Charity is Everyone's Business

Donors should be able to DO charitable work, not just DONATE to existing charities

by Dr. JT Dock Houk, JD, PhD, CPhD

Some of you may have read my blog from October 18, 2007 called "KATRINA PART-DEUX," which noted sadly that the Pension Reform Act of 2006 makes it illegal for a donor to recover reasonable compensation and expenses from moneys that he may have donated to a DONOR ADVISED FUND when he assists victims of a second disaster like HURRICANE KATRINA.

And now comes the CALIFORNIA FIRES PART-DEUX! A donor who makes a donation to a Donor Advised Fun HAS NO FINANCIAL WAY TO HELP. Sure, he can go to the disaster area as a volunteer and perhaps buy a shovel at a local hardware store. But he may not even get reimbursed for the expenses of the shovel from his donations to a Donor Advised Fund. And most certainly, he cannot receive compensation at all. But the wealthy – the Bill Gates's of the world – can set up a Private Foundation and pay themselves and others to participate in the California Fire recovery effort. The wealthy – those who can afford the tremendous expenses of a Private Foundation – CAN pay reasonable compensation and expenses for such worthy charitable work, those who are not wealthy CANNOT.

This reminds me of a conversation on CNN with author John Grisham, who was asked why he did not simply make a contribution to the Salvation Army or the Red Cross to reflect his concern for the victims of Katrina. He said “My wife and I wanted to roll up our sleeves. We wanted to get our hands dirty. We wanted to help personally.” So, because Donor Advised Funds are prohibited from paying reasonable compensation and expenses in such instances, he put $5 Million in his OWN PRIVATE FOUNDATION.

If you are half as upset about this as I am, please call your Congressman and let him know. For your review, under the current law change:

1. National Heritage Foundation (A Donor Advised Fund) can make gifts at the donor’s suggestion to approved (by NHF and IRS) charities and to other organizations for charitable purposes. And it can make gifts abroad to organizations that National Heritage Foundation approves on the basis that they “would be charities” if they were located in the U.S.
   


2. Congressional District Programs (A Field of Interest Charity) is NOT a Donor Advised Fund, must be monitored by a Project Manager who is a NON Donor with Congressional District Programs' approval, and can indeed pay reasonable expenses and compensation to non-donors.
   


3. Charity Admin, Inc. – this is a new Charity Management Company that can create and manage Public and Private Independent Charities that can indeed still pay the donor, and perhaps his nominees, reasonable compensation and expenses for their charitable activities.

So, shall we correct this legislation now, or wait till the next Katrina, the next California Fire, the next Mount St. Helena blast, the next Tsunami, the next Disaster? We need vehicles like Donor Advised Funds to make it possible for the little guys like us to make a difference.

Charity is everyone’s business, and it is not right to say to a small donor – well, you can't perform the work yourself, but you can just donate to (fill in the charity name).

Congress is Halting Americans from Charitable Involvement

by Dock Houk

Why in the world would Congress stop the progress of charitable involvement by the American People?

By preventing Donor Advised Funds from operating charitable programs, Congress has effectively hampered market forces at work -- to create jobs in the charitable sector and help those in need. Did you know these programs were operating in when the law was passed?

The 14 pages of the 400-page Pension Reform Act (that prohibits payment from a Donor-Advised Fund for reimbursement of expenses and reasonable compensation related to the charitable purpose) is short-sighted, dangerous and hurtful to America!

Here are some thoughts from the bipartisan work of President William J. Clinton and President George H. W. Bush, as expressed in Bill’s new book, “GIVING – HOW EACH OF US CAN CHANGE THE WORLD.”

1. “Everyone, regardless of income, available time, age and skills can do something useful for others, and, in the process, strengthen the fabric of our shared humanity.”
   
2. Worldwide philanthropy is a golden thread that can bind us together. ALL RELIGIONS AND ALL GREAT PHILOSOPHERS recommend GIVING!
   
3. We can make market forces work better for the poor if we can develop a more creative capitalism.
   
4. We need to stretch the reach of market forces so that more people can make a living serving people who are suffering from the worst inequities.

At some point in the near future, the Charitable Sector will create a significant number of jobs that Americans need. Imagine the joy of waking up in the morning and planning the day to MAKE THE WORLD A BETTER PLACE, little by little.

It is clear that our charitable programs help create those jobs and facilitate competent management and oversight in a way that private foundations and individual public charities cannot.

The charitable programs under the National Heritage Family (NHF) reflect the market forces the Clinton/Bush ideas are describing:

1. Charitable Entrepreneurship embraces the best of capitalism, and uses it to give jobs and livelihood to those who help others.
   
2. There is no better way for normal citizens to begin helping others than combining the forces of the National Heritage Family (administration) and the charitable entrepreneur (program action).
   
3. Everybody knows that setting up an expensive, cumbersome and dangerous private charitable foundation is NOT a solution except perhaps for the very wealthy – like Bill Gates. Even Warren Buffet does not want to face the administrative challenge, and has asked Bill Gates to help.

Read my previous blog from October 18, 2007 that illustrates how the Pension Reform Act has crippled Americans’ ability to assist the victims of future Hurricane Katrina-like disasters through the Donor Advised Fund .

Please also refer to the 2007 Annual Report of the National Heritage Family describing our struggle to deal with the Pension Reform Act. NHF programs give people the means to easily join together to advance the public good. The services of the NHFamily help people focus on the COMMUNITY NEEDS, while leaving the administrative tasks to experts at NHFamily.

• How does someone begin to help?
• How does an individual attempt to make a charitable impact in his or her community?

We have the answer. You will see it in the NHFamily Annual Report for 2007. And if you want to talk with me call 561-301-3891; or send me an email at dock@nhf.org. I will respond to you promptly.

Dr. J. T. Dock Houk, JD, PhD, CPhD
Founder and CEO

P.S. We have charitable programs hard at work in all Congressional Districts around the country.

Hurricane Katrina Part Deux

When Hurricanes Katrina and Rita hit the New Orleans and Texas areas, breaking down the levees and flooding the lower lying homes, many of the foundations under the authority of the National Heritage Foundation (NHF) took immediate action. Both money and people advanced on the tragedy and did what they could to help. And many wonderful new chapters in the NHF story were written – headlined by The KATRINA HOUSING FOUNDATION, EVERY CHURCH A SCHOOL FOUNDATION, AND MUTTSHACK.

Foundations at NHF tackled the basic tasks of getting displaced persons a place to live, ECAS helped mobilize the churches in the area to rescue and rehabilitation eff orts, and MuttShack helped take care of animals left to wander on their own having been separated from their owners.

NHF staff focused on analyzing requests for reasonable compensation and expense reimbursement, worked overtime to backstop these efforts and speed up the rescue and rehabilitation work. In our offices it was very like what happened when the September 11th terrorist attacks on the country. We had nearly $2 million out the door and helping those victims in New York before the smoke settled.

I listened to John Grisham and his wife being interviewed on CNN, at the time just after Katrina hit. He had put $5 million, I believe, into a Private Foundation at great expense, and the interviewer asked: “Why did you feel you had to go to the expense of setting up a Private Foundation. Why didn’t you just send the money to the Red Cross or some other agency in the New Orleans area?”

His answer was exactly why, in 1968, Dr. Wil Rose, in San Francisco, Ron Philgreen, in Kansas City, and I set up the National Heritage Foundation in the first place. He said… in effect:

“My wife and I wanted to roll up our sleeves – we wanted to get our hands dirty – we wanted to personally help the victims. And setting up a Private Foundation was recommended to us by our Financial Planner, since we would need some reimbursement of expenses.”

AND THAT’S WHAT WE AT NHF WERE CREATED TO DO.

NHF was created in 1968 to encourage philanthropy all over the world, and in our short lifespan, we have nearly 10,000 foundations under our authority, and have impacted lives in 26 countries. These foundations, under NHF authority, are taking care of Buddhist old folks in Golok, Tibet, we are helping Sufi Moslem Orphans in Cairo, Egypt, we are building a Golden City (Hindu) in southern Andra Pradesh in India which will provide services to 27 villages. In the United States, we have a homeless shelter in slumtown Phillie, we have a battered women’s shelter in Minneapolis, and we run a park in California. We were created to help encourage Philanthropy, worldwide. Some call it…

“CHARITABLE ENTREPRENEURSHIP”

The founders of NHF have always realized that the idea of “people helping their fellow man” was indeed a Golden Thread that could well bind the world’s peoples together on this Shrinking Blue Marble called “Earth.” AND DON’T WE NEED SOME BINDING-TOGETHER?!!!

NHF provides the back office administration for anyone who feels like helping others. In a sense we are, first, an incubator – then after some progress, a greenhouse, - and perhaps later on, when the project is big enough, strong enough, to stand on its own two feet – a launching pad for charitable independence. When the new charitable endeavor is big enough for independence, we have GRADUATION DAY, where our NHF foundation – with our help – becomes an Independent Public Charity.

NOW COMES THE DARNED PENSION REFORM ACT

And now it is Verboten for a Donor Advised Fund like NHF to help individuals respond to community needs – when those needs require the payment of Reasonable Compensation for Bona Fide Charitable Activities, or the payment of Reasonable Expenses for those projects. THIS IS NOW AGAINST THE LAW FOR A DONOR-ADVISED FUND TO DO.

Yes, of course we can set up a Field of Interest Charity, as we do with the Congressional District Programs, but the donor or initiator AND HIS FAMILY OR ANY CORPORATION OF WHICH HE MAY BE A SIGNIFICANT OWNER ARE PROHIBITED FROM MAKING A CONTRIBUTION. Yet he or she may do these things if only they set up an expensive PRIVATE independent foundation.

Consider how thoughtless the new law is: An individual wants to set up a foundation at NHF to, for example, “Tutor Inner City Gifted Children After School.” As any Entrepreneur would do, he fund this idea initially with his OWN donations. Under the new restrictions, he cannot be reimbursed, even if he purchases notebooks for them to study with. The law would make that a Donor Advised Fund. Yet, if he only creates his own non-profit corporation and files (for $750) Form 1023 with the IRS and begins his own dangerous and expensive journey through the administrative minefield of charity administration, he may be reimbursed for the notebooks and materials he has purchased for this after-school program. It makes you wonder whether the Congressmen even read the entire text of The Pension Reform Act.

HERE’S THE DANGER TO AMERICA

Charitable Entrepreneurship is indispensible to our future. CE will give employment to people, especially young people, and CE will give deep job satisfaction to those who are working on aspects of “Making the World a Better Place to Live.”

We are ENCOURAGING Charitable Entrepreneurship by asking Congress to remove from the category of Donor Advised Fund all “Foundation Accounts” at Community Foundations like NHF, funds which have at least 1/3 Public Support! Call me at (561) 301-3891 and we’ll go see your favorite Congressman together.