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Naming Gifts, Redux

Posted on April 6, 2016 by Mark Neithercut

In case you missed it, anyone interested in philanthropy will find Christopher Caldwell’s March 12 The Wall Street Journal essay, Donor Beware, a lucid summary of two important issues. First, he reviews the problems associated with major gifts that name a building or an institution. (The Avery Fisher Hall incident has been documented in this blog.) Caldwell’s point is that the political climate of the future may well reject a naming that today seems harmless. He cites as an example the current rejection of Cecile Rhodes by South African activists that includes the demand that a statue of Rhodes at Oxford University be removed.

In our work, we remind our clients that perpetuity turns out to be a long time and that a naming opportunity with a perpetual lifespan often turns out poorly. Most donors can achieve their goals with a 50-year naming gift.

Caldwell also dips his toe into a much more controversial pool: the taxpayer subsidy of major gifts that often benefit the elite.

This is quite a thoughtful essay and I was more than a little surprised to find it in the WSJ, especially given its length and prominent placement.

If you’re interested, call me and I’ll send you a copy, or click on this link to the essay.

The Almanac of American Philanthropy

Posted on March 10, 2016 by Mark Neithercut

Do you remember the World Book Encyclopedia? I do. I thought those days were gone, replaced by wikis, web sites and Google. Yet here comes the Almanac of American Philanthropy, a massive 1,300 page tome from the Philanthropy Roundtable’s Karl Zinsmeister.

Mr. Zinsmeister has devoted considerable space to the greatest American donors of all time (think W.K. Kellogg, Sebastian Kresge, Henry Ford, Benjamin Franklin, etc.), and he has given the bulk of the volume over to reviewing the major achievements of American philanthropy divided into nine areas, such as medicine, religion, public policy, etc.). And there is a useful review of the philanthropy literature.

All of this comes with the Roundtable’s conservative donor-focused perspective.

As an almanac, this piece is eminently readable, filled mostly with short one or two page summaries of donors, foundations, successful grants, and leading nonprofits.

In sum, this book is a marvel and anyone interested in philanthropy would derive nearly endless joy paging through this wonderful contribution to our field.

The Zuckerbergs and Their Charitable Giving

Posted on January 18, 2016 by Mark Neithercut

In December, Mark Zuckerberg created a small media frenzy with the announcement that he and his wife (Dr. Priscilla Chan) would give away 99 percent of their Facebook billions. What received less attention was their intended use of a limited liability corporation as a vehicle for this giving. The Zuckerbergs explained that the use of the LLC would give them greater flexibility to support charitably-minded entrepreneurs, whether these entrepreneurs led nonprofit or for-profit entities.

An LLC can be an innovative tool for philanthropists, just like donor advised funds, private foundations, and lead trusts — all of which we discuss with our clients.

But let’s be clear about this: Giving funds to an LLC that you control is not “giving it away” by any definition. In the end, the Zuckerbergs may or may not make gifts from their LLC that qualify as charitable deductions. And they may very well make investments in startups that have a charitable mission or community focus. History will determine whether the Zuckerbergs have honored their pledge in either the technical requirements of charitable giving or in the spirit of being charitable. But transferring funds to an LLC is not charitable.

Donor Advised Fund or Private Foundation?

Posted on November 6, 2015 by Mark Neithercut

I read an interesting article in Monday’s WSJ (11/2/2015, p. R4) about donor advised funds – interesting in the sense that the author doesn’t mention community foundations as a provider of this charitable giving tool, even though it was invented and proven successful by the community foundation field. Furthermore, the author doesn’t even mention private foundations as an option.

When we make presentations to professional advisors, a question we hear regularly is: When deciding between a donor advised fund or a private foundation, at what size does a private foundation make more sense?

My answer has always been that it depends on the goals of the donor, not necessarily asset size. For example, it can depend on your interest in personal involvement – it’s a lot easier to get personally involved with a grantee and lend additional resources beyond a grant with a private foundation. On the other hand, DAFs are a very efficient charitable giving tool that any donor should consider. Most of our clients have both.

When thinking about donor advised funds, don’t forget about your local community foundation and give some thought to your goals before deciding between DAFs and a private foundation. Indeed, you may find that both are useful tools in your charitable giving arsenal.

Donors:  The Perils of Starting Your Own Nonprofit

Posted on September 23, 2015 by Mark Neithercut

The Wall Street Journal had an excellent piece this week entitled “The Mistakes Charitable Start-ups Make” (Monday, September 21, 2015, P. R5). The article reviews a number of important issues regarding starting a nonprofit, including:

  • The likelihood that an organization already exists that works on your issue(s) of interest.
  • The large amount of paperwork and reporting required of a nonprofit.
  • The tendency to pick friends and family to serve as board members when they may not be qualified.
  • A misunderstanding of the importance of fundraising.

These are all important issues, but we find in our work with high-net-worth families that people with significant resources face a series of additional obstacles. First, meeting the public support test can be difficult for any new nonprofit, but it can be particularly challenging for a nonprofit that is started by, and publicly identified with, a person of significant means. A common reaction to a fundraising request from this type of organization is: “That is Bob’s organization, and he has more money than anyone I know. Why should I support his personal and private interests when he can afford to pay for it on his own?” If a nonprofit is funded largely by the founder and his/her extended family, the organization may eventually fail the public support test, resulting in a private foundation.

Second, a new nonprofit that is started by a person of significant means can have trouble maintaining momentum after five or 10 years, especially if the founder grows weary or is unable to stay involved.  A nonprofit so closely tied to a wealthy family can languish for reasons similar to the fundraising issues. If the entity is intimately connected with a specific person or family, others may be less willing or interested when it comes to getting involved and being supportive, especially after the initial bloom of excitement has faded.

The bottom line is this: It’s important to recognize that starting a new nonprofit can be a challenging task — and for a person with significant resources, remember that it presents a few additional challenges.

Naming Rights: How Long is too Long?

Posted on August 25, 2015 by Mark Neithercut

I saw a fascinating article in the NYT last week about the naming issues surrounding a major gift. (“College will get $20 million, if it changes its name,” New York Times, August 18, 2015, p. A18.) The article focuses upon a donor who is offering a $20 million gift to a college, with the requirement that the school add her name to its official name — in perpetuity, presumably. Thus, Paul Smith’s College may become the Joan Weill-Paul Smith’s College. Should a 75-year-old institution change its name in exchange for a $20 million gift? Well, we’ll let the college’s trustees struggle with that issue. What I found of greater interest was that the founder of the college had his own directive: He required that the college be “forever known” as Paul Smith’s College of Arts and Sciences. Thus, to honor the stipulation of the present donor, it appears the trustees will need to violate the promise made to the founding donor.

In our work, we find that naming something in perpetuity is rarely a good thing. It turns out that perpetuity is a long time. You get a better idea of this problem when you remember that Lincoln Center paid the Avery Fisher family $15 million so it could re-sell the naming rights to Avery Fisher Hall to David Geffen for $100 million. Naming rights for 50 years is often enough benefit for the donor and doesn’t handcuff the nonprofit forever and ever, which is what perpetuity turns out to be.

Tech Entrepreneurs Give Now While Building Businesses

Posted on April 20, 2015 by Mark Neithercut

This article from The Chronicle of Philanthropy provides some interesting insights into recent trends in giving among major Silicon Valley entrepreneurs.  The current generation of major donors from the tech area are eager to start their philanthropic efforts early in life—even while they are still building their businesses.  Their school of thought shows donors to be more focused, more involved and looking for results now.  This is a far different posture from days gone by when funders might write a check and say, “see me in a year and tell me how you did.”

A few highlights from the article:

“What I do think is a uniquely Silicon Valley dynamic is that they want to be intricately involved in understanding the business of the nonprofit,” [Emmett Carson, executive director of the Silicon Valley Community Foundation] said. “They want to understand the how, the why.”

Even within the rarefied world of big-ticket philanthropy, these donors form an exclusive fraternity. It is defined by its members’ relative youth, assiduous study of causes and charities, and intense interest in organizational innovation, according to people who work closely with them.

“Individuals who have great wealth, like a Mark Zuckerberg, do have influence,” said Mr. Lacon, who previously served as head of Northern California Grantmakers. “It challenges others who are in the same position, whether they are young or just wealthy, to say, ‘What are you doing with all of that wealth? Can you do it in a way that is bringing about change to the community?’”

Research Correlates Giving with Living

Posted on March 4, 2015 by Mark Neithercut

Anyone who has donated his or her time or money will tell you: it feels good to give. New research also indicates that a charitable lifestyle not only makes people happier, but physically healthier, too.

A recent Wall Street Journal article profiles research findings that found that donating to charity may improve a giver’s physical and emotional wellbeing. This same study also suggests a link between increases in charitable tax subsidies and improvements in people’s perceptions of their own health, which is recognized as an indicator of future healthcare use and mortality rates.

The research hypothesis was built around published medical and public policy research indicating that giving to others improves health and that tax subsidies significantly increase charitable giving. Researcher Baris K. Yörük, an associate professor of economics at the University at Albany-SUNY, overlaid those ideas and set out to explore whether increasing tax subsidies positively affects health.

The Journal spoke with Yörük about his findings, which include:

  • The probability of reporting better health goes up as the tax subsidy for charitable giving increases. For example, a 1-percent increase in a tax subsidy for charitable giving is associated with a 0.1-percent increase in the study’s health index. The study also found a positive relationship between charitable giving and self-reported health status – as the amount of the donation increases, health status improves in proportion.
  • Tax subsidies have a statistically significant impact on lung disease, arthritis and emotional disorders. Yörük concedes that interpreting why this is true on a disease-by-disease basis is a challenge – medical literature supports the positive impact of giving on psychological wellbeing, but the reason for the positive impact on other physical diseases is less clear. The paper also shows that tax subsidies have a positive effect on high blood pressure, diabetes, cancer, heart attack and obesity, but the magnitude of these effects is small and not statistically significant.

Yörük’s research is not the first to connect positive health outcomes from acts of giving. Dr. Stephen Post has conducted multiple studies into the giving-living connection, the results of which are shared in his book, “Why Good Things Happen to Good People.” His research includes a fifty-year study showing that people who give during their high school years have better lifelong physical and mental health. He also references additional studies showing that older people who give live longer than those who don’t, and that helping others has been shown to bring health benefits to those with chronic illness, including HIV, multiple sclerosis, and heart problems.

If you already believe that philanthropic activity is good for your soul, you can take additional comfort in knowing that it just might be good for your body, too.

A Foundation of Support Saves a Devastated Detroit

Posted on November 17, 2014 by Mark Neithercut

History happens every day, but on Friday it happened in a big way for both the City of Detroit and the philanthropic community. Nov. 7 marked the approval of the city’s federal bankruptcy plan, but as many in the foundation world know, this was no ordinary financial restructuring plan. It was an unprecedented display of the power of philanthropy.

At stake throughout the 16-month financial restructuring process were hundreds of millions of dollars in municipal pensions. Like many other public systems, Detroit’s pension system suffered from years of under-funding. As the city experienced many years of budget deficits, the under-funding problem became more acute, contributing greatly to the city’s insolvency. Given its financial straits, one of the most obvious – but least savory and politically viable – solutions for restructuring the city’s debt was cutting pensions. The city’s creditors also saw the Detroit Institute of Arts’ world-class collection of paintings and sculptures, each one vulnerable to auction in order to satisfy debt, as another source of funds. The city and its advisors, therefore, faced a major challenge: how to resolve the city’s debt crisis and confirm a viable plan of adjustment without drastic cuts to pensions and putting the city’s artwork at risk.

Enter the “Grand Bargain.”

Under the Grand Bargain, dozens of foundations, the State of Michigan, the Detroit Institute of Arts, Detroit’s water and sewer systems and businesses pledged north of $800 million to bolster the municipal pension system. The plan stipulated that the city-owned Detroit Institute of Arts be transferred into an independent charitable trust in order to put it out of the reach of Detroit’s creditors now and in the future.

As a result, retired city workers will receive slightly reduced monthly pension checks and benefits, the DIA’s treasures are protected, and significant improvements to municipal services and infrastructure have been funded. The state’s contribution to the Grand Bargain lasts until 2023, with the foundations and the art museum continuing their funding until 2033.

The Grand Bargain represents the integral role foundations play in advancing the goals of our communities and, more broadly, society. We are proud to be a member of a foundations community that recognizes and seizes opportunities to collaborate in innovative ways to achieve worthy goals. While Detroit’s Grand Bargain may not be a model for other municipal restructuring plans, it is a testament to the spirit and civic-mindedness of the philanthropic community.

Tax Benefits of Charitable Giving

Posted on November 3, 2014 by Mark Neithercut

Regardless of whether you regularly contribute to charity, it is useful to be aware of the unique charitable giving tax benefits available to entrepreneurs. Even the most knowledgeable, charitably-minded individual may not be aware of all of these opportunities. This article, written by Mark Neithercut and Jennifer Miller Oertel for the Small Business Association of Michigan, shares those opportunities.

Have a Mission to Preserve a Vision

Posted on October 26, 2014 by Mark Neithercut

Defining a mission to pursue is not as easy as it seems. Mark Neithercut’s latest article in Family Foundation Advisor argues that mission drives strategy and that therefore a family foundation needs to be sure its mission is clear before it engages in developing strategy. The article also addresses how a good mission statement can help preserve the legacy and vision of the founding philanthropist, and provides tips on how family foundations can better develop mission statements. Read the article here.

Making Philanthropy Personal and Urgent

Posted on October 12, 2014 by Mark Neithercut

Former president, CEO, and chairman of Intel, Andrew Grove, gives millions toward causes in which he has a deep personal connection. Over the last 20 years, through his foundation, Grove has given away more than $115 million. His diagnosis with Parkinson’s Disease was a large motivation for this his giving, donating $26 million to the cause. Read more about his personal giving habits here.

Mixing Philanthropy and Profit

Posted on October 5, 2014 by Mark Neithercut

Some businesses strive to make philanthropic giving a key part of their company DNA. Heart of Tea is one of those businesses. The New York City tea maker gives 30 percent of its annual profits to charity. In 2013, in just its second year in business, Heart of Tea donated $10,000 to charity. Read more about how this successful business gives back.

The Building Block of a Foundation

Posted on October 2, 2014 by Mark Neithercut

Mission statements are a fundamental building block of a foundation’s work. With a clear and effective mission statement, a foundation can enact its vision and preserve the intent of its founding philanthropist. Philanthropy Roundtable recently published our article, “Creating a Mission Statement to Preserve a Philanthropic Vision.” Click here to read the full article.

How to Preserve a Legacy

Posted on September 21, 2014 by Mark Neithercut

An organization on a mission is inspiring. Unflappable. Unstoppable. View our latest infographic, which was recently published on the Council on Foundation’s blog, to learn about one of the most overlooked elements of preserving a legacy.

A Tool to Spur Innovation and Create Awareness

Posted on September 11, 2014 by Mark Neithercut

The recent Breakthrough Prize in Life Sciences established by tech giants Yuri Milner, Sergey Brin, Anne Wojciciki, and Mark Zuckerburg has been awarded to 11 scientists doing innovative research. At $3 million for each scientist, these awards are more than twice the amount of each Noble Prize. The buzz surrounding these awards has shed light on a giving method that is growing in popularity: prize philanthropy. This giving method can be a useful tool for philanthropic leaders who are especially interested in bringing about radical new innovations or increasing awareness about a cause. But don’t close down your foundation or throw your giving plan out the window yet. Prizes are often more challenging to plan, advertise, and award than traditional gifts or grants. Prize philanthropy is not a replacement for traditional philanthropic tools, such as grantmaking, but can be a welcome addition to a philanthropist’s toolbox.

What is Prize Philanthropy?

  • Prize philanthropy is a form of philanthropic giving in which a competition is set up by an individual, foundation, or corporation through which individuals, teams of individuals, or organizations compete for a prize.
  • Prize philanthropy is the nonprofit sector’s answer to innovative Research and Development in the for-profit and public sectors. Those who award donated prizes “incentivize breakthroughs perceived as having some sort of broad social or philanthropic intent.”
  • Prizes are usually monetary, but a competition can also have other benefits such as providing a platform to showcase a new project or program or putting the prize winners in contact with people who can help them; for example, a partner that can help turn a winning prototype into a product.
  • A prize may or may not be funded by the same individual or organization that designs and runs the contest. A foundation or individual may make a grant or gift to a nonprofit that is set up to award prizes to ensure a prize is tax deductible. A foundation may also award a prize on its own as a non-taxable expenditure, but strict IRS guidelines regarding prizes must be followed.

Six Misconceptions About Family Foundations

Posted on September 10, 2014 by Mark Neithercut

It seems everyone wants a foundation these days – at least many people do. So, what are the common misconceptions about family foundations? The Council on Foundations recently published an infographic we prepared on its blog, Re: Philanthropy. The infographic explains the six common misconceptions concerning family foundations. Click here to view our infographic.