Task Force Minutes

APPROVAL OF JUNE MINUTES
Sue asked whether any corrections need to be made to the June minutes. John moved that the minutes be approved as distributed. Dale seconded the motion. All approved by voice vote.

UPDATE ON AUDITOR'S CHARITABLE GIFT ANNUITIES EXEMPTION BILL
Jim reported that Christina Goe, the Auditor's staff attorney, had intended to post on their web site the draft legislation exempting charitable gift annuities from regulation as insurance products before she went on vacation, but that didn't happen. He suspected that it would be posted by July 23rd (see http://www.state.mt.us/sao/default.htm). He said that there has been a lot of discussion in the community about the bill, and some anxiety among smaller charities, primarily out of confusion and lack of understanding. Jim thinks they have a good bill (he passed out the text of the draft legislation) and said that people will have to be educated about it. He reiterated that the Task Force did not initiate this bill, and wanted to make sure that others did not think so. It was agreed that the EndowMontana website should link to the Auditor's website once the bill is posted.

Jim walked everyone through certain sections of the bill. He noted in Section 1 (C) that the federal code citations are those distinguishing charitable gift annuities from commercial annuities. This citation was not in their original bill draft, but Jim felt it was an important addition - especially for lawyers who sit on boards of charities.

Sue said she appreciated Jim having made an excellent presentation to the Auditor's staff; they will get phone calls and will need to know that information. Sue noted that she sent a letter of thanks to Christina. Jim added that he ran into Commissioner Morrison when he was setting up for the presentation, and reported that Morrison was enthusiastic about the bill and thanked the Task Force for its participation.

Judy asked about Section 1 (C)(3): "Maintains a separate annuity fund with at least one-half the value of the initial amount transferred for outstanding annuities." She asked whether the separate annuity fund was a literally separate fund or whether that was for bookkeeping purposes only. Jim said it needs to be a physically separate fund; it makes it easier for the auditor and provides more protection for the donor. He noted that there have only been two failures in charitable gift annuities since their establishment; of those, one has since been remedied in the federal legislation and the other was an outright scam. So, in a sense, there really haven't been any instances of failure to maintain and pay out a charitable gift annuity.

Sue said that Mary Whittinghill pointed out that we need a facts sheet "for dummies" on this. Sue said that Alberta had been working on that, and will try to get back to it. She asked Bill whether he had created something at MCF that could be used for the time being. Bill said no; the closest thing might be taking a piece of Jim's presentation. Sue thought that, should it be necessary, it would be helpful to have a piece ready in time for the Special Session.

Judy asked what exactly we want: an instructional guide for issuing gift annuities? Bill said no; what we want is essentially "what you need to know before even considering issuing a charitable gift annuity." It should provide enough information that someone reading the Auditor's bill will be able to understand it. Jim reiterated that he thought the draft bill was good, and that we run the risk of stirring up more confusion distributing information. Sue asked whether we want to do a facts sheet at all. Jim thought it might be best on our web site to post comments by Conrad Teitell and other notable figures in support of the Auditor's bill.

UPDATE ON FEDERAL LEGISLATION
While awaiting a call in from Jonathan Selib, the staffer who works on tax-exempt issues for Sen. Baucus and the Senate Finance Committee, Steve provided a brief update on the federal legislation. He noted that the committee was in high gear now, and that the CARE bill has been marked up and could be on the floor at any moment. The Senate just returned from the 4th of July recess on Monday, and much legislation is backed up. Steve said that all we know for certain is that our provision (the charitable IRA rollover to a planned gift for those aged 59 1/2, which previously had been looked on skeptically, is now the centerpiece of the bill. He noted that the National Council on Foundations, with a membership of several thousand, is notifying its membership to contact their Senators in support of this provision.

Jim reported that, in a recent meeting with Conrad Teitell, Matt Hammel, and others, there was much enthusiasm about S. 1375 but that it has since been rolled into S. 1974, which is very expensive. His understanding was that it wouldn't actually get to the floor for a vote, but that that strategy would be to have it come out in the fall in a negotiated piece. Steve agreed that this is the way things happen in Congress now, since the politics cause the whole process to freeze up more often than not: everything gets folded into an enormous omnibus bill in the last few weeks, which is negotiated by the leadership and the administration.

Jon Selib joined the group by phone to explain the highlights and status of the Charity Aid Recovery Empowerment (CARE) Act, passed by the Senate Finance Committee by voice vote on June 18. The total cost of the bill is estimated at $10 billion. Highlights include:

• The IRA rollover. Jon said that the Committee adopted the version advocated by the Task Force, allowing direct rollovers from IRAs to charities at 70 and rollovers into planned gifts at 59 1/2 with no tax consequences. This piece is estimated to cost $3 billion over the next 10 years. He said this was a very popular proposal in the Senate and on the Committee, and said that it was very helpful to have heard from so many Montanans. He applauded the group's effort, and said it helped Baucus make it a priority.
• Non-itemizer deduction. This is a 2-year proposal, also costing $3 billion. The Finance Committee proposal, unlike S. 2925 and HR 7, includes a floor and a ceiling (an individual would have to make a minimum of $250 in contributions in order to deduct, with a maximum deductible contribution of $500. For married couples the numbers are $500 and $1000). This would affect 90 million of 130 million taxpayers who now take the standard deduction. It primarily impacts those who earn between $20,000 and $60,000.

Other pieces that have gotten less press, but the Committee thinks will be helpful to charity, include:

• Expansion of the deduction for contributions of food inventory. They expanded it from just pertaining to C-corps. Baucus received a lot of support from food banks for this piece.
• Expansion of recipient eligibility for expanded deductions for contributions of book inventory. This proposal would allow people to contribute to high schools.
• Simplification of the lobbying expenses that need to be declared by grassroots organizations.
• A piece that would encourage donations of conservation easements.
• Exclusion of capital gains from the sale of conservation easements.

Jon said that two weeks ago Sen. Dashell offered a request for the whole Senate to consider the CARE Act before the August recess, which required unanimous consent. There was one dissent, but Dashell and the President are still pushing for that to happen. Jon also said that the bill was paid for - it would have no revenue impact. They offset the cost with an inversion bill prohibiting companies from receiving tax benefits for reincorporating offshore.

Jon asked if there were any questions. Steve asked whether they've published a report for the bill; Jon said it should come out later that day. He said he would e-mail all of the Task Force members when he has that report. [NOTE: Jon mailed a pdf file of the committee report to the Task Force member list. Please contact Amy if you did not receive it or would like it sent again. The report is far too long to print and send via regular mail.]

Dale said that he is surprised the bill was able to be revenue neutral with the non-itemizer deduction in it. Jon said that it was a priority for Baucus to make it revenue neutral. Steve suggested that those whose taxes would increase because of this bill would oppose its passage. Jon replied that the corporate inversions overseas was not very popular right now, and that there is an attitude on the Hill that everyone needs to pay their fair share in taxes. Bill asked whether books donated to libraries would be included in this exemption. Jon said yes, as long as it is for charitable purposes.

Sue thanked Jon for his presentation and time, and told him to let us know if there is anything that we can do from here. Jon said that Senators Dashell and Lott could use letters and phone calls in support of the measure, and that the Committee members will continue to do everything they can to move it through. Sue asked what would happen should the bill pass the Senate. Jon said that, since it is the Senate version of a House bill, it would have to go to a conference committee. Sue asked whether it would help to contact Rep. Rehberg. Steve said yes, and Sen. Burns as well.

DISCUSSION ABOUT UPCOMING SPECIAL SESSION
Bill said he's been telling people across the state not to be complacent about the tax credit, although from the news in the paper it seems the legislature is looking at things like the coal tax, with much larger revenue impact.

The group discussed the arguments in defense of the tax credit that could be used should it come up in the Special Session, and agreed on the following:

Arguments in Defense of Maintaining the Tax Credit in its Current Form:


1. The fiscal analysis of the tax credit has never taken into consideration the considerable taxable income generated by the planned gifts created because of the tax credit. That figure is significant. Even Congress has recognized the significance of this tax policy. The Senate Finance Committee recently approved a bill containing a provision allowing IRAs to be rolled over into planned gifts at age 59 1/2 with no tax penalties, realizing that the income generated by planned gifts will generate taxes on money previously locked up in IRAs.
2. The tax credit is generating gifts to charities across Montana. It is mutually beneficial to the government, especially in these economic times, to have a strong charitable community, as it reduces the burden to government.
3. The tax credit was already cut during the debate over its renewal in the last legislative session in order to lessen its revenue impact. Reducing the credit further will erode the incentive for individual and corporate charitable giving.

Jim added that the Endowment Tax Credit is the only credit on the books that is not self-serving; in order to qualify, a person would have to give to a charitable endowment more than he or she would receive in a tax credit. If the legislature were to seriously consider changing it, they should evaluate all other tax credits first.

Steve will call Aidan to see if she would be willing and able to be "on call" at the legislature to work for the Task Force to defend the tax credit should it come up. [NOTE: Aidan agreed to take on this role.] Jim suggested that we also have several people ready to testify who have received income from a planned gift made because of the tax credit - someone who created a charitable remainder trust with land. Ralph said he could find someone in that category who is articulate and willing to testify. Bill suggested also having someone from one of the trust companies testify about how many new trusts have been formed since the tax credit's inception.

ENDOWMONTANA WEB SITE
Sue has asked members to look over the web site before the meeting, and noted that it would be helpful to have the site updated before the Special Session in August. Steve had already typed up his thoughts and had e-mailed them to Galen; Judy brought her comments with her.

Spence thought there was not enough contrast between the lettering and the yellow background on the new site. Bill was concerned that information about the tax credit didn't appear until the legislative tract, several clicks from the home page. He thought it should be up front on the home page, with a button that says "Montana Endowment Tax Credit," and rather than link to the legislation, link to bullet points about what the tax credit is and what it has done for Montana. Sue agreed. She thought that, for those who do want the actual legislation, they can "click here."

Judy thought that there should be a sub page with a blurb for each category defined on the new site home page (corporations and businesses, legal and financial advisors, private and family foundations, nonprofit organizations, policy makers) that would speak to that particular group and put the site in a context that makes sense to that group. She liked how the new version was much more clean and direct than the last version. She said she'd forward her typed comments to Galen.

Sue asked Galen whether he thought we could have a new site ready and posted by August. Galen thought yes. Judy asked whether he'd received enough feedback from the group about which pieces of the old site should be kept and which should be thrown out; Galen said no. Galen said he needed specialized information for the groups we've not before addressed, and that we'd need to modify what we already have to be more targeted to the various groups. Judy asked whether it was getting out of the purview of the Task Force to have information specialized to the point that we could tell a financial advisor how to talk about planned giving with their clients. Bill said that New Ventures has a good piece on that, and that it could be our role to link to that sort of information. Bill will send that URL address to Galen.

Steve thought the Governor's Conversation proceedings still relevant information; Judy agreed but thought it should have a date on it. Steve suggested that more testimonials would be a good addition. He also thought that the information on the tax credit's impact was getting a little dated, but was still relevant. He commented that the list of endowments is impressive - 29 pages worth! He was certain that more of the groups listed have websites than we've indicated. Galen said they could do that research again. Judy said that those with websites should appear as a different color on the list - not just when you roll over the name with the mouse. Sue was more concerned about the smaller counties, those that only have one or two endowments listed (or none at all). There aren't many in that category, but she suggested that Dale and Jim look over the list again and see if they can't come up with more endowments in those areas.

Steve said that the "contact your legislator" page should go. The "Brief History of the Task Force" was still good to have up. Galen suggested that the text on the bottom of the new site that says "this information provided by the Governor's Task Force" be linked to that information on the web site. Steve said that once the federal legislation moves we could link to that as well.

Bill reiterated that each category listed on the new site home page (financial advisors, etc.) should have a short paragraph that sets the context for those people. Sue suggested each category be assigned someone to write that "teaser paragraph":

• Individuals and Families: Judy Held
• Corporations and Businesses: Steve
• Legal and Financial Advisors: Jim
• Nonprofits: Dale
• Foundations: Ralph
• Policymakers: Spence

Each person assigned should submit his or her paragraph to Galen by July 18th. Galen will make the format consistent.

The group then went through all of the tabs on the "old site" and indicated to Galen what should go, what should stay, and to where it should be moved on the new site:

Proceedings of Governor's Conversation: keep. It should be linked under:
• Nonprofits
• Corporate
• Policymakers
• Foundations


Testimonials: keep (and expand). Link under:
• Individuals
• Advisors
• Corporate
• Policymakers


Impact of the Tax Credit: keep. Link under ALL CATEGORIES. However, Galen will write a short blurb that synopsizes the other page links, and allow people to link to the full text on these pages

Brief History of the Task Force: keep. Link to "This information provided by the Governor's Task Force…" at the bottom of the new home page.

Planned Giving Resources: is now on the links page, but should be hypertext on every page.

Thank Your Legislators: delete.

Text of the bill: keep, but move deeper. Should be able to link from the new "what is the tax credit" page.

Bill sponsors: delete or move deeper.

Administrative Rules for the tax credit: keep. Link to:
• Professionals
• Policymakers

Galen will take another run at the new site in the next few days, which he will still keep under http://www.endowmontana.org/newsite. He will notify all Task Force members for comment before replacing the old site.

TASK FORCE BUDGET
Ralph handed out the latest financial statement for the Task Force, from June 1 through 30, 2002. It showed an ending balance of $5,413.70, which reflected a $1,000 contribution from Yellowstone Boys and Girls Ranch Foundation and a $500 contribution from Sue Talbot, but did not reflect a July contribution of $500 from the United Way of Missoula County.

Ralph said that the fundraising letter he and Tim McCauley had been working on was ready to go now, but since it won't be sent out until September they will be able to include the latest information from the Special Session and on the federal legislation as well. He thought we have a strong fundraising piece, especially given the state budget situation. He reiterated that they'd like to have four signers onto the letter representing four different constituencies: Jim Soft, Linda Reed, Dennis Peterson, and one of the University foundation representatives, either Sharen Peters or Alberta Rivera. Dennis suggested adding a pitch for organizations to put their contribution into their annual budget. Benefis does that. He suggested: "We'd like to ask you to consider budgeting this contribution on an annual basis."

Sue asked Ralph to bring his mailing lists to the next meeting so the group can go through them, adding and deleting names.

TASK FORCE MISSION STATEMENT, GOALS, AND OBJECTIVES
After revisiting the discussion of the last few meetings, the group agreed that the new mission statement for the Task Force should read:

• Working together to advance charitable giving in Montana by:
• Promoting public policy
• Educating the private sector
• Benefiting the charitable sector

Bill suggested that, in the future, the Task Force consider a vision statement for where the group is going from here. Sue had everyone look at the "Current and Future Challenges" and assigned individuals to take charge of forwarding information to Galen to post on the web site, and to think long-term about what the Task Force might do to forward this area in general. The following assignments were made:

• Operations: Ralph
• Encouraging the Formation of Planned Giving Councils: Jim, Sharen, Alberta
• Educating Financial Advisors: Jim, Sharen, Alberta, Dale
• Tracking Federal Policy: Steve
• Model Exemption Act: all
• Maintaining the Tax Credit: all
• Web Site: Judy Held, Bill
• Encouraging Local Media Campaigns (e.g. Leave a Legacy): Sue
• Maintaining Communications Between the Task Force and Other Groups: Dennis

Dennis volunteered for the last piece, noting that not enough people know about the Task Force and what it has done. Bill suggested that, in addition to the web site as a means of getting information out, we could maintain a list serve, although he warned that they take a fair amount of someone's time to manage, as the information doesn't just come in without some prodding. Galen said that he could set up a discussion group through the web site. He said in order to make it work well you need to have something "hot" happening to keep people involved. Judy asked whether we have a way for people to give feedback through the web site. Galen said there is a vehicle now, but it is not prominent. Again, if we don't do something to promote it, he stressed, it won't happen. Sue suggested posting "polling" people from time to time on the web site.

Galen will set up a list serve so it will be there should we decide to use it. Bill said we could send a notice to the former "Net Notes" list to ask people if they want to participate in that group.

ANNUAL REPORT
Amy passed around a primitive mock-up design¹ for an "annual report" to be included in the fall fundraising letter. She explained that she incorporated the list of items brainstormed at the last meeting, and said she planned to work significantly more on the design , which she would send to several Task Force members for comment before sharing it again with the full group.

There was discussion about the concept of an "annual report" in general, and it was decided that this piece really should simply be "A Report from the Governor's Task Force." Several additions were suggested:

• A sentence indicating "Complete financial statements available on request"
• A blurb "To make a tax-deductible contribution…" with c/o MCF and address
• A month and year to date the piece
• Bill suggested changing the "gifts" list header to "Founding Contributors" followed by "Total Gifts to the Task Force" in parenthesis

Ralph said that 500 pieces would be enough for the mailing; 750 would probably be sufficient for printing. Amy will work further on the design and the content for the report.

NEXT MEETING
It was agreed that the next meeting would be held on Thursday, August 8 at 10 a.m. in the Northwest Power Planning Council conference room.

Meeting adjourned at 1:45 p.m.

¹She particularly stressed that the VERY primitive people scribblings included as place-markers in the sketch should not be interpreted as portraits!