This is part 1 of 3 posts on re-defining giving. Cross pollination between the for-profit/donor sector and the non-profit world is not only good but increasingly vital.

Part 2 will be about who is it we give to, anyway?  It will be posted November 17.

Part 3 will be some creative small-dollar but high value gifting concepts, websites, stories.  It will be posted November 26.

Yesterday in my office in a medium sized non-profit, I had a hallway conversation.  It didn't mean much at the time, but as I've been thinking about this topic and preparing to write, the snippet came back to me. 

The conversation basically went like this:

Beth: I'm not buying anything for holiday gifts.  If I give something it will be hand-made or something practical and/or locally grown (like organic honey, dried lavender or homemade wine). 

S: Homemade is good--that's what I always do!

Beth: I know, that's why we always like your gifts during our Secret Santa/Harry Hanukkah office tradition!

S: (sweetly demurs, but smiles).

Beth: Matter of fact, I'm not buying anything at all right now besides food and gas.  And I hope I never do again...I know that is not possible, but the desire is not to consume--I have all I could ever need, barring replacing or fixing some things as they wear out (like shoes).   I want this consumer crises we're in to end my personal consumer crisis forever.

S:  Really? Hmm.

flickr: fluential

honey bee and lavender getting it on, like non-profits and for-profits could...

This kind of discussion/decision is not good for 'the economy'.  Retailers in my city will be hard hit, and many of them who are hanging on for the hoped-for holiday buying will go out of business because there won't be much buying. 

And if there's no buying/selling, eventually the non-profit sector runs out of support, as most of our donation dollars come from a few larger donors and corporate sponsorship and a lot of smaller donations from individuals and small businesses.  When the stock market falters, the foundations that give grants are eventually impacted as well, as they give out a portion of the interest received from the capital they are gifted with to help non-profits provide services.

I've just spent the last month working furiously, with furrowed brow and disturbing dreams to help balance the budget of our non-profit, due to an expected 30-40% decrease in donations for 2009.  There's nothing like working on the numbers, foreseeing the impact on staff that you care about and a cause that you have fought hard to expand to drive home the wisdom: we have to do this differently.

I don't have any answers, but a few questions coming from standing above the fray a little.

While we have been successful in building a balanced budget for 2009 for our organization, it's at best a  precarious balance.  The success or failure of our organization lie in 3 arenas:

• the organization making sure our core business is lean and green; how we go about doing our business is going to have to be ever-more efficient.
• donors that realize that when we say we rely on them, we mean it.
• meeting our customers' needs. We have many customers: the children and families we serve, our community partners who refer to us, and our donor base are primary ones.  How do we best serve the diverse and changing needs of our community, including our donors, in an contracting environment?

The reason the tax codes have allowed for non-profits (or not-for-loss) organizations to be given non-taxed money is that it's supposedly a wash in the eyes of the funding streams and gives the system some sense that it is caring for the less hardy or fortunate in our communities. (This doesn't include churches, as they are tax-exempt for other reasons.) 

The simplified version is this:  If the government had to purchase the services that are supplied by non-profits they would likely spend considerably more to do so than the free-standing non-profits fund raise. So it's an assumed win-win for the government, the donors, the community and the non-profits (not sure which order that list goes in!).

Without going off on capitalism, the tax system or other inflammatory issues, I'd like to speak to the issue of non-profit fundraising and the giving that fuels it. 

After spending most of my career in the non-profit world, I know a few things about it.  One is that many non-profits are not good at being grateful and seem to assume that people give money for all the same reason: altruism.  While most do give for this reason, there are many other reasons, and the cause for giving may be determined by multiple needs of the donor. 

Altruism is based on the idea that in giving we receive, a cross-pollination in basic form.  In that mutuality, there's something that flows between the giver and the receiver that may or may not be tangible.  Included in the almost innate desire to help others is the need to feel good about that giving, and the need to feel that our carelessness, our desire to look the other way, our need to have our lives not impacted by poverty, addiction, abuse and despair are being balanced by our giving.  So in essence, we are often giving to mollify some deep pain in our heart around family issues that span generations, or other deep-hearted issues that we can only deal with on a surface level.  (See part 2 next week for more about these issues.)

I am so good with all that! Sheesh, we're human and we need a way to get some relief.  What I'm also thinking is that we need to pull on something other than altruism to get us all through this economic dark night.

While I'm no g-man and I, like most people, feel that the IRS is a necessary evil, I've been wondering about how the tax system might be set up to allow the non-profits and the for-profits/donors to form a more perfect union.

There are already special tax code-driven donations such as the charitable remainder trust and the charitable lead trust, allowing the donor to give the non-profit/charity either the principle or the interest from an amount of money.

Definitions from wikipedia:

Charitable trusts may be set up during a donor's life or as a part of a trust or will at death (United States)

Charitable Remainder Trusts (CRT) are irrevocable structures established by a donor to provide an income stream to the  income beneficiary, while the public charity or private foundation receives the remainder value when the trust terminates. These "split interest" trusts are defined in §664 of the Internal Revenue Code and are normally tax-exempt. A section 664 trust makes its payments, either of a fixed amount (CRAT - annuity trust §664(d)(1)(D)) or a percentage of trust principal (CRUT - unitrust), to whomever the donor chooses to receive income. Normally, the donor may claim a charitable income tax deduction, and may not have to pay an immediate capital gains tax when the CRT disposes of the appreciated asset and purchases other property as it diversifies its portfolio of trust property. At the end of the trust term, which may be based on either lives or a term of years, the charity receives whatever amount is left in the trust. Charitable Remainder Unitrusts (CRUT §664(d)(2)(D)- paying a fixed percentage) provide some flexibility in the distribution of income, and may be helpful in retirement planning, while Charitable Remainder Annuity Trusts (CRAT - paying a fixed dollar amount) are more rigid and usually appeal to much older donors unconcerned about inflation's impact on income distributions who are using cash or marketable securities to fund the trust.

Charitable Lead Trusts (CLT) make payments, either of a fixed amount (CLAT - annuity trust) or a percentage of trust principal (CLUT - unitrust), to charity during its term. At the end of the trust term, the remainder can either go back to the donor or to heirs named by the donor. The donor may sometimes claim a charitable income tax deduction or a gift/estate tax deduction for making a lead trust gift, depending on the type of CLT. Generally, a non-grantor lead trust does not generate a current income tax deduction, but it eliminates the asset (or part of the asset’s value) from the donor’s estate.

If the trust has qualified under laws such as Internal Revenue Code Section 501(c), donations to the trust may be deductible to an individual taxpayer or corporate donor.

What a great idea these 2 initiatives are! They are capitalistic and altruistic at the same time. What I've been ruminating about is: why aren't we as a society set up to do more of this type of investing in the work of the non-profit sector, this cross-pollination? Why does it have to be 'estate planning' that brings people to use these kinds of tax-shelters and important assists to the non-profits?  Why can't these be set up for smaller amounts that are not currently in use--and make them revocable after 5 years or so, if that is the donor's wish.

Can we change the tax codes to help the  community/donors more actively invest in the non-profit world, where there is more than good will and community services that come from the partnership?  I'm convinced that there's a way, if the non-profit is solid and excellent at managing and investing funds that these partnerships could  produce funding for both the donor and the non-profit.  

Here's an article from the Association of Fundraising Professionals. It's about the resilience of philanthropy and how giving we are as a nation and how we continue to give even in our fear and distrust.

While we'll always be a generous people, we may need to get smarter, get into 'bed' with our non-profit and for-profit neighbors, in order to sustain both the services our community needs and the income to help our for-profits and donors thrive. Cross-pollination is a very good thing!

These are just some ideas swimming around in my brain--they may be budget-addled ideas, but they have some sound basis.

Would love your input.

http://www.afpnet.org/content_documents/resilient_philanthropy.pdf