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Tinkering with the Charitable Deduction and Limited Lifespan Foundations

December 6, 2010

Last week saw NYTimes.com cover the philanthropic sector with two fascinating articles.

First, Nonprofits Fear Losing Tax Benefit touches on an issue close to my heart – taxes.  The article surveys different recent proposals to tinker with the charitable deduction in order to curb the deficit or pay for health care reform.  Nonprofits are afraid that any lowering of the tax benefit for charitable giving will discourage donors and harm charities.  One interesting tidbit was this description of a UK policy on federal matching of charitable donations:

The plan philanthropic experts find the most intriguing, however, comes from the Bipartisan Policy Center panel, which suggests borrowing a system of subsidizing nonprofits similar to the one used in Britain, called Gift Aid.

Under that proposal, nonprofits could claim a tax credit worth 15 percent of any charitable gift they received, effectively giving the donor a partial match. For instance, if a donor makes a charitable gift of $100 to a charity, the charity could apply to receive an additional $15 from the government.

Second, Foundations with a Limited Life, describes a new trend for some private foundations to set a deadline by which they will give away all their money.  No more long-term endowments – instead, these so-called “limited lifespan” foundations are seeking to go high-impact in the short-term.  (Certainly related to this trend is the Buffett/Gates challenge to billionaires that we’ve written about here and here.)

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