Task Force Minutes

REQUEST FROM U OF M FOUNDATION
John Siebeck, the Director of Planned Giving for the University of Montana Foundation, called in to request that the Task Force to consider running "Lunch and Learn" type seminars in the fall of 2002, pitching it as "the last best chance to take advantage of the endowment tax credit." There were some questions posed to John and discussion among the members present about the idea. Sue was concerned that the logistics are considerable, and Jim indicated that his schedule was full in October and November with other seminars. He also raised the issue that the IRA rollover has not as yet passed Congress, and thought it would be a better marketing opportunity to hold seminars centered around that issue, with the tax credit as a secondary issue, once/if it passes. John agreed. He said he would follow up the discussion with Sue later in the week.

Upon further discussion of the proposal, Jim pointed out that it is difficult to recruit professional advisors to take the time to come to a seminar, and unless we have something new to teach them, they won't want to come. If we knew about the IRA rollover, he thought, "we'd have a new song to sing," and could then have the tax credit as an add-on. Ralph pointed out that the Task Force has a lot on its plate right now, with a major fall fundraising effort and gearing up for the 2003 legislative session. He thought a seminar series should be considered for next fall.

Ralph made a motion to postpone holding "Lunch and Learn" type sessions until the fall of 2003; Steve seconded the motion. All agreed on voice vote. Sue will notify John Seibeck of that decision.

APPROVAL OF AUGUST MINUTES
Sue asked whether any corrections need to be made to the August minutes. Steve moved that the minutes be approved as distributed. Dennis seconded the motion. All approved by voice vote.

REPORT ON THE SPECIAL SESSION
As Aidan Myhre was unable to attend the meeting, Sue shared Aidan's assessment that the session went as well as could have been expected vis a vis the tax credit, given all of the budget items being cut. But, she stressed, we should expect the tax credit to be revisited in the 2003 regular session. Sue reported that Aidan very generously donated to the Task Force the time she spent lobbying on its behalf at the session.

Ralph thanked Steve for sending out information clarifying S. 15, since it wasn't clear to him upon several readings of the bill. Ralph passed out a handout with a timeline he created to help him understand the timing of when the new changes to the tax credit will take effect:

Montana Tax Credit For Charitable Gifts To Qualified Endowments

The Montana Tax Credit for Charitable Gifts to Qualified Endowments was enacted in 1997 for a five-year period, beginning January 1, 1997 and ending December 31, 2001. Last year, when the tax credit for charitable gifts to qualified endowments was reenacted for six more years (from January 1, 2002 to December 31, 2007), the rates for the credit for the next six years were reduced.

In August 2002, a special session of the Montana Legislature was called by the Governor to address looming state budget deficits. At the Special Session, the Montana Tax Credit for Charitable Gifts to Qualified Endowments was again amended, and its rates were reduced even further than they were in 2001. The new reductions, which were signed into law by the Governor on August 28, 2002, are temporary. They are scheduled to last for roughly a ten-month period that begins on enactment and ends at the end of the state's current fiscal year on June 30, 2003. In order to achieve revenue neutrality for the 2002-2003 budget biennium, the Legislature voted during the Special Session to increase the levels of the tax credit for the period July 1, 2003 to April 30, 2004 by the same amount they were lowered for the period August 28, 2002 to June 30, 2003. Beginning on May 1, 2004, the rates the tax credit for charitable gifts to qualified endowments would resume the levels that were in effect immediately before the August 2002 Special Session of the Legislature, and those rates would continue to apply until December 31, 2007.

Below is a time line showing various percentages and maximum amounts of credit since the inception of the credit up to the close of 2007:

Jan. 1, 1997 to Dec. 31, 2001
Individual: 50% credit; max. $10,000
Business: 50% credit; max. $10,000

Jan. 1, 2002 to Aug. 27, 2002
Individual: 40% credit; max. $10,000
Business: 20% credit; max. $10,000

Aug. 28, 2002 to June 30, 2003
Individual: 30% credit; max. $6,600
Business: 13.3% credit; max. $6,600

July 1, 2003 to Apr. 30, 2004
Individual: 50% credit; max. $13,400
Business: 26.7% credit; max. $13,400

May 1, 2004 to Dec. 31, 2007
Individual: 40% credit; max. $10,000
Business: 20% credit; max. $10,000

Sue reported that, thanks to the MT Community Foundation, she was able to send out the Governor's press release about the passage of S. 15 to their list serve. Ralph passed around comments received from that e-mailing - all were positive. Jim reported that Laurie Perrodin did an excellent job condensing and paraphrasing the new legislation in 1-page web format. He said anyone who wants to may link to that page on their website: http://www.yellowstonefoundation.org/taxcredit.html

Steve suggested that the Task Force approve Aidan getting started right away on the lobbying effort to retain the tax credit. All agreed. He also suggested that we ask Paige Dringman, who lobbied along with Aidan on behalf of the Task Force last session, to work in team with Aidan once again, if she is willing and available. All agreed. Steve will contact Paige.

UPDATE ON CHARITABLE GIFT ANNUITIES FACTS SHEET AND LEGISLATION
At the August meeting it was agreed that all Task Force members would "field test" the draft facts sheet that Alberta Rivera had compiled on charitable gift annuities (CGAs). All agreed that Alberta did a very thorough job, and the question was whether the information was "too thorough" for what would be the average reader. The two members who volunteered to field test the piece were not present at the meeting, and none of the members present conducted field tests themselves.

Jim noted that the information is a paraphrasing of the technical nature of issuing CGAs. He thought that, if a charity were considering doing so, they would need to know that information - unless they were issuing CGAs through another entity like a community foundation. He thought perhaps it's not unhealthy if those people are overwhelmed with the information, because that may be an indication that they are not yet prepared to play that role.

Jim reported that he forwarded our statement of approval to Christina Goe at the State Auditor's office regarding their draft legislation exempting from regulation certain entities that issue CGAs. He said she could post it on their website alongside the draft legislation when they post it (it had not yet been posted). Jim wanted to be sure that people know that the Task Force did not draft the bill, and that while the Task Force might be a fairly good representation of the charitable community, we do not represent all of it. Sue asked whether he thought the Task Force should link to the Auditor's website once they post the draft bill; Jim thought that would make sense, but didn't feel that the Task Force should play the role of promoting the legislation. Rather, we should encourage people like Conrad Teitell to submit comments confirming that this is good legislation.

Clark asked if anyone has pulled together the actual numbers on the taxable income being generated by CGAs. Sue wondered whether that is something we should be requesting of the Dept. of Revenue - now, before the 2003 legislative session, so that we have the numbers when the time comes. She reiterated Aidan's point that the fiscal note associated with the tax credit bill was - in her opinion - too high, because it was based on inaccurate assumptions. Steve said that the processing of the 2001 tax returns should be complete any day now. His prediction was that the numbers would be lower for 2001 due to the stock market crash. He thought that looking at the trends from Benefis or Yellowstone Foundation could give us a good indication of the rest of the state. Jim said that the tax credit hasn't had a huge impact on them, although he thought they might not necessarily be representative of the rest of the state. He said that Yellowstone has had banner years for the past 3 years, but they can't say why. Dennis said their numbers were up substantially; Ralph said that for MCF the 2001 numbers were the same as the previous year.

Jim reiterated that there is a certain incubation period involved with new programs like the endowment tax credit - it takes time for people to become educated about it and take advantage of it. That is why it's a shame to cut off the tax credit when it's just getting going.
Jim said he'd speak with the four largest trust companies and find out about the growth in new trust funds. He thought that if we could come up with the numbers on taxable income being generated by charitable trusts, we could project those numbers out, and that the DOR would confirm those projections. The information from the trust funds is easy to track; we will have data from 1998 through 2002 - five full years.

Steve agreed that it would be very helpful to have the numbers that show the revenue offset from the taxable income generated by planned gifts. He suggested we ask ten people to share their tax returns - on a very limited basis - with the DOR and the Legislative Fiscal Analyst. From those returns the Department could extrapolate statewide figures. He thought it would be hard for the legislature to argue the numbers if they are from actual returns, and the DOR and LFA won't want to make an argument before the legislature that they can't back up with actual numbers. Steve thought that we will have to do that homework, but we don't have the time or resources to undertake the kind of DOR study we did two years ago.

Jim said that Kurt Alme is open to the idea that people are taking low basis, low yielding highly appreciated assets (like property earning 2-3%) and turning them into charitable trusts, where the yield is much higher. He wondered if the DOR would be willing to evaluate just the charitable trusts?

Steve added that we will need to be much better informed about what the overall numbers mean, and that it would be good to sit down with Larry Finch at DOR and come to an agreement with them about what the analysis is. Steve reported that he'd asked Jim Standardt at LFA to get in contact with him in the coming week.

FEDERAL LEGISLATION UPDATE
Steve said he'd be in Washington DC next week, and will be able to give a better report after that visit.

FUNDRAISING/BUDGET
Ralph passed around the most recent financial statement for the Task Force (from July 1 through August 31, 2002). It showed an ending fund balance of $4,671.15.

Ralph distributed the most recent draft of the letter for the Task Force fall fundraising campaign. He explained that letter would be signed by one of four Task Force members, depending on to whom the letter was directed: Jim Soft, Linda Reed, Dennis Peterson, or Sharen Peters. The amount requested would also be tailored to the recipient. Enclosed with the letter will be the Task Force 2002 Report, which Amy had printed. The signers will follow up the letter with a personal phone call.

Jim asked Ralph to reiterate the goal of the fundraiser; Ralph said $25,000. Jim asked whether that was a number we could defend - e.g. could we say "we need $25,000 to cover x, y, and z specific projects?" And what would the "fair share" be for the trust companies? Jim said he would go to them, give them a report, and ask for a specific figure. He thought that, as long as their business hasn't gone down, they have a responsibility to pitch in as they have benefited from the Task Force's efforts. Sue noted that we need to be sure we do NOT go back to those who have recently given.

Sue asked if anyone had suggestions for changes to the letter. Jim suggested putting the $25,000 goal in the letter. He also wondered whether we could present a challenge, whether there was an individual or a foundation that would be willing to match contributions. Perhaps the Mott Foundation, who provided one of the initial grants to the Task Force? Ralph said he would ask them, but was concerned about the timeline; generally a foundation needs a year to make that type of decision. Steve added that most foundations have taken a hit from the current economic situation. Ralph thought that the Task Force could meet the goal even without a matching grant.

Sue asked how Ralph planned to ensure that various lists being mailed to don't overlap. Ralph asked people to mail him their lists, and he could cull them. But he suggested it might be easier if, for instance, Sharen mailed to the Universities, Dennis to the hospitals, and others avoided mailing to those entities.

WEB SITE
Sue noted that Galen had made many changes to the web site since the last meeting, and that it looks very good at this point. She had some questions/comments for Galen and the group:

1. We use both the terms "legal & financial advisors" and "professional advisors" on the web site - which one should we use? All agreed that "professional advisors" is more inclusive and therefore a better term.
2. What if we changed the groups on the home page to questions? e.g. "Are you a professional advisor looking for information about the Montana Endowment Tax Credit?" All agreed that shorter is better on a web site - stick with the current categories.
3. The only link to the Task Force isn't very obvious. Galen will highlight the name at the bottom of the home page to make it more obvious that it is hypertext.
4. The current directory on the web site is out of date. Amy will send Galen a revised directory.
5. Suggested change to the paragraph on the financial advisor page: "Thank you for advising your clients about the Montana Endowment Tax Credit." All agreed that was a good addition.
6. A suggestion by Alan Kahn: on the "Impacts of the Tax Credit" page, change "in the first two years" to "in 1997 and 1998." Galen will make that change.
7. A lot of links have been lost on the new version - will they be put back in? Galen will make a way to link to those parts of the old web site.
8. On the map: there are four counties with only one endowment listed, and three with none. Ralph will look through the list to make sure that all of the community foundations are included, and Sue asked everyone else to look over the list and see if we can't add more endowments to the map.