One outcome of the recent federal income tax overhaul will likely be reduced charitable giving. Taxpayers using the increased standard deduction (expected to be more than 90 percent of all individual filers) will lack a tax incentive to make charitable donations. The consequences for nonprofits could be sorely felt.
Interest for Others Foundation has responded by creating an online social giving network that operates through banks. A Minnesota-based 501(c)(3) tax exempt organization, Interest for Others permits bank customers to donate their earned interest (and more) to Minnesota charities, using a credit or debit card or ACH transaction. Bank customers will be introduced to the giving network directly through their online banking platform.
Interest for Others issues customer receipts, subsidizes 100 percent of payment processing costs for donations under $50, and remits all donations to recipient charities.
Participating charities are screened, and organized by category: Arts and Culture, Community Services, Education, Environment and Animals, and Health. Visitors to the site learn essential facts about each charity and may make one-time or recurring donations to the charities of their choice.
Through the Interest for Others social giving network, banks can weave charitable giving into the fabric of their customers’ financial lives, and build customer loyalty and trust. Tapping into a new source of funds for charity – “dormant” interest and dividend income – a new generation of charitable givers, many of whom lack prior philanthropic habits – can be engaged.
Congress has recognized the potential for earned interest as a source of charitable giving with introduction of the “Interest for Others Act of 2017,” H.R. 894, pending in the U.S. House of Representatives. Its passage would help offset the damage to nonprofits caused by the increased standard deduction: under the bill, individuals could exclude from taxable income up to $50 of checking or savings account earned interest or money market dividends, per account, contributed to charity via the Interest for Others network or any other 501(c)(3) “qualified aggregator,” as defined in the Act.
The average U.S. checking and savings account customer earned interest of less than $10 in 2017. Donations made to Minnesota charities on the Interest for Others network averaged $20 per transaction in 2017.
How will H.R. 894 benefit banks offering the program? In addition to demonstrating community involvement, support, and related goodwill, banks can save administrative costs under the bill. The current $10 exemption from preparation and filing Form 1099 statements of income would increase to $50 under the Act, but only if customers donate earned amounts to charity. Fewer 1099s to process is benefit to bankers designed to encourage their adoption of the program. A reduction in IRS administrative costs is also expected.
The elimination of charitable deductions for all but 10 percent of individual taxpayers invites new tax incentives for charitable giving like the Interest for Others Act. That approach encourages additional charitable giving, and compensates partially for the damage caused by an increase in the standard deduction. More charitable giving will lessen the burdens of government by enabling the nonprofit sector to do more, which will be vitally important given tax reform’s likely outcome, a smaller federal government.
The Interest for Others organization expects to expand beyond Minnesota’s borders soon with a network established for South Dakota charities.
Bankers in Minnesota or South Dakota who are interested in participating are encouraged to contact Mark Greene, [email protected].
William Dolan is the founder, and John James the is chairman, of Interest for Others Foundation. Both are Minnesota attorneys. They assisted in drafting H.R. 894, the Interest for Others Act of 2017.