Many have asked about what we are doing and what we have done with Kenya. Through a partnership of the Tapestry Church Kenya and the Global Access Foundation, we are having some affect in Kenya. We expect work focusing on humanitarian, hunger, micro-finance, education, water, and medical development in the interior of Kisii.
Watch this video we used for Sunday at the Tapestry DC.
I have added this article to the latest post set because I am beginning to build a portfolio of stock that I will be donating to my foundation later on, so you are welcome to use this, but it’s really for me.
HAHAHA!
Enjoy!
pd
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Q. I own UPS stock. I’ve held these shares since 1986 (before the initial public offering). I want to give some shares to the church I attend. Do I need a broker? I’ve never sold stock before, but I understand the capital gains/loss issue does not exist when you give stock (in the form of cash after it’s sold) to a non-profit organization. — D.C.
A. Wait, wait — don’t sell it! If you sell it, you will create a capital gain and you will have to pay the tax on it. If you’ve owned shares of United Parcel Service (NYSE: UPS) since 1986, the capital gains will be huge! If you let the church sell it, they probably won’t have to pay any taxes on it. Much nicer. Giving stock to a charitable organization is a wonderful way to expand the amount you can afford to donate. You get a tax deduction for the gift, and the church puts it to good — and untaxed — use.
This is the season for giving, and I suspect that a lot of us will be feeling more generous than usual this year. The needs are so great. I hope that everyone reading this article will take a moment to check out our five unique and very cost-efficient charities.
Charitable giving used to be simple. Donate money, stock, old shoes, whatever, and deduct the value of the goods from your taxes. Those days are gone, but donating stock to charity is still a good idea and one that rewards you (after you jump through the appropriate hoops) with a nice tax deduction.
A donation of stock is a contribution of property in the eyes of the IRS. When you donate property, you can deduct the “fair market value,” which with stock (as opposed to that run-down heap in your driveway) is easily ascertained. Well, since this is the IRS, it’s not easy, but it’s doable. You just look up the highest and lowest trading price for UPS on the day you made the transfer and average them. (Hint: Make sure you do the transfer on a market trading day.) Multiply the average share price by the number of shares you donated, and that’s your fair market value. (For a real laugh, see IRS Publication 561, “Determining the Value of Donated Property,” for the formulas to use when the day of your donation isn’t a market trading day.)
Since you have held your stock more than one year, you can deduct the full amount (subject to limits discussed later). Donating stock that’s been held for less than a year isn’t as nice a deal. You can generally deduct only what you paid for the stock unless you pay the taxes on any capital gains.
The mechanics of the donation aren’t difficult. If you actually have in your possession the stock certificates in the correct denominations for the number of shares you wish to donate, you won’t need a broker. You can simply fill in the form on the back of the stock certificate and make it over to your church. The church can take the stock to a broker and sell it, but I suspect they won’t mind the trouble.
If your shares are held in a brokerage account, you can have the broker issue a stock certificate for the number of shares you intend to donate in your name and make it over to the church, or you can ask your broker for assistance in the transfer. (It might be a bit late to order up a stock certificate if you want the deduction for this year.)
Now we come to those limits on how much you can deduct. First, remember that you will have to itemize your deductions to get the full effect. Then, if you are donating a lot of shares, you could run into the limits on charitable giving. They are complicated. Sigh. Essentially your deduction can’t be higher than 30% of your adjusted gross income, unless you pay the capital gains taxes on the sale. (In your case, that could be disastrous!) You can deduct an amount equal to 50% of your income if you pay the capital gains tax, but it’s hard to imagine how that could work out to your benefit.
If you do run up against the limits, there is a silver lining. Anything that you can’t deduct this year can be carried forward for up to five years, so you can keep deducting until you use it up or run out of time. If the tax deduction is important and the amount is large in relation to your income, you might want to contribute some now and some in a later year. No matter what, you should read Publication 526 very, very carefully.
I’m afraid that this time I will have to refer readers to the IRS website which is a pretty good resource if you don’t mind scrolling through a list of hundreds of forms and publications to find what you need .
If you have funds of your own that you plan to use to endow the foundation, then it can be very simple. I’d start down that path by talking with staff at the appropriate community foundation. Unless you have a lot of money to put into this (more than $250,000 is what I’ve heard people say, and they usually follow that with something like “it’s better with a lot more), you will probably find that the community foundation can arrange a donor-advised fund for you that will allow you a good deal of flexibility, handle all the administrative tasks for far less cost than you would incur, and can all be done in a few days. (There are similar services offered by major financial insitutions; you might want to compare services and fees.) There are lists of community foundations at The Grantsmanship Center (http://www.tgci.com/resources/foundations/community/) and the Foundation Center (http://fdncenter.org/funders/grantmaker/gws_comm/comm.html).
If you are planning to raise money to support your foundation, then it is a great deal more complicated. You might still be able to use a donor advised fund at a community foundation, but you would need to ask them about the requirements if you want to raise money from other people to put into “your” fund.
Or you can, as your question suggests, set up a separate foundation. This process is likely to take several months to a couple of years, depending on many intricacies that only someone who knows your plans, goals and local conditions can really estimate for you. It is also likely to cost several hundred to a few thousand dollars, depending on how much outside advice you need, want and use.
The rules about incorporating foundations vary from state to state. You will need to incorporate as a first step; everything else follows from that. Incorporation can be very simple to do, but it needs to be done exactly right to avoid problems later on down the road.
For example, In order to be eligible to receive tax-deductible donations, you will need to be sure your corporation meets the requirements the IRS has developed to implement the Internal Revenue Code, especially section 501(c)(3) — and there are many other things to think about while setting up the corporation in the first place.
The you will need to apply for recognition as a tax-exempt entity under federal tax laws. The form for doing that is IRS 1023; there’s a publication you can get from the IRS, or download from www.irs.gov, called “Tax Exempt Status for My Organization” (pub. 557), that explains a lot of this. For this step, you will indeed need a business plan (since you have to provide a budget, including details of the sources and uses of funds, for the first three years of your planned program).
Foundations are governed by similar regulations for federal tax and reporting purposes to those that apply to the more familiar “public charities” — the organizations that we all know as “nonprofits.” But the prohibitions on self-dealing are more stringent and all foundations have to pay an excise tax.
As a fundraiser, you will probably also have to register with and report to your state’s charity officials (usually in the Secretary of State’s office — see http://www.multistatefiling.org for information about this subject).
Another option, especially if you are planning to assist just one or a small number of nonprofits through your foundation, would be to work out an agreement that allowed you to operate as a “program” of some established organization. You would be subject to the overall direction of the sponsoring organization’s board, but the agreement could allow substantial flexibility and scope for you to work on your cause without having to meet the administrative requirements foundation status would impose. This structure often goes under the name of “fiscal sponsorship.”
The “Start-up” section of the Nonprofit FAQ has lots of information about all these subjects, and pointers to further information as well. See http://www.nonprofits.org/npofaq and click on Start-up in the left hand column.
(If by any chance you’re in Washington state, you’ll want to get hold of the King County Bar Association’s very useful workbook “How to Form and Manintain a Nonprofit Organization” – see http://www.tess.org/pages/support2.html#publications for advice
about how to do that and other subjects. Many other states have statewide associations of nonprofits who can connect you with local resources; for a list see http://www.ncna.org)
