Consider This . . .
Record levels of contributions
related to the September 11 tragedy are currently estimated at
$1.9 billion. Reported bookkeeping irregularities of corporations
are too numerous to count, and mainstream charities are having
some accounting irregularities of their own. So, I thought it
might be appropriate to review charitable giving and related issues
as we get ready to select our preferred charities and make our
final contributions for 2002.
I can't talk about Dec. 31, 2002, issues and decisions without
first reviewing past charitable gift practices of Americans in
general and Marylanders.
According to the American Association of Fundraising Council (AAFRC
shown), the U.S. philanthropic activities generated $212 billion
for charities in 2001; 75.8 percent or $161 billion came from
individuals, while 4.3 percent or $9 billion came from corporations.
The charitable gifts mix shows 38.2 percent going to religious
organizations, 15 percent going to educational organizations,
18.3 percent going to human services and so on. See the chart
for a complete breakdown.
It is quite clear that, as a group, we continue to be a most generous
nation, possibly the most generous. To assist both charities and
donors, the AAFRC has published a voluntary "Donor Bill of Rights"
which can be viewed in its entirety at www.aafrc.org/counsel/donorbor.html.
These rights are based on the following statement by the AAFRC:
"Philanthropy is based on voluntary action for the common good.
It is a tradition of giving and sharing that is primary to the
quality of life. To assure that philanthropy merits the respect
and trust of general public, and that donors and prospective donors
can have full confidence in the not-for-profit organizations and
causes they are asked to support, we declare that all donors have
The American Institute of Philanthropy, another watch dog group
will provide you with a sample report (for just $3) entitled
the Charity Rating Guide which is part of their Charity Watchdog
Report. Their reports are intended to inform donors about how
approximately 400 national charities spend your money and keep
donors up to date on current issues related to charitable giving.
If you are more interested in the operational efficiency of your
favorite charity and the costs required to support their projects,
check out www.charitynavigator.org.
This site provides a detailed analysis of operating expenses and
ratios from food banks to animal shelters. This site analyzes
the appropriate levels of expenses for fund raising and project
fulfillment. Another small feature of this site is a factoid box
on their home page. I learned such facts as: Bill and Melinda
Gates gave $2 billion dollars in Microsoft stock to the Gates
Foundation in 2001, or 1 percent of all charitable giving in 2001;
and the average value of a volunteer hour rose to $16.05 in 2001,
up from $15.39 in 2000.
If you haven't figured it out yet, this is one of the largest
financial sectors in the American economy and it all comes from
sources such as the change collected by churches on Sunday to
the Bill Gates contributions of stock.
There is ample evidence from my small sampling to suggest that
the rates of contributions have begun to moderate. The Philanthropy
Journal indicated that, while we have collectively set a
new record for giving in 2001, it represented a 2.3 percent decline
from 2000 when compared to the Gross Domestic Product (GNP).
Charitable giving data is also constantly analyzed by the Internal
Revenue Service, then printed and posted to the Internet for public
consumption. According to 1999 IRS data, Marylanders filed 2.5
million tax returns. Of those, nearly 1 million itemized their
deductions and, of those filers, the average charitable gift deductions
totaled $3,207. This data placed Marylanders at 28th in the state
rankings or $4,592 below Wyoming, the first-place state for charitable
The IRS data does not estimate lost tax revenue, but at an average
of 20 to 35 percent at the Federal tax level and another 3 to
7 percent at the State tax level, the combined taxes lost could
be between $48 and $89 billion dollars per year. At these charitable
gift levels, the government will continue to aggressively scrutinize
these deductions at every available opportunity. The absence of
proper documentation or an adequate valuation in the case of gifted
property might lead to an ugly surprise if audited.
For information about organizations that are qualified to receive
charitable contributions, see IRS Publication 526, Charitable
Contributions. Publication 526 also describes contributions
you can (and cannot) deduct, and it explains deduction limits.
For assistance about valuing donated property, see IRS publication
561, Determining the Value of Donated Property. These
documents can be downloaded from the IRS web site at www.irs.ustreas.gov/forms_pubs/pubs.html.
I'm sure I didn't answer all of the questions you might have about
this subject, but I do hope that this will prompt you to look
more closely at your favorite charities before you make your final
contributions on Dec. 31. Keep up the good work!
If you have comments or suggestions, or have an idea for a future
computer or business topic, e-mail me at email@example.com
Jimmy R. Hammond, CPA, is a resident of Annapolis and a consultant to businesses in Annapolis, Baltimore and Washington D.C.