By Brian Hunter
December 18, 2008
Everyone has been hit by the economic crisis and nonprofit organizations are certainly not the exception. During this time of year, when nonprofits are seeking contributions with the economy in crisis, funding for charitable giving will likely decline.
Controversial tax policies to ease the crisis are debated daily, and the unfortunate reality is that it is hard to find critics of the Michigan tax credit for contributions to endowed funds to Michigan community foundations. Successful state legislation that was passed approximately 20 years ago has helped to make a difference in our communities.
Indeed perhaps no state has developed more of a commitment to its communities than Michigan. There are community foundations which serve in each county in Michigan - and 66 total throughout the state. Michigan-based community foundations hold more than $1 billion in endowed funds and they distribute nearly $50 million in local grants on an annual basis.
The Community Foundation of Greater Rochester for example, administers endowed funds which provide funding of approximately $50,000 per month into the local community. This foundation supports such causes as Rochester Neighborhood House, college scholarships for high school students who otherwise couldn’t afford a higher education and the Rochester Older Persons Commission.
The logic behind the tax credit was to provide an incentive for donations to endowed funds for use in the community. Such endowments are assisting the communities to help take care of themselves and place less reliance on government programs. The tax credit assists these community foundations in efficiently addressing the needs of those citizens - and our neighbors - who are in need without public funding during a time when it seems that an unlimited number of entities are asking for handouts.
Setting up your own charitable cause can be a difficult or time-consuming activity. Community foundations have resources to partner with donors and assist with the development and administration of funds. They exist to assist you with such logistics.
Another significant advantage of endowments is that they allow the donor to maintain control of the direction in which the funds will be used. It is common for the direction of nonprofits to change as the composition of their boards change. Maintaining funds in an endowed fund secures the principal, which lasts forever for the specific cause.
In these challenging economic times, leaders of certain nonprofits in Michigan should expand the use of community foundations, to provide further incentive for charitable giving, to those who may be hesitant to donate. Our leaders in Lansing should expand the use of solid tax policies such as this tax credit which has been so successful in building wealth in our communities.
Whether you are interested in giving to an endowment, or donating your time toward assisting the less fortunate in your community, getting involved with such a community foundation is a great place to start this holiday season.
Brian Hunter, CPA, is a partner with Fenner, Melstrom & Dooling, PLC in Auburn Hills. He is also on the board of trustees for the Community Foundation of Greater Rochester and is a board member of Leader Dogs for the Blind. He can be reached at [email protected].