ALSO IN THIS ISSUE Volume 19 / Issue 2 / April 2016

3 A note from the editor 4 Final GIK guidelines from the Ethics Committee 8 Higher education fundraising14 Senny’s policy scorecard17 Best of DC Nonprofit Conference pics!

Target Analytics’ Planned giving glossary, p. 10

OF THE DMA NONPROFIT FEDERATION

adj

noun

Members

Mr. Angel AlomaFood For The Poor Ex Officio

Mr. John BellMMI Direct

Ms. Mary BoguckiAmergent Ex Officio

Mr. Lane BrooksFood & Water Watch

Ms. Tracey BurgoonDisabled American Veterans

Mr. Nate DrushellInfoCision Management Corp.

Mr. John ErnstWiland

Mr. Steve FroehlichALSAC — St. Jude

Mr. Tom GaffnyTom Gaffny Consulting

Mr. Kevin GaschlerDucks Unlimited

Ms. Mary Pat GillinMemorial Sloan Kettering Cancer Center

Ms. Jacqui GrosethOlive Crest

Mr. Tim KerstenRobbinsKersten Direct

Ms. Alicia MeulensteenASPCA

Mr. Matt PanosFeed the Children

Ms. Kim PostulartAlzheimer’s Association

Ms. Jann SchultzProject HOPE

Mr. David StraussThe Nature Conservancy

Mr. Carter WadeMasterworks

Mr. Craig ZeltsarNNE Marketing

DMA Nonprofit Federation Advisory Council

Chair

Ms. Shannon McCrackenSpecial Olympics International

Vice Chair

Ms. Gretchen LittlefieldInfogroup

2016 Leadership

Staff Xenia “Senny” Boone, Esq. General Counsel & Executive Director

Alicia Osgood Director of Membership & Communications

Malene Ward, CMP, CEM Director of Education & Conferences DMA Nonprofit Federation

@DMANF & @AliOzDC

Members Only

The DMA Nonprofit Federation of the Direct Marketing Association protects & defends nonprofit fundraising across marketing channels

to advance responsible data-driven fundraising & marketing.

1615 L Street NW, Suite 1100Washington, DC 20036Phone: 202.861.2427

Fax: 202.628.4383nonprofitfederation.org

The Journal is published online three timesper year — January, April, and September.

Alicia OsgoodManaging Editor

AOsgood@the-dma.org

Leslie Oakey Publication & Website Design

leslie.oakey@gmail.com

News UpdateAn every-other Thursday round-up of

nonprofit-specific news direct to your inbox

Nonprofit CareersThe latest jobs, delivered to your inbox weekly

Sign up for either newsletter (or both!) by emailing AOsgood@the-dma.org

Volume 19 / Issue 2 / April 2016 3

Dear Readers:

Thanks to all who joined us for Fundraisers Unite! Enjoy the fabulous images on page 17 of the photogenic crew that attended #DCNP2016. I hope to see you in NYC August 2-3 for the 2016 New York Nonprofit Conference.

The DMANF Ethics Committee finalized the GIK guidance document put before you for comment last issue based on member feedback. In an era of donor decline, how will higher education fundraising reach new heights? Read the executive summary of a new white paper from Ruffalo Noel Levitz. Target Analytics’ Katherine Swank demystifies the wonderful world of planned giving with a comprehensive glossary of terms. Nurture your planned giving program & see the old adage “the best things come to those who wait” in action. Senny’s Policy Scorecard features several important updates so please make sure to review.

Best wishes to the one & only Malene S. Ward, CMP, CEM who departs the Federation for a new career opportunity the first week of May. Malene, thank you for the stellar events & programs you delivered. You will be missed.

As always, thanks to all of you for your support of the DMANF.

Best,

Managing Editor AOsgood@the-dma.org

A Note from the Editor

Attend the 2016 DMA Nonprofit Federation’s Conference

in New York City, the grittiest and greatest city ever! You’ll

discover from top fundraising professionals the nitty

gritty details you can use to get your fundraising program

going in right direction, bound for greatness!

GET GRITTY. GET GOING.

GET GREAT!2016 New York Nonprofit Conference

GET GRITTY. GET GOING.

GET GREAT!2016 New York Nonprofit Conference

Join us at #NYNP2016!

4 The Journal of the DMA Nonprofit Federation

Definition: Gifts-In-Kind (GIKs) are contributions of goods and services offered by donors in lieu of cash donations or grants. GIKs to NGOs have significantly increased during the past 10 years to reach an estimated 17% of the total humanitarian assistance provided through NGOs.

GIKs may be tangible or intangible personal property. An example of a gift of tangible property could be medical supplies; a gift of intangible property could be intellectual property, software, or pro-bono services. For gifts of tangible property, a nonprofit may effectively use direct-distribution models and multiple channels (aggregator, pass-through, end use distributor) in normal and disaster situations to create social impact, ensure GIKs have “no harm” to local economy and the resilience of local popu-lations, and create shared values with donors. An additional approach is to use GIK for “resale,” in which an organization must take into consideration the complexity and risks associated with the resale models (market distortion, local business replace-ment, taxation liability, oligopolistic/monopolistic behaviors in marketing channels, and complexity of end-use monitoring).

Best Practices for Solicitation and Acceptance Nonprofits may further develop GIKs as a program-directed fundraising mechanism that has the dual purpose of enhancing desired programmatic outcomes and efficiently increasing revenue. A strong GIK program features many of the following best practices:

1. Clear strategy and a supportive infrastructure; 2. A clear and adaptive procedure that outlines the responsibilities within the organization; 3. Delineated accountability framework to ensure strong consultation and coordination among designated contact

points in the various units (from donor cultivation to end-use reporting); 4. Adequate warehousing, inventory management controls, and accounting that comply with industry standards

and practices; 5. A dedicated funding source to cover the cost of logistics and associated program costs not provided by donors; 6. Adequate operational oversight at the receiving ends; 7. Clear and respected standards covering compliance with organizational strategy, product appropriateness

(defined lists of desirable and undesirable products for the organization), variance power, valuation, recording and documentation, revenue and expense recognition, and disclosure;

8. Standards for refusing GIK that would involve significant expense, either directly or indirectly, for their present or future use, display, maintenance or administration, or gifts where the donor has asked to be indemnified.

9. Structured reflective sessions to analyze opportunities, challenges, risks, and the efficacy of the infrastructure to continuously strengthen overall performance throughout the GIK cycle (cultivation to end use reporting);

10. Compliance with existing host/receiving country rules and regulations, where applicable.

DMANF ETHICS GUIDANCE:

Gifts-In-Kind

Based on member feedback, the DMANF Ethics Committee

presents the final version of the GIK guidance document put

before you for comment last issue.

Please note: This guidance document is not intended as legal advice. For legal counsel, please be in touch with your own legal advisor.

FINAL

Volume 19 / Issue 2 / April 2016 5

Accounting Framework for Recording Contributions of GIKNonprofits should maintain a principles-based valuation framework to recognize the value of non-cash Gift-in-Kind (GIK) contributions based on FASB guidelines, ACCORD Gift-in-Kind Standards, and other industry standards. Vary-ing valuation methodologies can be applied to different cat-egories of GIK.

Valuation PrincipleA nonprofit recognizes GIK contributions at fair value as de-fined by FASB “…the price that would be received to sell the asset or paid to transfer the liability in an orderly transac-tion between market participants at the measurement date.” ASC 820-10-30-2 further defines fair value as “…the price that would be received to sell the asset or paid to transfer the liability (an exit price).”

Fair Value DeterminationTo establish the exit price of GIK, FASB 820-10-35-29 and FASB 820-10-35-5 guide nonprofits to use a market ap-proach technique with prices generated by market transac-tions that would occur in the principal market (the market where the reporting entity would sell the assets with the greatest volume) or most advantageous market (the market where the reporting entity would sell the assets at a price that maximizes the amount that would be received). In as-sessing the principal market, an organization must consider its position in the supply chain as a participant in that prin-ciple market.

An organization should conduct valuation analysis as guid-ed by ASC 820-10-35. The organization should incorporate quality considerations as well as quantity discounts into its methodology as supported by ASC 958-605-30-11 that states “in determining fair value, entities should consider the quality and quantity of the gifts, as well any applicable discounts that would have been received by the entity, in-cluding discounts based on that quantity if the assets had been acquired in exchange transactions.”

It is the responsibility of the donor to substantiate the gift value used when filing his/her tax return to the IRS. The IRS requires donors to obtain an appraisal to substantiate their charitable tax deduction for gifts valued at $5,000 or more. Personal property gifts with a value of $5,000 or more should be accompanied by an appraisal (performed within

IRS time requirements) from a qualified third party appraiser for gift recording valuation purposes. The cost of the ap-praisal will be the responsibility of the donor.

In cases where the donor is not claiming a tax deduction and thus isn’t required to obtain an appraisal, documenta-tion should be submitted with the deed to support the val-uation placed on the gift. Please contact (the Revenue Ac-counting Director) in cases involving this special situation.

Gifts involving the payment of expenses for an event must be documented by both the event receipts and payment documentation to substantiate who actually paid for the ex-penses. The payment documentation is required to ensure the tax receipt is issued properly.

Any purchases that include “donative intent” (partially do-

nated) should have clear, corresponding documentation of

such intent given by the donor to the receiving nonprofit.

Development should acknowledge the property gift in ac-cordance with IRS requirements. The receipt will not value the property gift because the charitable deduction valuation is the responsibility of the donor to determine. The receipt will also indicate that the donor may need to file IRS Form 8283 with an appraisal of the donated property. The receipt will be mailed directly to the donor along with a fully execut-ed Deed of Gift.

Variance Power An organization can record contributions of GIK where they can demonstrate it has variance power in distributing the gifts. FASB defines variance power as “[t]he unilater-al power to redirect the use of the transferred assets to another beneficiary. Unilateral power means that the re-cipient entity can override the donor’s instructions without approval from the donor, specified beneficiary, or any other interested party.”

POLICY EXAMPLES4

6 The Journal of the DMA Nonprofit Federation

POLICY Examples 1.1 Nonprofits should exercise proper stewardship over GIK resources for the benefit and promotion of initiatives, domestic and international programs, and core organizational functions.

1.2 Nonprofits should only accept GIK that corresponds to an established programmatic purpose, project or organizational need.

1.3 Nonprofits should exercise reasonable care to ensure GIKs are only accepted in a condition of quality that meets the beneficiaries intended uses.

1.4 Ensure that all dated and/or perishable GIK (ex: food, medicine) are distributed before the expiry date.

1.5 Nonprofits should exercise caution to ensure GIK do not put staff or beneficiaries at risk, are culturally sensitive and will not harm or disrupt local economies.

1.6 Nonprofits should take the necessary precautions to ensure that GIK are only received from appropriate business partners that have good standing and acceptable practices in the business community and pose no reputational risk to the organization.

1.7 As with any donation, GIK or otherwise, a nonprofit should ensure that no conflict of interest is present when accepting receipt of the gift or services.

1.8 Nonprofits should take steps necessary to ensure that any donor requirements are reasonably met and will honor any reasonable and lawful restrictions, conditions or guidelines donors place on the donations and or distributions agreed upon between the nonprofit and the donor.

1.9 Nonprofits should conduct GIK procurement, transportation, and management in a cost-effective manner and will exercise due diligence to ensure proper implementation, oversight, and control of GIK resources.

1.10 Nonprofits should establish valuations of all GIK received in accordance with US GAAP Accounting Principles.

1.11 Under no circumstance should the nonprofits offer for sale, sell, transfer or barter gifts-in-kind donations in exchange for any monetary consideration or tangible or intangible goods or services from any individual or entity.

1.12 All distributions of gifts-in-kind donated goods should be made to institutions and individuals without regard to gender, race, ethnicity, religious beliefs, or sexual orientation.

1.13 Nonprofits should maintain compliance with all US government regulations and foreign laws.

POLICY Examples — GIK Appeals 2.1 Nonprofits should only represent items being used within appropriate distribution timelines and/or FY timelines in appeals (align funds with shipments in process or scheduled for delivery within a reasonable timeframe).

2.2 Multipliers for GIK appeals should represent current (within 12 months) shipments or an average of shipments over a rolling 12-18 month time-period (taking into account FY).

2.3 Appeals should make an accurate representation of the scale/proportion of GIK and types of GIK that make up their work.

2.4 Appeals should use stories and images of impacted beneficiaries whenever possible.

2.5 When requested by GIK partners, appeals should be approved by partners and/or their agencies.

1

2

DMANF ETHICS GUIDANCE:Gifts-In-Kind

FINAL

PAST RECIPIENTS

2015 Food For The Poor

2014 Alzheimer’s Association

2013 City Harvest

2012 The Nature Conservancy

2011 Human Rights Campaign

2010 Heifer International

2009 ASPCA

2008 Operation Smile

2007 Doctors Without Borders

2006 American Diabetes Association

2005 CARE

2004 Mothers Against Drunk Driving

2003 Marine Toys for Tots Foundation

2002 Easter Seals

2001 Special Olympics

2000 Catholic Relief Services

1999 Christian Appalachian Project

1998 World Vision

1997 American Heart Association

1996 Disabled American Veterans

1995 March of Dimes

1994 Habitat for Humanity

1993 St. Jude Children’s Hospital

1992 Salvation Army

1991 Father Flanagan’s Boys Town

1990 American Red Cross

1989 Christian Children’s Fund

1988 Covenant House

2016

The Nonprofit Organization of the Year Award recognizes outstanding accomplishments by a nonprofit organization using direct response marketing to advance its mission. The award is presented annually based on the following criteria:

Sustained achievement in fundraising through data-driven marketing and consistently successful financial performance

Recognized leadership with a reputation for excellence within the nonprofit and data-driven marketing communities, as well as with the public at large

High ethical standards and compliance with generally accepted standards for management and public disclosure

Use of proven innovative data-driven marketing techniques

Nominations due June 15 for DMANF’s prestigious Nonprofit Organization of the Year to be presented at a gala

luncheon during the New York Nonprofit Conference this August.

Download the nomination form now!

Questions? Contact Awards Committee Liaison Alicia Osgood (202.861.2427)

Recognize the excellence that is everywhere in our sector!

8 The Journal of the DMA Nonprofit Federation

Making Higher

Education Advancement

Work

in an Era of Donor Decline

5 Trends Changing the Fundraising Landscape and 5 Winning StrategiesAn excerpt from the Ruffalo Noel Levitz whitepaper

RUFFALO NOEL LEVITZ provides technology-enabled services, software, and an-

alytics that foster productive, lifelong engagement. We partner with more than 1,800

colleges and universities and hundreds of nonprofit clients worldwide each year. We

empower our clients to aggressively rethink the status quo and reach their mission

even as they face a complex and ever-shifting environment. For more information, visit

RuffaloNL.com.

To find out more about who RNL brings to the table, visit

https://www.ruffalonl.com/consultants-higher-education-fundraising.

...

...

Volume 19 / Issue 2 / April 2016 9

Executive SummaryColleges and universities face a formidable higher educa-tion landscape. The last decade has produced a near-per-fect storm of economic crashes, funding shortages, unfavor-able demographic shifts, and budget shortfalls — bedeviling many of even the best institutions. New enrollment strate-gies have been insufficient at stemming the pain, as esca-lating price has caused affordability issues for students and parents while excessive discounting has created net reve-nue issues for institutions.

Development must instead step in and play a larger role in generating revenue for institutions. And it has, as last year, charitable giving to higher education totaled a record $40 billion.

Yet, at the same time, the underpinnings of recent higher education fundraising have forward-looking leaders deep-ly concerned about the sustainability of results in the days ahead. Most all institutions have become more reliant on major gifts carrying an increasing share of the fundraising load — while at the same time experiencing net declines in overall donor participation.

The pipeline builder for virtually all such major gifts — donor participation — has declined for more than 20 years. The is-sue is widespread and alarming, as two-thirds of institutions have suffered declines in alumni donor counts since 2007. Given that engagement and participation are two key pre-dictors of future giving, this contrast is a paramount problem for ongoing health.

Based on our work with hundreds of higher education insti-tutions on their development efforts, we believe that FIVE

POWERFUL TRENDS have emerged — dramatically impact-ing most institutions’ ability to build the donor engagement, pipeline, and results critical to ongoing institution health.

These trends reflect changes in donor expectations, com-munications, technology, and economics. An explosion in solicitations, for instance, has crowded out fundraising communications, while donors also are increasingly moti-vated by personalized giving rather than unrestricted dona-tions to colleges and universities. This has made traditional “one size fits all” fundraising programs increasingly ineffec-

tive. Furthermore, effective data management and analytics have also assumed vital roles in fundraising, while a shift of wealth to Generation X and Millennial donors has trans-ferred significant philanthropic power to younger donors.

These trends require proven methods for adapting and overcoming them, and this analysis details FIVE WINNING

STRATEGIES already helping colleges and universities in-crease engagement with donors and achieve even greater fundraising success. These institutions organize around the donor experience, aligning departments such as alumni re-lations, development, and athletics to present a unified mes-sage to donors — rather the communicating in disjointed silos. They engage Generations X, Y, and Z by presenting a notion of one integrated lifecycle, as opposed to a collection of steps, and deploy methods such as crowdfunding and other peer-to-peer engagement. Successful institutions like-wise build affinity early, first with current students through student philanthropy programs, and then cultivating regular giving with those students after they graduate. They use ac-tionable data to guide communications, strategies, and all other vital action steps. Most importantly, they attack donor decline aggressively through segmentation, multichannel outreach, and pulling lapsed donors back into the fold.

These five trends and five strategies must be well under-stood by every senior leader overseeing fundraising results at higher education institutions.

Read the full paper RuffaloNL.com/ FundraisingTrends.

24Planned Giving

Terms You Should Know

Executive Summary

You’ve established a planned giving program and you’re ready to make personal appointments with your top prospects, but you fear you’re not yet fully confident in your knowledge. Don’t panic!

Planned gifts can account for 10-30% of an organization’s annual revenue, and the percent-age usually increases over time. Today’s fundraisers understand that a strong planned giving program is integral to a healthy, well-rounded fundraising strategy. You may already have the ability to promote for legacy giving toward your organization but if you’re not ready to promote all planned gift types, you don’t have to do so! Accepting the most often made and simplest gift types is the best way to get started.

This article will discuss the most common planned gift vehicles and will start you on your way to establishing a basic planned giving program. Over time, you’ll consider if you’re ready, willing, and able to promote other vehicles such as gifts of securities, real estate, or charitable gift annuities. Strong planned giving programs build over time, but there’s no time like the present to begin.

Most conversations about planned gifts don’t start with technical questions; rather, they center on donors’ wishes to have an impact on the organization’s needs. When the time comes, you’ll be ready — this glossary of terms, which uses practical examples, will give you a basic working knowledge of key words common in ongoing planned gift conversations.

KATHERINE SWANK, J.D.

Senior Consultant Target Analytics,

a division of Blackbaud

10 The Journal of the DMA Nonprofit Federation

Volume 19 / Issue 2 / April 2016 11

1 | Planned gift or planned giving: Once called deferred giving, “planned giving” or “planned gift” refers to any chari-table gift that requires more thought and planning to execute than the average donation. Planned giving has traditionally been defined as the gift that an individual creates during his or her lifetime that will take affect at or after their passing. There are many kinds of planned gifts, including, but not lim-ited to: simple bequests in a will or trust or within an estate plan, charitable gift annuities, charitable remainder trusts, charitable lead trusts, non-cash assets and assets trans-ferred using pay-on-death or transfer-on-death documents.

2 | Bequest intention or planned gift intention: This is a donor’s indication of his or her intent to leave a future gift. An intention is neither a legal nor binding commitment upon the donor’s estate. Rather, it’s a courtesy notification of the donor’s desire to make a future gift. It is generally accepted that the average bequest amount in the U.S. and Canada is around $35,000. Some sectors like healthcare, arts & culture and higher education, report average planned gifts 3 to 4 times that amount. Many organizations treat these deferred major gift donors similar to or as the same as they would a current major donor and include them in a recog-nition club with some level of regular benefits. Because of the non-binding nature of the intention, however, it’s most wise to provide benefits that are either of no cost or low cost, such as listing donors in acknowledgement publica-tions, sending them special invitations or advance notices for organizational activities, or perhaps giving them a token thank-you gift.

3 | Bequest notification or planned gift notification:

This is an estate representative’s official notification that a bequest or other estate gift has come to realization. If the gift is a percentage of an estate, a remainder gift, or a gift of personal property, it may not be possible to determine the value of the gift immediately. In this case, a gift expectancy value may be used where appropriate until it can be substi-tuted with a more accurate amount.

4 | Bequest expectancy or planned gift expectancy:

This is a term commonly used within planned giving pro-grams to unofficially report the value or approximate value of gifts to be received in the future. Some organizations use an expectancy value of $1 until such time as a more appropri-ate value can be determined. Other organizations choose to use an average gift expectancy value. This is often arrived at by using a 5 or 10 year rolling average of actual planned or bequest gifts received by the organization. Be careful not to inflate that value by including unusually large gifts. Because some planned gifts may not be received for months or years from a complex estate or where an asset must first be sold, having an expectancy amount helps to provide a picture to organizational leadership and other staff members of the im-portance that planned gifts have on future revenue.

5 | Cost per dollar raised or “CPDR”: Usually presented in dollars and cents, the “cost per dollar raised” attempts to calculate the effectiveness of a fundraising effort or cam-paign. The CPDR concept can be applied to a specific so-licitation piece such as the May 2016 Gift Annuity Solicita-tion Appeal, or it can be applied to an entire campaign or program such as the Bequest Marketing and Solicitation Ef-fort. There is no standard method between organizations, so CPDR can vary widely depending on what expense items are being included. Typically for a new or smaller planned giving solicitation effort, costs are limited to the printing, mailing, and postage expenses that may or may not include mail house and data processing expenses. To assess the CPRD for a mature or more comprehensive planned giving program, staff salary and benefits, office expenses, outside vendor and legal/financial management, as well as other larger budgetary expenses, might be considered in the cost.

6 | Return on investment or “ROI”: This term is used by some organizations in place of the term “cost per dollar raised” and illustrates a similar concept. In a more global setting however, ROI has non-monetary objectives such as public awareness of a product or new sales leads. In the financial world it means the ratio of money gained or lost on an investment relative to the amount of money invested.

Terms commonly used in the administration of a planned giving program

6

12 The Journal of the DMA Nonprofit Federation

7 | Charitable bequest: This is a provision in a will, trust, or estate plan that allocates a gift to a designated charity. The most common gifts to nonprofit beneficiaries are cash, securities, and real prop-erty including homes and personal property (things). Many wills and trusts are still written with quite formal language and might be similar to this example:

“I give, bequeath, and devise the sum of fifty-thousand dollars ($50,000) to Middletown Library, located at 123 Main Street, Middletown, Wyoming.”

The most common gift amounts are usually stated in one of the following ways:

a. A specific amount, such as the example above.b. A percentage amount, such as “. . . Ten percent (10%) of my

estate to Middletown Library . . .”c. A remainder amount also called “residue,” such as “After all

specific bequests have been paid, I give, bequeath, and de-vise the remainder of my estate, including real and personal property, to Middletown Library . . .”

8 | Contingent bequest: This is a provision in a will, trust, or estate plan that allocates a gift to a designated charity as an alter-native to a higher priority bequest or condition to be met. Contin-gent bequests can also incorporate specific amounts, percentage amounts, or remainder amounts, such as the examples above, with-in them. For instance:

“In the event that (named individual) predeceases me, I give Miller Healthcare Foundation, 2345 East Street, Centerville, Vermont, 25% of the residue of my estate to be used wherever the needs and opportunities are greatest.”

9 | Non-probate transfer vehicles: Half of all states in the U.S. now allow the use of “Transfer on Death Deeds” that provide for the transfer of real estate directly to another person or charity — by-passing the probate process.1 Savings and checking accounts, money market and other investment funds including retirement funds and life insurance policies with built-up savings also allow non-probate transfers. This large variety of transfer vehicles, also known of “beneficiary designation form gifts”, are fast becoming a preferred way to leave charitable gifts, especially among Ba-by-Boomers and younger generations.

10 | Securities: Used for planned gift purposes, “securities” is a general term that includes the following: shares of corporate stock or mutual funds, bonds issued by corporations or governmental agencies, stock options or other options, limited partnership units, and various other formal investment instruments that can be ex-changed for money.

11 | Non-Cash Asset: When related to an outright gift or a planned gift, this term usually refers to an asset such as securities, life insurance policies, CDs, retirement accounts, real property, and the like. Conversely, gifts of currency and checks, as well as gifts using credit cards, are considered cash or cash-equivalent assets.

12 | Real property: “Real property” is a general term that encompasses land, land improvements such as buildings and machinery sited on the land, as well as the various prop-erty rights associated with owning the land, buildings, and machinery. Real property that is mortgaged or otherwise is subject to another person’s preceding claim is known as encumbered. Charitable gifts of encumbered property have their own sets of challenges and tax consequences.

13 | Personal property or tangible personal property:

Think of this as things that can be touched or things that are tangible. Examples of gifts of tangible personal proper-ty to charities include book collections, art, and jewelry. It does not include however, cash or cash equivalents such as checking accounts.

14 | Charitable gift annuity: This is an irrevocable transfer of property (e.g., cash, securities) in exchange for a contract to pay the donor or the donor’s designee an annuity for life. Depending on state law, payments could begin immediately or may be allowed to be deferred until a future date. Be-cause the value of the property exceeds the value of the annuity, it is partially a gift to the charitable institution. While most charitable gift annuity contracts are established be-tween the donor and the organization to receive the remain-der gift amount, community foundations have been given permission from the IRS to issue such gift annuity contracts on behalf of other qualifying charitable organizations. Addi-tionally, there are different types of charitable gift annuities, and not all states permit the use of each type.

a. There are several types of charitable gift annuities, usually chosen according to the type of property used to fund the annuity, or chosen because of the donor’s desire to control payment timing or payment amounts. Explore a fuller list of charitable gift annuity types and versions of agreements, as well as state regulations, on the Web at the American Council on Gift Annuities website at http://www.acga-web.org.2

b. When all of the annuitants have passed away, the residuum, or remains of the initial gift plus any interest income, is distributed to the charity to be used

Legal and technical terms commmonly used in estate planning

Volume 19 / Issue 2 / April 2016 13

according to the contract’s directions. Usually, this is for general use by the charity but may be restricted by the donor for a particular use, such as student scholar-ships or biomedical research.

c. A college tuition annuity allows a donor to create a single-life annuity that defers payments until a child or grandchild is expected to enter college. The child has the option of accepting the annuity payments for his or her lifetime or to receive much larger payments over a shorter period of time, usually four to five years.

15 | Charitable remainder trust: This is an irrevocable trust that pays a specified annual amount to one or more people for a fixed period of years (often the life of the individ-ual). At the end of the term of the trust, the remaining trust assets are distributed to the charity.

a. A charitable remainder annuity trust provides a fixed payment as determined and stated in the trust docu-ment.

b. A charitable remainder unitrust pays out a fixed per-centage of the trust value each year as determined and stated in the trust document. The value of the unitrust is recalculated annually to determine the current payout.

16 | Charitable lead trust: This is similar to a charitable remainder trust, except that the annual payments are given to a charitable organization and the principal reverts to the donor or to his or her designated beneficiaries at the end of the trust term. If the principal reverts to the donor, he or she gets a charitable income tax deduction; if to another, that person gets a charitable gift tax deduction.

17 | Income or current beneficiary: This is the person(s) or entity(ies) that receive(s) the current income or distribu-tions from a trust according to its terms.

18 | Remainder beneficiary: This is the person(s) or en-tity(ies) that receive(s) the remaining assets from a trust when its controlling terms have been met or its term of years for existence has come to an end.

19 | Life-income gifts: A generic term used to describe a variety of charitable gift vehicles that provide an income, usually for life, to a donor and/or his or her designated beneficiaries. Life income gifts include, among other things, charitable gift annuities, charitable remainder trusts, both unitrust and annuity trusts, and charitable lead trusts.

20 | Split interest gifts: These gifts, usually involving property or business interests, start with the idea of making a partial gift of an asset to charity while still retaining a partial interest in it. Because the donor retains some portion of the assets or the income from the assets, the term “split interest gift” is derived. The “split” refers to the fact that ownership is now divided between the original owner and — in our case — a charity. Splitting the interest creates a prob-lem in determining the value of the portion given to charity (gift por-tion) and the value of the portion which was kept (retained interest).

21 | Present value: The value that a gift expected in the future would be worth today. A future gift of $100,000 is not as valuable as a gift of $100,000 today due to factors such as inflation, curren-cy fluctuations, and investment risk. Financial advisors may use the phrase time value of money, referring to the way the value of money changes over time. The present value of a gift of $100,000 to be received fifteen years from now, given a 3% discount, would have a present value of only $64,186.19.

22 | Fair market value: This is an estimate of what a willing buyer would pay to a willing seller, in a free market, for an asset or a piece of property.

23 | Cost basis: This term generally means the purchase price of an asset or property. An asset’s value will change over time and can therefore appreciate or depreciate from its original cost basis. Its value at the time of gifting would be classified as appreciated if it was worth more than was paid for it. Conversely, it would have depreciated value if it was worth less than was originally paid.

24 | Capital gains: When investment (or capital) assets are held for longer than a year and then sold to another person or given to a charity, the gain or appreciation in the value of the asset may be subject to government taxation on the gain (or profit). When prop-erty subject to capital gains tax is donated to a nonprofit institution, that is tax-exempt, capital gains normally imposed might be avoid-ed by the donation. If the price of the asset has declined instead of appreciated, this is called a capital loss. Property with a capital loss is subject to different taxation rules by the I.R.S. and proposed gifts with property where a capital loss exists should be dealt with differently than those with a capital gain. Capital gains and capital loses occur in both real assets, such as property, as well as finan-cial assets, such as stocks or bonds.

Works Cited

1 States that Allow Transfer-On-Death Deeds for Real Estate. www.nolo.com. Nolo, Mary Randolph, J.D. Web. April 22, 2015.

2 Types of Gift Annuities. http://www.acga-web.org/. American Council on Gift Annuities, 30 June 2011. Web. April 22, 2015.

14 The Journal of the DMA Nonprofit Federation

Policy ScorecardSummaries of the current issues

Charitable tax deduction & other giving incentives

To date, we successfully defend the charitable tax de-

duction for individuals, but a reduction to the deduc-

tion could be on the table again.

Currently, donors who itemize their taxes may claim up to 35 percent of the amount donated to charities as a tax deduction. This giving incentive must be preserved at its current rate. President Obama included a proposed limit on the charitable tax deduction in his FY 2011 budget to change the deduction from 35% to 28% for couples mak-ing $250,000 or on individuals making $200,000, stating this would raise $179.8 billion over 10 years to help pay for government programs, and continues to support reducing the deduction. Presidential candidate Hillary Clinton recent-ly echoed President Obama’s 28% cap by proposing this reduction to help pay for tuition assistance at colleges and universities.

A reduction in the deduction continues to be seen as a via-ble option to fund government programs but is detrimental to charities who count on donations. Senators Thune and Wyden recently introduced a bill, the Charities Helping Americans Regularly Throughout the Year Act (CHARITY

ACT), to express the sense of the US Senate that the tax deduction should not be reduced.

We anticipate more proposals to reduce the deduc-

tion in 2016 as the Presidential campaign unfolds.

We will update members if and when the deduction

is challenged.

Legislation is in the works to potentially fund a “mid-

dle class” charitable gift annuity via a rollover from

an individual IRA, allowing individuals who seek to

give but also need retirement income to establish a

new way to support charities. We will keep you ap-

prised. This may face hurdles during the Presidential

election season and an inactive Congress.

Postal legislation & nonprofit mailing rates

The nonprofit postal rate discount is essential to

help eligible nonprofit mailers mail affordably. We

succeeded in pushing back efforts to drastically raise

rates in postal reform legislation over the years—yet

rates rose under the “Exigency Rate” case decision,

which tacked on a “surcharge.” The surcharge ended

in April 2016, leading to the first rate increase roll-

back, a positive outcome for mailers.

Last July, the Postal Regulatory Commission (PRC) resolved the postal exigency price increase “surcharge” dispute dat-ing from December 2013. The exigency rate surcharge was meant to allow the USPS to recover its losses from the Great Recession. The PRC order entitles the USPS to recover $1.191 billion in additional contribution, for a total exigent rate adjustment of $3.957 billion. This means that the USPS continued to include the exigency rate surcharge for an ad-ditional 8 months until that amount was “recovered” (i.e., charged to mailers) from mailers, including nonprofits. Al-though the continuation means the 4.3% surcharge paid by mailers does not decrease, the PRC order benefits mailers in the long run by bringing finality to the exigency surcharge and by providing certainty to future postal price setting.

The mailing community, including nonprofit organizations, feared the exigency rate surcharge would be made per-manent without adequate justification. DMA and others argued against a permanent surcharge as the exigency case made its way through the Court of Appeals and the PRC remand. (The USPS originally sought $8.6 billion in a surcharge for an additional 4 years.) The surcharge ended since the amount was reached. The USPS is now seeking new legislation and a full review of postal rates to find a way to preserve the exigency surcharge and to increase rates.

We oppose rate increases that will raise rates on

nonprofits and other mailers and lead to permanent

mail volume losses for the USPS as customers move

to less costly channels.

Volume 19 / Issue 2 / April 2016 15

Xenia “Senny” Boone, Esq.General Counsel & Executive Director | DMANF

The DMA Nonprofit Federation

protects and defends nonprofit

fundraising across marketing

channels to advance responsible

data-driven fundraising and

marketing. Our policy focus

continues to be preserving charitable

giving incentives, supporting postal

reform to maintain a stable United

States Postal Service, sustaining

marketing channels for fundraising,

and reviewing unreasonable

fundraising solicitation regulations

impacting nonprofit organizations

and suppliers working on their

behalf at the state level.

Telemarketing reminder: Telemarketing, robocalls & autodialers “clarified” rules by FCC

Nonprofit organizations use telemarketing for inbound and outbound

fundraising as an important marketing channel. Due to an increase in bad

actor activity with robocalls on mobile devices, the FTC and FCC have tak-

en a sharp look at current rules. As a result, new clarifications issued in July

must be reviewed by nonprofit organizations to ensure compliance.

On July 10, 2015, the Federal Communications Commission (“FCC”) released the text of its omnibus Declaratory Ruling and Order (“TCPA Declaratory Ruling and Order”) which the Commission adopted by a 3-2 vote almost a month earlier, on June 18, 2015.

In the ruling, the FCC responded to 21 petitions by a number of companies and trade associations, including the DMA, regarding the requirements of the Telephone Consumer Protection Act of 1991 (“TCPA”). The ruling, which applies to phone, text, mobile outreach, redefines the equipment definition for “autodialer,” specifies liability for calls to “reassigned” telephone numbers, allows callers to contact the reassigned number one time (only) to confirm whether or not the number has been reassigned, provides consumers with a right to revoke consent (as required by TCPA) by any “reasonable” means, and establishes new exceptions for financial and healthcare-re-lated calls. The ruling clarifies that carriers and VoIP providers are allowed to imple-ment call blocking technologies upon the request of consumers who want to use such technologies to block unwanted calls. It permits entities to send a one-time text immediately in response to a consumer’s request for information, and provides an additional 90 days to replace prior consents (a DMA petition request) with consent obtained using the language required in the FCC changes that took effect in Octo-ber, 2013.

MEMBER ISSUE: REASSIGNED NUMBERS — If an individual changes

their assigned number, how would the caller/seller know not to call that

number without proper consent? Individuals do not always alert the caller

when they change numbers, and there is no single database that tracks

every consumer and his/her number. Callers fear they could face TCPA lia-

bility if they mistakenly call a reassigned number.

(Federal Communications Commission, In the Matter of Rules and Regulations Implementing the TCPA of 1991, FCC 15-72, 7.10.15)

FCC Order Excerpt:

“The FCC finds that where a caller believes he has consent to make a call and does not discover that a wireless number had been reassigned prior to mak-ing or initiating a call to that number for the first time after reassignment, liabil-

ity should not attach for that first call, but the caller is liable for any calls there-after. The caller, and not the called party, bears the burden of demonstrating: (1) that he had a reasonable to basis to believe he had consent to make the

6

16 The Journal of the DMA Nonprofit Federation

call, and (2) that he did not have actual or constructive knowledge of reassignment prior to or at the time of this one-additional-call window we recognize as an opportunity for callers to discover reassignment.

We emphasize that the TCPA does not prohibit calls to reassigned wireless numbers, or any wrong number call for that matter. Rather, it prescribes the method by which callers must protect consumers if they choose to make calls using an autodialer, a prerecorded voice, or an artificial voice. In other words, nothing in the TCPA prevents callers from manually dialing. Callers could remove doubt by making a

single call to the consumer to confirm identity. Even if the con-sumer does not answer, his or her voicemail greeting might identify him or her. Callers can also email consumers to confirm telephone numbers. Consumers who receive the types of messages Petitioners describe, such as bank and health-related alerts to which they have consented, can reasonably be expected to respond to such email requests to in-form callers about number reassignments. In other words, callers have options other than the use of autodialers to discover reassignments. If callers choose to use autodialers, however, they risk TCPA liability. Consumers switched numbers at the time Congress passed the TCPA and callers undoubtedly called wrong numbers, yet we see nothing in the law or legislative history suggesting that Congress intended less-er—or no—protection for the unfortunate consumer who inherited a new number or happened to be one digit off the intended number.

A caller might obtain actual knowledge of reassignment in a num-ber of ways, such as by the called party informing the caller that he or she is a new subscriber to the number or that the caller has reached a wrong phone number, by accessing a paid database that reports the number as having a high probability of reassignment, by a caller’s cus-tomer reporting a new phone number prior to receiving a call, or by receiving information from a wireless carrier that the number is no lon-ger in service or has been reassigned. A caller receives constructive

knowledge of reassignment by making or initiating a call to the re-assigned number, which often can provide a reasonable opportunity for the caller to learn of the reassignment in a number of ways, including by hearing a tone indicating the number is no longer in service or hearing a name on a voicemail greeting that is different from the name of the party the caller intended to call.

…In other words, callers have options other than the use of autodialers to discover reassignments. If callers choose to use autodialers, however, they risk TCPA liability. Consumers switched numbers at the time Congress passed the TCPA and callers undoubtedly called wrong numbers, yet we see nothing in the law or legislative history suggesting that Congress intended lesser—or no—protection for the unfortunate consumer who inherited a new number or happened to be one digit off the intended number.”

Participate & get active!

If you have questions about these

and other issues and/or would like

to participatein our grassroots efforts

in the event of a legislative concern,

please contact Senny Boone at

SBoone@the-dma.org or

Alicia Osgood at

AOsgood@the-dma.org.

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