1. After the Tax Cuts & Jobs Act What do Nonprofits Need to Know?
Charitable Planning
After the Tax Cuts & Jobs Act
What do Nonprofits Need to Know?
Presenters:
Robert F Price, CPA, MST, AEP, Shareholder/Tax Price, Paige & Co, Clovis CA 93612
(559) x 112 –
Lynne P Pietz, JD, Executive Director, Development, Hinds Hospice, 2490 W Shaw Ave, Fresno CA 93711
(559) –
Crescendo Interactive, Inc. 2013

2. TCJA is a game changer for donors & nonprofits
The charitable deduction can only be claimed by those that itemize their taxes
Many donors will want to stop itemizing so they can claim an enhanced standard deduction
Yet, gifting certain kinds of assets can help many donors cut their taxes (assuming they itemize)

3. Nonprofits can help non-itemizer donors find reasons to give that have nothing to do with taxes
There is also a financially smart way for every donor to make a gift regardless of their circumstances
Development professionals must understand the tax changes so they can help donors find gifting strategies (and reasons to give) that fit the donor’s situation

4. Overview of the Changes:
Increase in the standard deduction
Elimination of personal exemptions
Limit on State and Local Taxes (SALT) of $10,000
Reduction in the corporate income tax rate
Reduction of five of the seven tax brackets (marginal rates)

5. TCJA Changes: (continued)
Increased Charitable Contributions Deduction for cash from 50% of AGI to 60% – but only if deduction exceeds new standard deduction
Temporary doubling of estate, gift & generation skipping tax exemption for individuals from $5M to $10M base, indexed for inflation until With proper planning, couples can shelter up to $22.4M in 2018

6. TCJA Changes: (continued)
Mortgage Interest – $750,000 Loan and no deduction for Home Equity Loan Interest
Medical: 7.5% Floor for 2017 & 2018
10% Floor in 2019
Adjustment of the Alternative Minimum Tax (AMT) tables so that fewer taxpayers are subject to AMT
Elimination of the “Pease Rule” which lowered value of charitable deductions for HNW donors

7. What Did NOT Change? Donor Advised Funds (DAF)
Rules on Qualified Charitable Distributions (QCD) from Individual Retirement Accounts (IRA’s) for donors over 70 ½
Capital gains tax rates
Planned gift rules regarding charitable gift annuities (CGA’s), charitable trusts (CRT’s and CLT’s)

8. TCJA Tax Rates Top Income Tax 37% Income/Medicare Tax 40.8%1
Top Income Tax 37% 2
Income/Medicare Tax 40.8% 3
Top Capital Gains Tax 23.8% 4
Top C Corporate Rate 21% 5
Passthrough Business Rate 29.6%

9. ACJA Tax Rates
Single Person
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10. ACJA Tax Rates
Married Couple
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11. Standard Deduction Married -- $24,000 (was $12,700)*
Single -- $12,000 (was $6,350)*
*If over 65 or blind, the standard deduction is increased by $1,600 for single individuals and $1,300 for each married individual
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12. What do these changes mean?
Lots of unknowns; “donor paralysis” is possible
Many taxpayers will see more income – but lose deductibility for charitable gifts. (Estimates: itemizers reduced from 45 million in 2017 to 18 million in 2018)
Most estates won’t pay estate tax (until 2025)
Corporations will have more revenue
Charitable gifts can still provide tax savings if anticipated deduction exceeds the standard deduction (and taxpayer itemizes)
Crescendo Interactive, Inc. 2013

13. Appreciated Property Gifts
Charitable Tax Planning: What Kinds of Gifts Produce Tax Savings?
1. Make Appreciated Gifts
Bypass Capital Gains
FMV Income Tax Deduction
2. Skip Year Funding (“Lumping”)
3. Age 70½ IRA QCD (Qualified Charitable Distribution)
60% AGI
Cash Gifts
30% of AGI
Appreciated Property Gifts
Charitable Deductions
The first strategy is to reduce taxable income through charitable gifts. The most attractive charitable deduction is through a gift of appreciated property. A gift of appreciated stock, land or other assets produces two benefits. The gift will produce an income tax deduction, generally for the fair market value of the asset. Because the receiving charity is tax exempt, it may sell tax-free and the capital gain is also bypassed. These two benefits make a gift of appreciated property very highly attractive. The limit on deductions of these gifts is 30% of AGI, with a carry forward of any excess for up to five additional years.
It is also possible to make cash gifts. The cash gifts are deductible to 60% of the AGI. For a donor who makes both appreciated gifts up to 30% of AGI and additional cash gifts up to 20% of AGI, the total may equal 60% of AGI for the year. With a combination of a QCD from an IRA and maximum use of charitable deductions, upper-income persons may reduce their taxes by 60% to 75%.
IRA Charitable Rollover
The next strategy for any charitably-minded taxpayer who is over age 70½ is to make maximum use of the IRA charitable rollover. By transferring funds to directly from an IRA custodian to charity, there is a qualified charitable distribution (QCD). The QCD each year is limited to $100,000. Fortunately, a QCD fulfills the IRS rule that you must take a required minimum distribution (RMD) each year. All upper-income persons who are interested in philanthropy should keep AGI as low as possible with an IRA charitable rollover. This will avoid many of the tax increases with higher AGI levels.
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14. Planning Option 1: Gifting Appreciated (Capital Gain) Property
Example: Gift of Stock
Fair Market Value: $50,000
Cost Basis ,000
Taxable Gain if Sold $30,000
Results of Sale:
Increases reportable income in year of sale
Impacts taxability of Social Security Income
Increases capital gains tax payable
Reduces Net Cash Available for Charitable Gift

15. Gifting Capital Gain Property to Charity vs Sale
Results:
Charitable Income Tax Deduction $50,000
Capital Gain Included in Income $ -0-
Charitable Deduction Limited to 30%
If Exceed 30%, Have Five Year Carryover
Other Benefits:
Use Cash to Repurchase Stock and Set New Basis
Can Allow New Purchase to Gain in Value for Future Gift

16. Planning Option 2: Skip Year Giving:
Harder to surpass new standard deduction thresholds
Donate two years worth of contributions every other year and use standard deduction every other year
Can distribute gifts over two years if gift is made through Donor Advised Fund
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17. Skip Year Gifting: An example: Typical Year Vs. Alternate Year
Charitable $10,000 $20,000
State Taxes , ,000
Mortgage Int , ,000
Total $25,000 $35,000
Std. Deduction , ,000
Excess I.D. $ 1,000 $11,000
32% Tax Benefit $ $ 3,520
Results:
Use the benefit of the Std. Deduction in one Year
Itemize the next year: Provides a Net $3,520 Benefit

18. Planning Option 3: Qualified Charitable Distributions from IRA’s:
Age 70 ½
Direct Transfer up to $100,000
Not Taxable
IRA ROLLOVER GIFTS
The IRA charitable rollover is available for individuals who are age 70½ or older. It is a direct transfer to a public charity. Previously, some individuals would take a withdrawal from their IRA, report the distribution as taxable income, make a cash gift to charity, obtain the required receipts for charitable gifts over $250, and then take a deduction on their tax return. Not only was this process rather cumbersome, it also resulted in increased adjusted gross income.
The IRA current gifts rollover is very simple. The transfer is made directly from the IRA to the qualified public charity. The IRA rollover is not taxable on the donor’s tax return and there is no need for a tax deduction. It is a nice, simple and effective way of making a charitable gift.
No Tax Deduction

19. Example: Non-Itemizer Donor over 70 ½
Retired Nurse
Owns Home, Savings and Stocks, plus $435K IRA
Annual Gift $10,000
Standard Deduction – No added gift deduction
Better – IRA Qualified Charitable Distribution (QCD)
QCD does not qualify for charitable deduction but reduces her AGI
JUDY – STANDARD DEDUCTION AND THE IRA ROLLOVER
Judy was a retired nurse and a volunteer for her favorite charity. During her working years, Judy had never enjoyed a large salary. With good investments and tax-free growth, Judy's retirement plan had increased to over $435,000.
Judy is now age 78, owns her home and has more income then she needs. Each year she makes a gift of $1,000 to charity. Because she does not have home mortgage interest or enough other deductions to itemize, Judy takes the standard deduction. But she has heard about the IRA charitable rollover and wonders if that will be a good option. She asked her best friend, “Do you think that I should give the $1,000 from my IRA?”
Each year Judy is withdrawing the $1,000. It increases her income by $1,000. Because she gives the $1,000 to charity and takes the standard deduction, Judy does not reduce her income taxes with her gift. She has increased income of $1,000 from her IRA, but no added charitable deduction.
A better plan is for Judy to gift the $1,000 directly from her IRA to charity. This would reduce her income by $1,000 and will save taxes.
Judy was pleased to learn that she could rollover $1,000 from her IRA to her favorite charity. Best of all, Judy was able to make the gift and reduce her current taxes. Judy spoke with her best friend and noted, “An IRA charitable rollover is a great plan. I helped those in need through favorite charity, and also lowered my taxes!”

20. Social Security Donor
Retiree aged 78 with CDs, a large IRA , retirement income and home
He must take a Required Minimum Distribution (RMD) from his IRA every year, causing 85% of his social security benefit to be taxed. Extra tax kicks in at these thresholds:
$25,000 for single taxpayers
$32,000 for married couples
If he directs up to $100,000 of his RMD to a charity, he cuts his AGI. This can help to reduce the amount of his social security benefit subject to tax. Also can reduce Medicare premium.
SAM – THE SOCIAL SECURITY IRA ROLLOVER
Sam is a retired manufacturing worker with a substantial IRA. He has some retirement income from CDs and dividends from stocks. With his regular retirement income, his Social Security payments are taxable at 50%. However, Sam also has a large IRA. At age 78, the federal rules require a larger taxable IRA distribution each year.
With Sam's required distribution from his IRA increasing his taxable income, he knew that up to 85% of his Social Security payments would soon be taxable. Sam spoke with the gift planner at favorite charity and discovered that there now is the option for making a gift directly from his IRA to charity.
After learning about this option, Sam was excited about the IRA rollover and decided to check with his tax advisor. His tax advisor explained the advantages of this plan.
Since the IRA rollover qualifies for part or all of the required minimum distribution, Sam could give part of his required IRA payout to favorite charity. By transferring a portion of his required distribution to charity, Sam is able to maintain a lower taxable income. With a lower income level, 50% rather than 85% of Sam’s Social Security payments may be taxed.
Sam commented, “This IRA rollover is a great plan. I helped those in need through favorite charity and also lowered taxes on my Social Security payments!”

21. How Donors Can Give From IRA1
Donor contacts IRA Custodian
Sign application requesting $ amount or % be sent to charity 2 3
IRA Custodian sends funds to charity 4
If specific purpose, contact charity
HOW TO GIVE FROM AN IRA
The IRA rollover will require a payment by your IRA custodian to a qualified public charity. IRA custodians are in the process of preparing documents to make the IRA rollover payment.
The first step is to contact the IRA custodian. Most IRA custodians have a standard IRA distribution form. It is likely that the IRA custodians will add the IRA charitable rollover as an option to this form. The IRA owner will need to sign the application, and indicate the amount of the gift and the correct legal name, city and state of the public charity.
After the IRA custodian has received the form and processed the transfer, it will pay the specified payment to the public charity. This gift can be made for a specific purpose. For example, the gift could be to a specific relief fund, to a scholarship fund, or to another “field of interest fund” with a charity.
Charity should state gift is not received by donor advised fund or supporting organization 5 4 5 4

22. Other Planned Giving Tools
Wills, trusts and bequests
Beneficiary designations: IRA’s, 401K’s, annuities, life insurance
Life Insurance gifts
Donor advised funds
Gifts of house or farm/life estate
Commodity gifts by cash basis farmers
Charitable remainder or lead trusts (“CRT’s and CLT’s”)
Charitable gift annuities (“CGA’s”)
Family foundations

23. How Can Nonprofits Respond to TCJA?
Learn about TCJA and educate your donors
Monitor your donation revenue carefully
Get to know your donors and why they give to you
Build donor engagement and translate your story into outcomes to help donors find “value” in gifting
Explore opportunities with corporations (they have more $)
Focus on major donors – they can reap huge tax savings through large charitable gifts

24. How to respond to TCJA? (continued)
Promote QCD’s to older donors (from their IRA’s)
Be prepared to explain “lumping” of gifts to donors
Encourage simple after-death gifts through estates using beneficiary designations and bequests
Be on the lookout for gifts of appreciated assets
Educate yourself about CRT’s, CLT’s and CGA’s - they provide great tax-smart gifting opportunities
Come to the San Joaquin Valley Planned Gifts Council Annual Symposium on June 15, 2018

25. IN SUMMARY The new tax law and rules apply NOW
The sky is not falling – but it is a new world
Know what TCJA means to your donors
Focus on telling your story & building relationships
Laugh at least three times a day!!