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The Advisor Resource: November 2020

The Advisor Resource

At the Community Foundation, our goal is to serve as an extension of a professional advisor's team. Offering our expertise in philanthropic planning and community investment, we're here to help build a tailored giving plan that aligns with an individual's interests, values and charitable goals, while also maximizing important tax advantages and key benefits.

The Advisor Resource is an occasional eNewsletter designed to provide attorneys, accountants and financial advisors with helpful resources and information to better serve their clients.

Our November 2020 issue includes:

A couple works through financial planning

IN FOCUS: The Power of Planning

Complex community needs and recent tax law changes are shining a new light on charitable planning.

More and more, we're hearing from donors who want assistance structuring their charitable giving plans to address the complex challenges facing our community today. From the pandemic to issues of social justice and beyond, donors want to know their gifts will help drive positive change and create meaningful impact.

This trend, coupled with recent tax law changes, can add layers of complexity when it comes to helping your clients structure their charitable giving plans.

We're here to help.

In our work with professional advisors over the last few months, these are some of the most frequently asked questions we've received, and their answers:

Why the Sioux Falls Area Community Foundation?

With deep roots in this community and a Community Investment team that spends every day talking and working with local nonprofits, schools and civic leaders to understand the needs and opportunities that exist here, there's no better place to turn to for advice on where charitable gifts can make the greatest impact.

Numbers of bequest inquiries are soaring. What's driving that?

Without a doubt, the public health fears and economic uncertainty of 2020 have caused more people to plan for their futures. A report issued by FreeWill cites a 400 percent increase in the number of wills with bequests in March 2020 compared with March 2019. Encourage your clients to think about their legacies, especially as they reflect on the ways 2020 has illustrated just how important sustainable nonprofit organizations are to a strong and healthy community.

What are the advantages of "Bunching"?

For the last couple of years, your clients have likely been hearing about a tax-efficient charitable giving strategy called “bunching.” The popularity of this tool increased significantly under the Tax Cuts and Jobs Act provisions that reduced the incentive for taxpayers to itemize deductions on their income tax returns because of the now doubled standard deduction. In other words, your clients now have to give a lot more to charity to reap the tax benefits.

“Bunching” involves using a donor advised fund to separate the tax event of the charitable gift itself from their financial support of charities. Because contributions to a donor advised fund at the Community Foundation are immediately deductible for tax purposes — but are not required to be granted out of the fund to charities right away — your clients can “frontload” donations into a donor advised fund at a level where they will be able to take advantage of itemizing deductions. In essence, this tool gives your client immediate tax advantages and time to develop a more strategic and impactful giving strategy.

Discussion Point: Why open a donor advised fund before year-end?

An Eye Toward Year-End Tax Strategy

A look at the advantages of donating appreciated securities, closely held business interests.

As we look ahead to year-end, we often encounter inquiries related to the benefits of donating appreciated securities and closely held business interests. Here, we discuss each:

Appreciated Securities

Yes, 2020’s stock market has been a rollercoaster, but remember, for many clients, 2020 is an excellent year for year-end giving. As you guide your clients into year-end, don’t forget the powerful benefits of donating appreciated securities.

Donating a gift of appreciated securities is one of the most tax-efficient ways for your client to give. Gifts of publicly traded securities are generally deductible at 100% of the fair market value, including the avoidance of capital gain, at up to 30% of the donor’s adjusted gross income (with a five-year carry forward).

Here’s How it Works

  • Your client makes a gift of eligible securities directly to the Sioux Falls Area Community Foundation.
  • Your client receives a receipt detailing their charitable contribution.
  • Their gift of publicly traded securities is generally deductible at 100% of the fair market value, including the avoidance of capital gain, at up to 30% of the donor’s adjusted gross income (with a five-year carry forward).
  • The market value of a gift of publicly traded securities is calculated as the average of the high and low prices on the date the gift is received in a Community Foundation account. Once received, we will sell the shares at the earliest practical date. The amount deposited to the donor’s fund of choice will be the value of the shares when we sell the stock, less any sales or administrative fees or commissions.

Closely Held Business Interests

Year-end is also a time when most business owners consider their next steps. For some, this means developing an exit strategy built around the sale of their business. As you know, the sale of any business creates a significant tax event, so before your business-owner client starts putting out feelers to potential acquirers, be sure to counsel him or her about the benefits of contributing an ownership interest to a charitable organization, especially to a flexible donor advised fund at the Community Foundation. Doing so can help your client avoid capital gains tax on the portion owned by the charitable organization. Again, these discussions need to happen early, and well before the business is sold, but, when facilitated correctly, the tax advantages for your client, as well as the impact to local nonprofits throughout our community can be remarkable. The Community Foundation is happy to partner with you to help facilitate these types of gifts. Contact us today to learn more.

2020 year-end giving deadlines

In order to provide the best possible service for our donors, and to ensure year-end gifts qualify for a charitable income tax deduction in the 2020 tax year, please keep these important dates in mind.

  • Gifts of appreciated stock must be received into the Community Foundation brokerage accounts on Thursday, December 31.
  • Gifts of mutual funds must be received into the Community Foundation brokerage accounts on Thursday, December 31. Please note gifts of mutual funds may take over a week to complete.
  • Gifts of complex assets such as real estate, closely held business interests or stock, and planned giving vehicles should be discussed with a member of our philanthropic services team in the early weeks of December to ensure the Foundation's gift acceptance committee has adequate time for review and approval before year end.
  • Checks sent via U.S. Postal Service to the Community Foundation must be postmarked on or before Thursday, December 31.

See More: 2020 Year-End Giving Deadlines

Corporate Giving: Execs Keep Social Impact Programs Top of Mind

Case Study: How one business worked with the Community Foundation to structure a social impact program.

According to the just-released 2020 Porter Novelli Executive Purpose Study, more than 80% of large company executives believe for-profit companies have a responsibility to play a role in resolving social issues. The study also found that most executives believe a social impact strategy improves customer loyalty (93%) and helps motivate a buying decision (91%).

So how should you approach advising your corporate clients about the structure for their social impact programs, especially now that those programs play an increasingly important role in philanthropy?

We want to share one example with you that we've had the pleasure of working on:

In 2013, Alliance Communications was experiencing a symptom that comes from being a fast-growing, community-minded company.

The internet, cable TV and telephone service provider was on the move — expanding throughout portions of South Dakota, Minnesota and Iowa.

“As we were growing in all our communities, we were thinking of different ways we could give back,” said Paul VanDeBerg, head of business relations (shown above with his team in Brandon).

So Alliance turned to the Sioux Falls Area Community Foundation for help in establishing a donor advised fund to support an idea called Keep the Change, a program through which customers’ bills are rounded up to the nearest dollar.

The difference between the billed amount and the rounded amount is pooled, deposited into their donor advised fund at the Foundation, and is used to provide grants to nonprofits throughout Alliance’s cooperative service area.

A donor advised fund proved to be the perfect way to help the idea come to life. And today, nearly $400,000 has been awarded from this fund to help local nonprofits and causes working to build a better tomorrow.

See the full story from our 2020 Annual Report