Yeah, more of a base fund on steroids that could enable more aggressive giving.
Yeah, you’re right perhaps smart financial instruments could be helpful (Yield and Spread could advise). However, I’m not sure sure that there would be products that could be as safe as a broad right to obtain some percent of your former donations.
Still seems like a broader policy could enable significantly more aggressive giving. Base fund’s cap of 2k likely wouldn’t be sufficient to many donors’ concern.
I bet more EAs would be comfortable with giving larger percentages of their income if they felt like they could do so while being responsible to themselves and their families.
I think Basefund’s 2K limit is based on it being in trial status, rather than something that is intended as a permament feature. However, as Bob mentioned, its status as a 501(c)(3) constrains the circumstances under which it can return money to a donor. Given that donation amounts are right-tailed and they can only return money to address “hardship,” I don’t think the Basefund model is likely to scale to protect a large percentage of donations (as opposed to a large percentage of donors, which is more plausible to me).
@Denis wrote a post about a similar idea recently. I opined that it likely posed some tax hurdles, because the revocable donations would probably be seen as loans, and we discussed some potential workarounds. Those workarounds are probably easier to execute to the extent “some percent” is significantly less than 100% and there are reasonably well-defined criteria for what circumstances would warrant an undonation.
Yeah I hadn’t seen that, but he and I are on the same page.
The solution to your tax problem would just be to incorporate the tax benefit from the initial giver into the available amount thay they could get back (eliminating the possibility of a windfall through the program). Then the disbursements of the organization would be distinct… The orgs 501c3 is to facilitate donation to charities by providing this function, thus its disbursements would be in furtherance of its charitable purpose.
Why do you think Basefund has to limit itself to the “US legal definition of harship” because of its US charitable status?
I inferred from that statement that we’re doing this for the charitable purpose of encouraging donations to effective charities wasn’t enough to persuade IRS that there was no more than incidental private benefit involved. Rather, Bob’s statement makes me think IRS approved Basefund as the equivalent of a benelovence fund of the sort often operated by religious groups. A benevolence fund for adherents of Qualy the Lightbulb, as it were.
It’s well-established that operating a benevolence fund that makes discretionary distributions to members of a defined charitable class on the basis of hardship is a valid thing for a 501(c)(3) to do. Furthermore, when a nonprofit makes appropriate grants on the basis of need “out of detached and disinterested generosity rather than to fulfill any moral or legal duty,” Rev. Rul. 2003-12, its grants are gifts and thus not income to the recipient under I.R.C. 102.
If that is how the Service views Basefund, then it’s likely going to be hard to scale a Basefund-like program to reach large donations under a 501(c)(3). Certainly the limit on allowable benevolence payments for hardship isn’t 2K, but 20K would probably be pushing it in ordinary circumstances, and 200K is pretty unlikely to fly in my opinion (except in fairly extreme circumstances). Also, in your hypo, the refunds made to needy donors would ordinarily be income under the extremely broad Glenshaw Glass definition, and seem to be made out of a sense of moral or legal duty rather than detached and disinterested generosity. So I’d be concerned that they are also income to the donor-refundee.
Sounds like you are thinking of basefund?
Also I think it’s worth asking in what situations the risk can be managed by the donor using insurance, annuities, or other financial products.
Yeah, more of a base fund on steroids that could enable more aggressive giving.
Yeah, you’re right perhaps smart financial instruments could be helpful (Yield and Spread could advise). However, I’m not sure sure that there would be products that could be as safe as a broad right to obtain some percent of your former donations.
Still seems like a broader policy could enable significantly more aggressive giving. Base fund’s cap of 2k likely wouldn’t be sufficient to many donors’ concern.
I bet more EAs would be comfortable with giving larger percentages of their income if they felt like they could do so while being responsible to themselves and their families.
[duplicate comment due to technical error, can’t seem to delete it.]
I think Basefund’s 2K limit is based on it being in trial status, rather than something that is intended as a permament feature. However, as Bob mentioned, its status as a 501(c)(3) constrains the circumstances under which it can return money to a donor. Given that donation amounts are right-tailed and they can only return money to address “hardship,” I don’t think the Basefund model is likely to scale to protect a large percentage of donations (as opposed to a large percentage of donors, which is more plausible to me).
@Denis wrote a post about a similar idea recently. I opined that it likely posed some tax hurdles, because the revocable donations would probably be seen as loans, and we discussed some potential workarounds. Those workarounds are probably easier to execute to the extent “some percent” is significantly less than 100% and there are reasonably well-defined criteria for what circumstances would warrant an undonation.
Yeah I hadn’t seen that, but he and I are on the same page.
The solution to your tax problem would just be to incorporate the tax benefit from the initial giver into the available amount thay they could get back (eliminating the possibility of a windfall through the program). Then the disbursements of the organization would be distinct… The orgs 501c3 is to facilitate donation to charities by providing this function, thus its disbursements would be in furtherance of its charitable purpose.
Why do you think Basefund has to limit itself to the “US legal definition of harship” because of its US charitable status?
I inferred from that statement that we’re doing this for the charitable purpose of encouraging donations to effective charities wasn’t enough to persuade IRS that there was no more than incidental private benefit involved. Rather, Bob’s statement makes me think IRS approved Basefund as the equivalent of a benelovence fund of the sort often operated by religious groups. A benevolence fund for adherents of Qualy the Lightbulb, as it were.
It’s well-established that operating a benevolence fund that makes discretionary distributions to members of a defined charitable class on the basis of hardship is a valid thing for a 501(c)(3) to do. Furthermore, when a nonprofit makes appropriate grants on the basis of need “out of detached and disinterested generosity rather than to fulfill any moral or legal duty,” Rev. Rul. 2003-12, its grants are gifts and thus not income to the recipient under I.R.C. 102.
If that is how the Service views Basefund, then it’s likely going to be hard to scale a Basefund-like program to reach large donations under a 501(c)(3). Certainly the limit on allowable benevolence payments for hardship isn’t 2K, but 20K would probably be pushing it in ordinary circumstances, and 200K is pretty unlikely to fly in my opinion (except in fairly extreme circumstances). Also, in your hypo, the refunds made to needy donors would ordinarily be income under the extremely broad Glenshaw Glass definition, and seem to be made out of a sense of moral or legal duty rather than detached and disinterested generosity. So I’d be concerned that they are also income to the donor-refundee.
[duplicate comment due to technical error, can’t seem to delete it.]
[duplicate comment due to technical error, can’t seem to delete it.]
[duplicate comment due to technical error, can’t seem to delete it.]