Pension Reform Act not all bad for Charities

The bulk of the Pension Protection Act is intended to compel employers to shore up their pension plans. In addition, it will in many ways encourage more non-defined pension plans including 401K’s and 403B’s in lieu of defined plans. Presently, many pensions are under funded, which means that promised pension benefits would exceed the funds available, leaving pensions short of money. The Pension Protection Act of 2006 "requires most pension plans to become fully funded over a seven-year period" starting in 2008, according to a CCH tax briefing.

According to a press release by Sen. Grassley, the pension bill includes a “good package of charitable giving incentives and loophole closers.” Grassley commented, “It makes sense to tighten areas of abuse while increasing incentives for charitable giving. Americans are very generous with their donations. They deserve to know that their money helps the needy, not the greedy.” Grassley thanked Sen. Santorum, Republican of Pennsylvania who he said was especially helpful in developing the giving incentives, and the Panel on the Nonprofit Sector, who Grassley said, “represented many of the nation’s charities in a comprehensive effort to study ways to improve the non-profit sector”.

To achieve full pension funding, the new law allows employers to deduct the cost of making additional contributions to fund the pension, provides strict funding guidelines, and imposes a 10% excise tax on companies that fail to correct their funding deficiencies.

Charitable IRA Donations

The good news for charities is that The Pension Protection Act allows taxpayers to donate money to charity directly from their IRA account. The distributions will be tax-free and avoid the penalty on early withdrawals. Taxpayers are allowed to donate up to $100,000 per year from their IRA. Since the distribution will not be included in taxable income, individuals will not be able to claim a tax deduction for the charitable contribution.

Individuals won't get a tax deduction for the contribution. So why should they do it?

At age 70 ½ individuals must start taking a minimum amount of money out of their IRA each year. The Money taken out is added to your adjusted gross income, and is subject to federal and state taxes.

If the same amount is donated to charity, the amount qualifies for a tax deduction but it doesn’t negate the full amount of the tax. That is because the amount of the IRA withdrawn is still in adjusted gross income, which may affect a number of things. The amount many have been enough to place the individual into a higher tax bracket; an increase in adjusted gross income would also reduce the deduction for medical and other expenses and personal exemptions. Likely, the higher adjusted gross income would increase income tax on Social Security benefits.

With the new allowable Charitable IRA donation, a donation of money directly from the IRA to a charity would never show up in the adjusted gross income, eliminating the possibility of higher taxes. Charitable IRA donations also fully qualify as a portion or the entire minimum amount of money required to be withdrawn from IRA’s belonging to individuals age 70 ½ and older.

Stricter Rules on Charitable Donations

The Pension Protection Act toughens the tax laws for charitable donations. Effective in 2007, to qualify as a deductible expense, taxpayers must now keep records of all cash donations. Individuals must show a receipt from the charity, a canceled check, or credit card statement to prove their donation. No tax deduction will be allowed if the taxpayer cannot provide any supporting documentation. Previously, receipts were required if an individual monetary gift was $250 or more.

Taxpayers will not need to mail in the receipts with their tax return. Instead, taxpayers will need to keep receipts and other documentation with their copy of the return in the event of an IRS audit.

The new law also toughens the rules for non-cash donations. Donated items, such as clothing and household goods, must be in good used condition. While the new law does not define “good condition” the law does specify that no tax deduction will be allowed for items in less than good condition. In addition, for non-cash donations in excess of $500, taxpayers will be required to file a qualified appraisal for the donated property.

Future legislation

The “Panel on the Nonprofits” which included ECFA participation along with nineteen other national organizations, reviewed and commented on a number of other charitable provisions of which some are still likely to ultimately become law. Sen. Charles Grassley, mentioned above and the sponsor of the Pension Reform act commented, “I look forward to working with the same individuals to put together more legislative proposals to increase governance, transparency, and accountability in the non-profit sector."

Becoming an Advocate

Being so close to the Washington D.C. area, I’m starting to develop a new and different perspective on how the non-evangelical world looks at evangelicals. For years, I’ve been so involved in my church and ministry, it was easy to not understand how completely different some of our elected officials and others look at not only what we do, but who we are.

One of the first telephone calls I received from the media when I took this position was regarding relief efforts still going on in the hurricane ravaged gulf area and the fact that evangelicals were still there, helping and sharing.

“They are proselytizing you know….trying to get people to become Christians”, was his comment as well as his obvious, but unasked, question.

I tried to help our friend from the press understand that sharing the good news of Jesus Christ is what we do. We are to be motivated by both the Great Commandment ---to love God and neighbor, and the Great Commission -- to share our faith in Jesus Christ.

One of the other things that I’m starting to understand being close to Washington DC, is the increasingly loud call for transparency in our finances; both with respect to our typically donated income as well as our expenses.

ECFA standards of responsible stewardship advocate full financial disclosure (Standard 5 – providing a copy of current audited financial statements when requested) as well as specific communication and truthfulness in communicating with the donors regarding fund-raising. ECFA Accredited Members have taken the lead and not only comply with standards related to financial disclosure but also have agreed to an independent board, to having audited financial statements, to avoiding conflicts of interest, etc.

If you pay attention to what some of our political leaders are saying, the Charitable Community (including our evangelical organizations) are not doing what they should be doing with regard to providing comprehensive and accurate information about their financial activity (typically, income and expenses). While the 1,200+ accredited members of the ECFA lead the way in accountability, it is time that we become advocates for the rest of our evangelical friends including the churches that we attend.

Churches are largely exempt from government regulation because of historical understandings of the First Amendment. However, donor trust as well as government wonder, has much to do with the willingness of our organizations to freely provide financial information and become transparent with regarding to our fund-raising purposes and results.

It’s really time for all of us to become advocates for financial accountability and transparency. Providing simple financial statements and balance sheets on a regular basis to our donors and/or positing financial information on our websites helps answer many questions before they are even asked.

Over the past twenty-seven years, ECFA accredited members have taken the lead on financial accountability and transparency. We now need to become advocates as well for the rest of our evangelical friends in order to maintain the publics’ trust and to clearly show that we have a “higher standard and a higher purpose”

Charitable Tax Incentives included in Senate Pension Bill

WASHINGTON – Sen. Chuck Grassley today won final Senate approval of his bill that broadly reforms pension plans and, like many other House and Senate Bills, contains other legislation that may or not be related to the original intent of the Bill. Included in the Senate Pension Bill are provisions that provide additional tax incentives that should help charities.

Chief among the charitable tax incentives included in the pension reform bill (H.R. 4) is an IRA rollover provision that allows individuals age 70 ½ and older to make charitable donations up to $100,000 from an IRA without having to count the donation as taxable income. This provision, while highly contested, has broad applicablity for two years, allowing the charitable community to demonstrate its value as an incentive for increased giving that could be either eliminated or expanded in the future. The bill also provides expanded tax deductions for contributions of book and food inventory and qualified conservation contributions. The bill does not include a charitable deduction for taxpayers who do not itemize.

The IRA rollover provision, as well as other recommendations were identified by work accomplished in part by ECFA involvement in the "Panel on the Nonprofit Sector". The Panel was an independent effort by charities and foundations that included twenty top executives and national leaders including ECFA President Emeritus, Paul Nelson.

The work of the Panel was welcomed and encouraged by Sen. Chuck Grassley, Republican of Iowa and the Chairman of the influential Senate Finance Committee. The reforms were part of comprehensive legislation Grassley also helped to draft that will shore up the nation’s pension funding for workers nationwide.

The bill is considered by many to be the most comprehensive reform of pension funding laws since 1974. Developed in large part through the Senate Finance Committee, which Grassley chairs, it contains a number of reforms to shore up pension funding. A major change includes changing the formula companies must use to contribute to their pension plans. The bill also increases the amount of fees companies must pay to the Pension Benefit Guaranty Corporation, which guarantees pension funding if companies can no longer afford their contributions.

The Senate passed the bill by a 93 to 5 vote. It now goes to President Bush for his signature.

America's Fastest Growing Churches

Outreach Magazine has published an annual report on America’s fastest growing churches the past few years and are now known as the provider of the "Top 100 Largest and Fastest-Growing Churches in America". The data is self-provided and all the reports are provided by Dr. John N. Vaughan, president and founder of Church Growth Today, who specializes in research related to megachurches both domestically and globally.

Click on the link for the entire list but here is a sampling of just the top 10

1. Lakewood Church (Houston, TX) +12,000
2. Park Cities Presbyterian (Dallas, TX) +5,108
3. New Birth Missionary Baptist (Lithonia, GA) +3,500
4. Salem Baptist (Chicago, IL) +3,366
5. Without Walls International Church (Tampa, FL) +3,330
6. Asbury United Methodist (Tulsa, OK) +3,240
7. St. Luke Community UMC (Dallas, TX) +3,037
8. Willow Creek Community (Chicago, IL) +2,900
9. Grove City Church of the Nazarene (Grove City, OH) +2,861
10. Community Bible Church (San Antonio, TX) +2,858

Elders Want Audit of Church Finances under Ousted Pastor

A popular church in Bellevue that recently ousted its pastor is auditing some of its financial records after concerns about the church's bookkeeping, a spokesman for the church elders said.

The audit of documents at Bellevue Community Church is of records directly involving former pastor David Foster, spokesman and elder Richard McKinney said Tuesday.

He would not elaborate on exactly what records were being audited. He said elders met with an attorney Monday who recommended they hire a "forensic auditor" to review the records.

McKinney said the elders discovered some of the issues more than a year ago and confronted Foster about them and the problems stopped.

However, as elders are facing a revolt among church regulars over their decision last week to fire the charismatic pastor, they have called in an accountant to review the books.

"It did not follow standard accounting practices," McKinney said of the records. "It did not have the normal checks and balances you'd expect in an organization this size. We're having an accountant review it to see if there's anything untoward."

Foster said he does not know what McKinney and the other elders are talking about. He said he didn't handle the church's books or its money — that fell to an office administrator and the elders.

Foster said he believes the elders are picking out issues to pile on him in the wake of an unpopular decision to fire him and his wife, Paula Foster, who was the head of the nondenominational church's youth ministries.

"In all the 13 months we've had discussions and meetings, I've never heard that brought up," Foster said. "I have nothing to do with the finances. I don't sign the checks. I don't count money."

McKinney said the financial issues have been a concern for elders, but the chief issue that led to Foster's ouster was his style and bullying of staff.

"His personality and his unwillingness to be anything but the boss, period," McKinney said. "In any work setting, but in a church particularly, you have to have a congenial work environment.
You cannot have someone bullied."

Foster has acknowledged that he has not always acted as he would like in dealing with the staff, but he said it was more a matter of his "passion" for doing the job right than any effort to mistreat the staff.

McKinney said the flare-up that led to Thursday's firing started in June 2005 after an elder approached Foster about two of the pastor's daughters being on the church payroll. Foster blew up at the issue being raised, McKinney said, and the concerns of the elders quickly shifted to what they describe as Foster's explosive temper.

"He just blew up, and he said, 'I've had it,' " McKinney said. That episode sped up a process of elders looking to hire a head pastor and move Foster into a founding-pastor role.

Foster disputes McKinney's version of the discussion regarding his daughters being on the payroll. He said he never quit, but he does not wish to battle the elders on their decision to fire him.

"It's over," he said. "They've fired me. I accept it. I accept that my wife and I have been fired"

Source: www.tennessean.com staff writer: BRAD SCHRADE