Giving’s on the Rise—and a Deadline Approaches for Foundations

Now’s the season for helping others who are less fortunate than you by giving your time, talents and resources to a worthy charitable cause. According to “The Nonprofit Fundraising Survey: November 2010,” compiled by the Association of Fundraising Professionals, Blackbaud, the Center on Philanthropy at Indiana University, the Foundation Center, GuideStar USA Inc., and the Urban Institute's National Center for Charitable Statistics, charitable donations in the U.S. are on the upswing, but still have not climbed back to pre-recessionary levels.

Specifically, 36% of the charities surveyed recorded an increase in donations during the first nine months of 2010, compared to just 23% that saw an increase in 2009. Additionally, just 37% of the charities reported lower donation levels this year, versus the 51% that experienced declines last year. Other findings: Organizations focused on international causes such as the Haitian earthquake and Pakistani flood relief efforts reported the greatest increase in donations. Domestic health organizations and religious charities reported the greatest declines in contributions.

Overall, charitable organizations remain “guardedly optimistic” about 2011. In fact, 47% plan to spend more, while only 20% expect to make budget cuts.

If you have a family foundation, you know that to avoid taxes for under-distribution, you must generally distribute at least 5% of the value of investment assets (minus fees and investment taxes) each year. Ideally, of course, this annual amount has been calculated and distributed throughout the year. However, as the year draws to a close, it’s often wise to take a look at the year’s distributions to avoid shortfalls.

Missing the 5 percent distribution can result in penalties from the IRS, but often the agency allows the offending foundations to make up for their miscalculations by contributing more than 5 percent in the following year. However, missing your mark could also result in higher taxes on investment income.