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Endowments and Charitable Giving

Talking Points and Other CONSIDERATIONS

NACUBO suggests that business officers consider this background information and the talking points below in preparation for communications with students, community members, policymakers and others about the value of charitable giving and endowment support at colleges and universities.

CONSIDERATIONS

When meeting with policymakers and others:

  • Illustrate local impact. Communications are more effective when you can demonstrate how these issues impact your community. Data and anecdotes about your students, faculty, staff, and stakeholders illustrate how federal policy changes made on Capitol Hill can affect lives in your states and local communities.

  • Recognize the responsibility lawmakers (and their staff) have for driving federal tax policy.

  • Help them understand how those policies help you fulfill your commitment to supporting students and institutional success.

  • Familiarize them with the role that your college foundation and advancement work plays in supporting students, faculty, and the university mission.

  • Emphasize the role of charitable giving (both through annual campaigns and endowments) in lowering pressures on tuition rates and revenue, and supporting students' access to affordable, quality education.

  • Highlight access and affordability. Explain the importance of charitable giving and the endowment to promote an affordable quality experience for undergraduate students, including those from first-generation families or lower- and middle-class backgrounds.

  • Emphasize the importance of small gifts and contributions for achieving and maintaining an engaged community. 


EXAMPLES OF PROPOSED POLICIES 

A number of ideas have been publicly floated by lawmakers and others. It is unclear at this time what may ultimately be enacted into law. While some proposals have targeted the largest endowments, it is possible that all endowments could be affected—at private and public institutions of higher education, small or large. It is even possible that legislation could impact all endowments, not just those established in support of institutions of higher education. Here are some proposals that have been floated or drafted in legislation:

  • Minimum payout requirements for endowments above certain thresholds (e.g., based on absolute value; investment earning rates; or other tuition/student need metrics).

  • Tax on endowments above certain thresholds (e.g., 1 percent excise tax on on endowments in excess of $100,000 per student).

  • Increase charitable deduction for gifts to endowments specific to financial aid.

  • Change charitable deduction for gifts to endowments (e.g., reduce value of deduction for gifts spent over time or not immediately used for charitable purposes). Some options considered have included:

  • A 2 percent "floor" on charitable deductions, meaning a taxpayer would have to contribute at least 2 percent of their income to charity in order to claim a deduction. Experts believe this will discourage some donors while encouraging others to give more.

  • Appreciated property gifts would be limited to cost basis.

  • Capping the amount of itemized deductions.

TALKING POINTS

Charitable Giving and Endowments

  • Our foundation raises funds in excess of $### per year to support the university's strategic priorities and manages an endowment of more than $###.

  • Our most recent comprehensive fundraising campaign engaged more than ### donors who made gifts exceeding $### to advance our school's priorities.

  • The annual endowment impact is significant and growing, totaling nearly $### for the university this year and more than $### in the past 5 years combined.

  • Charitable giving is fueling our commitment to providing an affordable, quality education.

  • Endowments are critical for student financial aid (scholarships), but they also provide important funding sources for faculty, libraries, laboratories, student services, and other components that are key to a student's education.

  • Endowments also support research and public service missions, such as innovations in nanotechnology, medical research, or university-based youth and community development programs.

  • Studies of charitable giving indicate that tax deductions are an important factor leading donors to make gifts. We ask Congress not to impose barriers that may limit charitable giving

Endowment Management

  • Endowments are an instrument of good financial planning for nonprofit entities—large and small. They are not a savings account or rainy day fund. They are managed to provide a steady, stable, reliable funding source over the long term.

  • Endowments are a collection of funds—often comprised of 100s, or even 1000s, of individual funds that range in size from below $10,000 to over $1 million—managed for both future needs as well as current needs.

  • Most college and university endowment funds have a specific, donor-directed purpose (e.g., research, financial aid, public service).

  • Endowed funds represent the school's promise to donors to use income and investment gains generated by their gift into perpetuity.

  • Donors often stipulate the purpose for which funds can be spent and expect funds to last into perpetuity.

  • An institution's governing board determines the appropriate spending distribution policy. Spending policies strive to balance two primary investment objectives:

1. The need for current operating income.

2. The need to preserve the endowment's future purchasing power.

READING MATERIALS, VIDEOS, PODCASTS, AND MORE

A number of additional helpful resources can be found here, including NACUBO videos and podcasts and links to college and university publications describing endowment basics and discussing the importance of philanthropy in higher education.

Contact

Liz Clark
Director, Federal Affairs
202.861.2553
E-mail