Year-End Giving Season Is Bountiful for Charities That Rely on the Wealthy

With just a little more than two weeks left in the holiday giving season, the Fidelity Charitable Gift Fund is close to raising as much money as it did in 2007, before the recession slammed the door on big gifts from wealthy donors.

By Monday, annual contributions to the charity topped $1-billion, a big jump from the $700-million it had raised by the same day in 2009. Fidelity, which seeks large gifts to charitable accounts called donor-advised funds, and other institutions that get much of their support from wealthy people—such as colleges and community foundations—are reporting a surge in year-end donations.

While some of those institutions are still not raising as much as they did before the recession, many are reporting gains of 10 percent or far more over last year. The percentage gains are much higher than those reported by many other kinds of charities that rely heavily on modest gifts from low- and middle-income donors, according to a new Chronicle poll.

A Question of Taxes

Leaders at charities that raise a lot from rich people said they would have collected even more money by now if the Capitol Hill debate over whether to raise federal income taxes for wealthy Americans had not dragged on for so long. Congress passed a measure on Thursday night that maintains current income-tax levels until 2012.

Charity leaders say that the new measure may clear the way for last-minute gifts by affluent donors who had shelved plans to donate this year until the tax implications were clear.

But even before income tax levels were assured, Benjamin Pierce, president of the Vanguard Charitable Endowment Program, which also offers donor-advised funds, says that giving to his organization this year has far surpassed last year’s returns. Total donations have grown by 17 percent over 2009, and the number of new donor-advised funds has increased by more than 70 percent.

Many charities are benefiting from donors’ growing interest in donating stakes in privately held businesses and other forms of restricted stock this year. “We see a continuing interest in alternative gifts like limited partnerships and other complex gifts,” says Laura McKnight, president of the Greater Kansas City Community Foundation, where contributions from new donors have grown by 20 percent, with much of that increase coming from such gifts.

“There has been a change in donated assets,” agrees David Wills, president of the National Christian Foundation, now projecting at least a 40-percent increase in contributions to donor-advised funds this year. In the first two weeks of December alone, he says, his organization has raised more than double the amount it expected for those weeks.

“People are much more likely to give a business interest or any kind of nonliquid gift from gold to real estate to interest in a company,” Mr. Wills says. “It used to be that you gave cash, and if you were really smart, you looked for publicly traded stocks with long-term capital gain. Not anymore. The question for donors has always been where should I give and how much? The new question is what should I give? That is a whole new set of issues.”

The University of Alabama is in negotiations over a donation of rare books worth at least $1-million, after accepting another gift of historical documents worth $12-million this fall.

“People are looking at giving what they have, as opposed to money,” says Phillip Adcock, assistant vice president for development.

Stock Gifts

Many donors are also showing far more interest in contributing publicly traded stock as the markets and donors’ confidence continue to improve.

At the Schwab Charitable Fund, stock gifts from January through November rose by nearly 200 percent, to $516.6-million, up from $180-million over the same period in 2009.

Schwab and other charities that offer donor-advised funds are also benefiting from transfers of assets from the private foundations of wealthy donors who have decided that, because of the bad economy, they are better off with a donor-advised fund.

“Donors’ assets dropped in the downturn, and the only way to keep up grants is to cut costs,” says Kim Wright-Violich, the president of Schwab. “We can cut 40 percent of their costs.”

That is one big reason why Schwab has received $235-million in assets from private foundations this year, or close to a third of the $697-million it had raised by the end of November, says Ms. Wright-Violich.

Another reason so many private foundations are transferring assets to donor-advised funds this year is the Bernard Madoff scandal, says Mr. Pierce of the Vanguard Charitable Endowment Program. Many charities invested with Mr. Madoff but lost big when his Ponzi scheme collapsed.

Now with two dozen lawsuits pending against private foundations and charities that may have benefited from Mr. Madoff’s fraud, “people running these funds do not want this liability, and unloading investment oversight relieves this burden,” says Mr. Pierce.

After getting “dozens of inquiries” from private foundations this year, he says, he got another one this week about a fund worth more than $10-million.

‘A Real Nail Biter’

Not every institution that seeks gifts from wealthy donors is reporting an increase in giving this year. At the Silicon Valley Community Foundation, in California, for example, big donations in the final quarter of the year have declined every year since 2007. And this year, “things have slowed down in November and December,” says Mari Ellen Loijens, the foundation’s chief fund raiser. “It is a real nail biter.” Ms. Loijens chalks up the lull in year-end giving to wealthy donors’ continuing uncertainty about taxes. But she hopes the next two weeks will unleash multiple large gifts to help the organization raise at least as much as it did last year.

“In the last two weeks, we can raise twice as much as we do in the rest of the final quarter,” she says. “We might raise $30-million from October 1 to December 15 and then raise $60-million in the last two weeks.”

Now that Congress has passed a low that maintains current income-tax levels, she adds, “I am hopeful I get blown away by a wave of generosity.”

Regardless of whether such a waves materializes for nonprofit groups between now and the end of the year, leaders of large institutions say that affluent donors have become pickier this year.

“Donors are really shopping more; their advisers want to compare us to others. There is lots of back and forth,” says Eileen Heisman, president of the National Philanthropic Trust, which seeks donor-advised funds.

In negotiations this week over a $10-million gift, Ms. Heisman says, “we had an adviser today tell us that the donor wants to talk to the president whenever she wants.” For such a large gift, she adds, “I was fine with that.”

Says Mr. Pierce at Vanguard: “Over the last 11 months, we have found that people are highly interested in the way we operate. Maybe this goes back to Madoff. They are asking how we are paid, how we pay our bills. They are being more careful.”

Wealthy donors, adds Ms. McKnight at the Greater Kansas City Community Foundation, “are demanding more from their giving experience.”

Many families with donor-advised funds requested gift cards to use as holiday presents this season. The gift cards enable donors’ friends or relatives to make a donation to a local charity that is processed through the foundation’s Web site, and they can be purchased in any amount.

Donors are increasingly looking for “tangible, hands-on” ways to share their giving experience, says Ms. McKnight, and the foundation is trying to respond. In addition to the gift cards, she says, the foundation plans to offer five or six new services for donors next year, up from two or three in previous years.

“The challenge has been to make our services resonate,” says Ms. McKnight. “We are not selling the same products and services we were five years ago. If we were, there would be a decline in giving.”