Charities Scramble to Persuade Donors to Make Retirement-Account Gifts

With the future uncertain for a law that allows older Americans to transfer money from their individual retirement accounts to charities tax-free, nonprofit groups are rushing to get as many gifts as possible by year’s end.

Nearly two years ago, Congress passed a law, set to expire on December 31, that allows people ages 70 or older to transfer up to $100,000 annually from their IRA’s without paying tax on the withdrawals. The measure has helped many charities win donations — at least $111-million has been donated through retirement accounts, according to an estimate by the National Committee on Planned Giving.

The House has already approved a one-year extension of the law, and the Senate is expected to act soon to extend the provision through 2009.

But fund raisers are still focusing on the December 31 deadline in the hopes that some donors will set up gifts now out of concern that the benefit could lapse.

Focus on a Deadline

Among the efforts under way:

• Fund raisers at the Nature Conservancy are making dozens of personal visits to some of its most generous older donors, urging them to act before the law expires. The charity, which expects to raise a total of nearly $4-million in retirement-account gifts by the end of the year, is also advertising the December 31 deadline in its quarterly magazine and other publications.
• In Ohio, the Columbus Foundation, which has received more than $1-million in IRA donations to date, has been sponsoring full-page advertisements in local business newspapers and magazines to reach financial advisers who might recommend such gifts to their clients. One of the ads features an old-fashioned alarm clock with the hands set at five minutes until midnight. “Make the most of the short window of opportunity,” it reads. The foundation has sent e-mail messages and letters to donors and professional advisers to remind them that time is running out to arrange an IRA gift, and last week made another in a series of presentations to local brokers about giving options, including the IRA benefit.
• The University of Alabama, which also expects to raise about $1-million from IRA transfers, including at least $300,000 this month, is sending e-mail messages to donors warning them of the December 31 deadline, and is including the same information in brochures about year-end giving options. Since the IRA provision allows donors to give a maximum of $100,000 annually, the key is to get wealthy donors to make a gift every year, says Phillip B. Adcock, the university’s assistant vice president for advancement.

  A donor who gave the $100,000 maximum to the university last year is giving the same amount this year. His wife, who just turned 70 this year, is also giving $100,000 from her IRA. “That’s $300,000 from one couple,” Mr. Adcock says.

• Vermont’s statewide public radio station, VPR, has been broadcasting brief radio spots once a day highlighting the December 31 deadline for IRA gifts. Robin Turnau, vice president for development, says the station expects to raise a total of about $175,000 by the end of the year. For many of the donors, the IRA gift is the largest they have ever made to the station. For example, a woman who has never given the station more than about $5,000 at one time is donating $100,000 through her IRA this year, Ms. Turnau says.
• The Saint Louis Zoo, which has received a total of $700,000 in IRA contributions, placed calls to donors who had promised that when they die, money in their retirement accounts will go to the zoo. Fund raisers told them about the IRA benefit and urged them to make their gift this year. Those calls were followed by a postcard about IRA donations. Featuring a kangaroo, it urges donors to “jump-start your legacy,” by making a retirement-fund gift “before time runs out.”

Such last-minute promotions could produce a sizable payoff for charities, says Timothy J. Prosser, a senior official at the TIAA-CREF Trust Company, in St. Louis, a nonprofit financial-services organization that has processed dozens of IRA donations.

Since the law passed, Mr. Prosser says, he has helped nearly 150 people transfer more than $1.2-million in IRA money to nonprofit groups and he expects to see a flurry of additional IRA gifts this month.

“Charities that inform their donors adequately about the deadline are going to see some nice gifts in this last quarter,” he says.

Lack of Response

Not all charities are gaining significant benefits from the IRA incentive.

One reason is that the number of older Americans who have IRAs is not that large, which means that a big percentage of account holders would have to give to make a difference, says Robert F. Sharpe, a Memphis planned-giving consultant. He points to figures from the Investment Company Institute, a Washington trade association for investment companies, showing that only 37 percent of people older than 55 have an IRA.

Some charities, even after strenuous efforts to promote IRA donations, have received no such gifts.

That is the case with several local United Ways, says Edward F. John, vice president for planned giving at United Way of America, in Alexandria, Va., which has just completed the last in a series of online seminars about giving that emphasizes the IRA-gift deadline and enables local affiliates to ask questions about it. Local United Ways can also tap into an online resource center about the law.

“My gut tells me that 80 percent of United Ways have not experienced any positive results from the IRA law, either because they didn’t understand it, they didn’t promote it, or they had no takers,” Mr. John says.

Part of the problem, Mr. John says, is that it’s hard for potential donors to understand how they benefit from making an IRA gift. Donors typically see the tax advantage of charitable contributions when they claim deductions for those gifts on their income tax returns. While donors do not receive a tax deduction for giving money from their IRA, they do avoid the taxes they would normally pay for making a personal withdrawal from their account.

“It’s almost counterintuitive, says Mr. John. “You’re saying to donors, ‘You can get this money out of your IRA, but you can’t take a deduction for it.’ They say, ‘Why is that such a good deal?’”

Poor Promotional Effort

Vaughn W. Henry, a Springfield, Ill., planned-giving consultant who is a frequent speaker at conferences for estate planners and other financial advisers to donors, says charities have done a poor job of letting people know about the law. “I mention it at every presentation,” he says. “The fact that I still hear people say they don’t know anything about it tells me that we haven’t done a very good job.”

What’s more, many elderly people cannot afford to donate money from their IRA accounts, says Mr. Henry. “You can’t take money out of your retirement when you need it to eat.”

Roy Quanstrom, a fund raiser at the Heartland Division of the Salvation Army in Peoria, Ill., which covers central Illinois and eastern Iowa, says many of his charity’s donors are not rich enough to make IRA gifts. His organization has received just eight, totaling $41,000. “Other organizations did a lot better than we did,” he says. “It may have to do with the wealth of their typical donor.”

Although the law permits IRA transfers up to $100,000 per year, some charities have been able to attract gifts by seeking lesser amounts from donors.

“People say they don’t have $100,000,” says Thomas L. Thieken, director of planned giving at the Catholic Community Foundation, in Phoenix. “I say, ‘You can do an IRA gift with $2,000.’”

By publishing simple examples of donors who made gifts of a similar size on its Web site and in brochures, the foundation has received amounts as low as $5,000, for a total of about $250,000 so far in retirement-account gifts, Mr. Thieken says. And the foundation, which also sends information on the expiring IRA provision to churches for inclusion in their bulletins, has fielded more than a dozen calls from donors who want to help their churches with an IRA donation.

No matter what Congress does in coming weeks to extend the provision temporarily, charities plan to keep lobbying lawmakers to further expand the law so donors will be more likely to send retirement funds to charity.

The National Council on Planned Giving is asking Congress to make the break for IRA gifts permanent and allow people to donate as much as they want each year with no limits.

Lawmakers have introduced House and Senate versions of a bill backed by the National Council on Planned Giving that would expand the types of groups that could receive support: Donors could transfer IRA gifts to foundations, donor-advised funds, and other entities that are not now eligible to receive the retirement-account money. In addition, they could put their IRA funds into charitable remainder trusts and other types of gifts that produce income for donors for several years, with everything left eventually going to charity.

What’s more, the legislation also would allow donors as young as 59 to make contributions from their retirement accounts.

But getting those changes passed will be an uphill battle, says Mr. Sharpe, the consultant, especially because members of Congress will worry about the potential burden on the federal treasury.

Meanwhile, Mr. Sharpe and other experts are urging charities to be aggressive in promoting IRA donations before year’s end. Says Mr. Sharpe: “There’s definitely still time to pick up the phone.”