In many ways, the charitable response to the natural disaster caused by Hurricane Katrina mirrored the giving response to September 11, 2001. However, a significant difference in the magnitude of the events also was highlighted: the hurricane destruction wasn’t accompanied with the fear that gripped the world, and the economic impact clearly wasn’t of the same magnitude.
Americans, as corporations and as individuals, reacted to the event of the hurricane’s destruction in similar ways we have to other calls for help. As in 2001 and the tsunami destruction in 2004, we’ve responded with increased giving. This is giving from the heart to aid people who’ve lost everything.
Recent studies of philanthropic support and individual giving plans suggest the response to Hurricane Katrina won’t diminish planned support of most major charitable causes. The reason given for these findings support the rationale of why people give to charity.
This rationale is based on sound development principles; people give because of the relationships they have with their charity of choice. These relationships usually have been built over many years and have been nurtured by the work the charity does with those they help. Universities, hospitals, and other non-profit organizations have strengthened these relationships by the contact with senior leadership and the patients or others served by the charity.
While the passion for the services and good work of the charity is the main reason people contribute to the hospital or school of their choice, tax law has encouraged giving and provided incentives for increased giving. The aid package Congress approved for hurricane relief included additional incentives for the remaining months of calendar year 2005.
Large gifts receive favorable tax treatment due to the exemption of cash gifts by individuals and corporations to percentage limitations. Individuals and corporations now can deduct up to 100 percent of their adjusted gross income. The previous limitations of 50 percent and 10 percent no longer are in place. This exemption expires December 31.
For individuals, this enables them to use funds invested in IRAs to make larger gifts. If donors are at least 59.5 years old, they could withdraw cash from an IRA plan and contribute it to the charity of their choice and deduct the full amount of the gift, thereby making the withdrawal a tax neutral event. Donors with fully funded or over-funded accounts should consider this option closely.
With many individuals giving support to the victims of the hurricanes, we shouldn’t forget that charities that support the social needs of those in the tri-county area also are in need of ongoing support to help the poor and homeless in our community. IBI