiary has attained age 70 1/2 before the distribution is made.
Q-38. If a 2006 distribution satisfies all the requirements under section 408(d)(8), but it was made before August 17, 2006 (the date PPA '06 was enacted), is the amount distributed excludable as a qualified charitable distribution?
A-38. Yes. Section 408(d)(8) is applicable to distributions made at any time in 2006. Thus, a distribution made in 2006 that satisfies the requirements under section 408(d)(8) is a qualified charitable distribution even if it was made before August 17, 2006.
Q-39. Is the amount of a qualified charitable distribution deductible as a charitable contribution under section 170?
A-39. No. For purposes of determining the amount of charitable contributions that may be deducted under section 170, qualified charitable distributions which are excluded from income under section 408(d)(8) are not taken into account. However, qualified charitable distributions must still satisfy the requirements to be deductible charitable contributions under section 170 (other than the percentage limits of section 170(b)), including the substantiation requirements under section 170(f)(8).
Q-40. Is a qualified charitable distribution subject to withholding under section 3405?
A-40. No. 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). For purposes of determining whether a distribution requested by an IRA satisfies the requirements under section 408(d)(8), the
IRA trustee, custodian, or issuer may rely upon reasonable representations made by the IRA owner.
Q-41. Is a check from an IRA made payable to a charitable organization described in section 408(d)(8) and delivered by the IRA owner to the charitable organization a direct payment to such organization?
A-41. Yes. If a check from an IRA is made payable to a charitable organization described in section 408(d)(8) and delivered by the IRA owner to the charitable organization, the payment to the charitable organization will be considered a direct payment by the IRA trustee to the charitable organization for purposes of section 408(d)(8)(B)(i).
Q-42. Will a qualified charitable distribution be taken into account in determining whether the required minimum distribution requirements of sections 408(a)(6), 408(b)(3), and 408A(c)(5) have been satisfied?
A-42. Yes. The amount distributed in a qualified charitable distribution is an amount distributed from the IRA for purposes of sections 408(a)(6), 408(b)(3), and 408A(c)(5).
Q-43. What are the tax consequences of a direct payment of an amount from an IRA to a charity where the transaction is intended to satisfy the requirements of section 408(d)(8) but fails to do so?
A-43. If an amount intended to be a qualified charitable distribution is paid to a charitable organization but fails to satisfy the requirements of section 408(d)(8), the amount paid is treated as (1) a distribution from the IRA to the IRA owner that is includible in gross income under the rules of section 408 or section 408A, as applicable; and (2) a contribution from the IRA owner to the charitable organization that is subject to the rules under section 170 (including the percentage limits of section 170(b)).
Q-44. Will a distribution made directly by the trustee to a section 170(b)(1)(A) organization (as permitted by section 408(d)(8)(B)(i)) be treated as a receipt by the IRA owner under section 4975(d)(9)?
A-44. Yes. 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.
DRAFTING INFORMATION
The principal author of this notice is Angelique V. Carrington of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this notice, please contact the Employee Plans taxpayer assistance telephone service at (877) 829- 5500 (a toll-free number) between the hours of 8:30 am and 4:30 pm Eastern Time, Monday through Friday. Ms. Carrington may be reached at (202) 283-9888 (not a toll-free number).
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Plan for your CFRE Certification
The 2007 schedule for CFRE application deadlines and exam dates is posted HERE. Did you know that AFP Washington has our own CFRE ambassador--Karl Leggett. Click HERE to read more about Karl's tips about CFRE certification and to ask Karl a question. Congratulations to Washington's most recent CFRE recipients: Lisa Gilbert, Lara Koritzke, Lara Littlefield, Elizabeth Pluhta, Ara Serjoie.
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New Job Listings on AFP WA Website
Transitional Resources (Seattle), Habitat for Humanity (Redmond), Solid Ground, (Seattle), Planned Parenthood (Seattle), ACT Theatre (Seattle), The Jewish Federation of Greater Seattle, St. Joseph Family Center (Spokane). Visit the jobs page to view these and other interesting jobs by clicking HERE.