October 1993
Philanthropy Journal of North Carolina
Connections
Smart Start
Nonprofits
in works
for kids
5 mart Start is off and
running. Eighty-nine
counties, some of them
working jointly, sub
mitted applications to
the state hy the Sept. 15 deadline to
he one of 12 pilot projects to improve
local services for young children and
their families.
The winners — each of which
will set up a nonprofit to run its local
program — had not been selected
when the Philanthropy Journal
went to press, but were expected to
be picked in late September.
Advocates for children have been
enthusiastic about the possibihty of
creating public-private partnerships
that will represent the broad inter
ests of communities, raising the
quality of day care and other ser
vices designed to prepare children to
start kindergarten.
But the application process,
which unfolded quickly after the
state legislature last summer
approved $20 million for Smart
Start, also has produced some con
troversy.
Controversy prompted New
Hanover County to not even submit
an application. And a Smart Start
meeting in Wake County was abrupt
ly adjourned by a county commis
sioner after a group of conservatives
called tor a vote to select members of
Wake’s Smart Start team.
Robin Britt, state human
resources secretary and the official
charged with selecting counties for
the Smart Start pilot projects, says
the process of developing Smart
Start plans is designed to let people
express their opinions. But the goal
is to produce consensus in a local
community about which particular
combination of services will produce
the best result.
“The goal here is that you do
have a process where every voice is
heard, where people’s concerns are
debated,” Britt says. “But we do
need a process that can move to con
sensus and can move to action, and
that is going to require compromise
and it’s going to require collabora
tion.”
Todd Cohen
Philanthropy
Journal
of North Carolina
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Good news, bad news
Impact of tax law on nonprofits mixed
Under a new tax law, nonprofits
must do more to document con
tributions. And people making
gifts of appreciated property can
take the same property deduc
tions under the alternative mini
mum tax as they do under regu-
iar income taxes.
By Todd Cohen
he good news about the
I changes Congress made in
I the tax laws last summer
■ is that donors have greater
incentives to make charitable contri
butions. The had news is that charities
now face a lot more paperwork.
Two changes, both affecting any
contributions made starting Jan. 1,
1994, require more record-keeping by
charities.
The first record-keeping change
bars a donor from claiming a deduc
tion tor a gift of $250 or more without
a written receipt from the charity that
received the gift.
The rule applies to gifts of cash,
property or both. The receipt should
state the amount of cash received, a
description of any property received,
whether the charity provided any
goods or services in return for the gift
and, if so, their estimated value.
The second change requires that a
charity give a written statement to a
contributor who pays more than $75,
partly as a contri
bution and partly
for goods and ser
vices.
The statement
should estimate the
value of goods or ser
vices provided by the
charity and should state
that the contributor may
deduct only the differ
ence between the pay
ment and the value of
those goods or services.
For example, if you pay
$100 for a ticket to a
charity dinner and the
actual value of the food
and beverages is only
$25, you may deduct
$75, and the charity
must e^qilain that to you
in writing.
Without such a
statement, the contribu-:
tor still may claim thCj
deduction. But the char
ity faces a penalty of $10 for every fail
ure to provide a statement to the con
tributor. Penalties for a sin^e event
can’t exceed $5,000.
Nonprofit executives say the book
keeping rules will increase their cost
of doing business.
“It’s going to mean extra costs to
our fundraising and what we’re trying
to do,” says Jim KeUey, director of
development for the Cathohc Diocese
TAXES
he alternative
minimum tax changes
are going
to be helpful
for people who wish
to give property that
has appreciated
in their hands.
WALTER R.
ROGERS JR.
Lawyer
Smith, Anderson, Blount,
Dorsett, Mitchell & Jemigan
of Charlotte and
president of the
Charlotte chapter
of the National
Society of Fund Raising
Executives.
“We’re going to have
to spend some time and
money to comply with
the new laws.”
Two other changes
in the 1993 federal tax
act could boost the
incentives to make char
itable donations.
The first change ,
involving the alternative
minimum tax, applies to
gifts of property such as
art work, stocks and
real estate. The alterna
tive tax is a “shadow”
tax designed to ensure
that wealthy taxpayers
who claim a lot of
deductions known as
“preference items” still
pay a minimum amount of taxes.
A taxpayer generally may deduct
the fair market value of property
donated to charity even if the proper
ty’s value has risen above what the
taxpayer initially paid for the proper
ty-
Previously, tor purposes of the
alternative minimum tax, a taxpayer
making a gift of property could not
deduct any increase in the value of the
property. Any increase - known as
appreciation - was treated as a “pref
erence item” and thus could trigger
the alternative minimum tax.
'The new law eliminates this item,
allowing taxpayers to take the same
property deductions under the alter
native minimum tax as they do under
regular income taxes.
The change is retroactive to gifts of
tangible personal property such as art
work made after June 30,1992, and to
other gifts such as stocks and real
estate made after Dec. 31,1992.
Some experts believe the changes
will increase charitable giving.
“The alternative minimum tax
changes are going to be helpful for
people who wish to give property that
has appreciated in their hands,” says
Ralei^ lawyer Walter R. Rogers Jr. of
the firm of Smith, Anderson, Blount,
Dorsett, Mitchell & Jernigan. “It will
provide them with greater tax benefit
and in some cases may make the dif
ference between maMng the gift or
not.”
Still another change that could
spur charitable giving is the increase
in the hipest rate at which individu
als can be taxed to 39.6 percent from
31 percent.
“(jlenerally,” says Durham accoun
tant Heather Smith Linton, president
of Linton, DiGiano & Associates, “the
higher the tax rate, the greater the
incentive to give.”
Spreading the word
Trian^e foundation pitches for charitable giving
The Greater Triangle Community
Foundation is embarking on a
campaign to persuade lawyers,
accountants, trust officers and
other financial advisers to
encourage their clients to con
tribute to charity.
By Todd Cohen
Shannon St. John is about to step
up her missionary work.
As executive director of the
Greater Triangle Community
Foundation, St. John has worked to
build philanthropy in the region.
'That effort has included trying to fos
ter regional cooperation among orga
nizations in Durham, Orange and
Wake counties.
Now, with the help of $105,000
from three other foundations, St.
John is setting out on a long-term
project to increase charitable giving
in the region.
“The foundation’s mission has
been for a number of years to e^and
private philanthropy in the local
community,” she says.
“We recognize that the vast
majority of the [700] nonprofit orga
nizations in the Triangle are very
small and would not have the oppor
tunity to conduct this kind of out
reach. And we feel that having a
responsibility
really to all of
the nonprofit
organizations
in the Trian^e,
this is one way
beyond our
grant-making
that we can be
of service to the
entire nonprofit
community in
the three-coun
ty area.”
St. John hopes in the next year to
visit 35 organizations - law firms,
accounting firms, trust departments,
financial consultants - spreading the
Shannon St. John
word that professional advisers have
“both an opportunity and an ohUga-
tion to assist their clients in achieving
their clients’ philanthropic objec
tives.”
Her goal, she says, is “simply to
get advisers to raise the question of
charitable giving in their ongoing
interactions with clients, not to urge
them to give, but simply to have char
ity or charitable objectives on their
list of matters that they discuss with
clients.”
Measuring the success of the
campaign will take years, she says,
because planned giving typically
Look for TRIANGLE, page 22
Networking
Nonprofits talk by computer - naturally
Natural electronic networks are
forming among nonprofits with
common interests, and linking
those whose similarities may
not be so obvious.
By Kay McFadden
A s anyone who’s worked at
/ \ the grass-roots level
' * knows, short budgets and
long hours often don’t allow for the
socializing that can yield helpful
exchanges of ideas and information.
And, pragmatic reasons aside, talk
ing to folks in other groups can be a
big morale-booster for slender orga
nizations.
That’s why one of the greatest
advantages computers offer to non
profits is networking - sending and
sharing thoughts and useful intelli
gence throng electronic mail. Using
a network multiplies a nonprofit’s
resources and helps
dispel that feeling
of being small and
alone.
Timewise, a network is thrifty.
You type out a message at the com
puter, send it to a general or individ
ual mailbox, and go on to other tasks
while your mailbox stores up replies.
The finances are right, too:
Networks for nonprofits don’t charge
expensive access fees that can run
into thousands of dollars per year.
In North Carolina, the best of all
worlds is contained in NC Exchange,
which provides hookup to Hands-
Net, a national network for nonprof
its based in Cupertino, Calif.
According to Terry Grunwald, pro
ject director of NC Exchange, users
pay about $400 to $600 a year,
depending on the amount of use.
HandsNet is what’s known as a
host network, meaning it brings
users throu^ the door and into an
TECHNOLOGY
electronic gath
ering where
they can choose
which group
they’d like to join on any given occa
sion. The groups within the gather
ing are natural networks - so called
because they’re a natural result of
user interests.
And that’s the beauty of what’s
happened at NC Exchange’s
HandsNet operation. Originally set
up to connect North Carolina non
profits to the rest of the country,
HandsNet has given birth to a bunch
of natural networks servicing in
state interests and needs.
“We’ve gotten so many occasions
where a group rushed to HandsNet,
put out their request and got help,”
says Grunwald. “The really interest
ing thing is how often aid comes
from the most unexpected places.”
Here’s just one great example of
how the network works. Last month.
Farmworkers Legal Assistance in
Newton Grove in Eastern North
Carolina posted an SOS to the
Farmworker Issues group on NC
Exchange/ HandsNet: The group
desperately needed a bilingual
receptionist and wasn’t sure where
to find one, or how to pay for one.
Enter Jim Powell of Prospect Hill
Community Health Center in Caswell
County who’d read the message. He
informed the group about a federal
ly-funded summer youth program at
a local high school. Through this
program, the Health Center had
hired a bilingual high school student,
a dau^ter of Mexican migrant farm
workers.
The end result of this exchange?
By using the same summer jobs pro
gram at a high school in their area.
Farmworkers Legal Services found
their staffer, a young woman bom in
Look for TECHNOLOGY, page 24