by William Skink
Don’t be fooled by the “charitable” intentions of wealthy people, people like Wisconsin transplant Lord Checota. In today’s Editor’s Choice op-ed, where the Missoulian gives out chokecherries for bad things and huckleberries for the ostensibly good things happening in Missoula, I found this part about a charitable donation to be quite interesting:
Shelves lined with huckleberries to the plans taking shape for the new five-story Missoula Public Library, with a special shelf dedicated to Nick and Robin Checota for their recent $50,000 donation. The Checotas’ gift, made through their Logjam Foundation, will go toward the library’s art space for children, which will be supplied with books of course, but also offer a host of other media and even a climbing structure. The library foundation is still working to close its steadily shrinking fundraising gap, with only $450,000 more to go.
How dare I criticize a charitable donation, you say? Well, don’t take my cynical word for it, take it from Investment News. There actually is a non-altruistic incentive behind parking money in foundations. The jargon the article uses to make it sound exotic and incomprehensible to Joe and Jane is “donor-advised funds”:
It’s all the rage in charitable giving — and it’s actually got some charities worried.
Donor-advised funds — money that grows tax-free in individual accounts — are reshaping the landscape of U.S. philanthropy. After creating their account, donors choose how it’s invested, and the money compounds until they decide where to dole it out. DAF assets mushroomed to more than $85 billion at the end of 2016 from $30 billion in 2010.
Not everyone thinks that’s good news. Critics say the approach may slow the flow of money directly into nonprofits that serve the needy on a daily basis. Moreover, it injects charitable affiliates created by for-profit financial players such as Fidelity Investments and Charles Schwab deep into the big business of philanthropy — a boon for them and their clients, but, some worry, not so clear a win for the causes.
Why would anyone think this is not great news? Well, when you actually look into the beneficial tax reasons (not altruism) for creating these foundations, you understand the real incentive. Here’s more from the article:
The financial services industry’s interest in giving is tied to a looming generational wealth transfer — and a desire not to see assets walk out the door. (A common DAF marketing theme is the ability to leave a legacy of giving for heirs.)
The money in many of these accounts started out as highly appreciated, publicly traded stock and illiquid “complex assets” such as shares in closely held businesses, restricted stock, oil and gas royalties, and real estate interests. Then there’s the art, the cruise ship, the bitcoin and bushels of wheat and soybeans DAFs have liquidated to fund accounts.
If the donor sold them, those assets could produce huge tax bills. If they’re donated to a DAF, they bring huge tax benefits and a bigger pool of charitable funds than if they’d been sold and the proceeds donated.
Got that? Good. So let’s get back to Lord Checota’s noble offering…for the children.
I went to the Logjam website to see how they are framing the “charitable wing” of Logjam Presents and here is what I found:
The newly formed Logjam Foundation has been created to serve as the charitable wing of Missoula-based entertainment company Logjam Presents. The mission of the Logjam Foundation is to cultivate and incubate arts and culture in the Missoula community. Additionally, the Logjam Foundation is committed to the sustainability of the community in which it operates. Logjam Presents appreciates the strong support of Missoulians for live music and that they work hard for the money required to support live music. As a result, Logjam feels it is important to reinvest proceeds earned from our concerts back into the community to incubate a strong arts culture and to help maintain a sustainable environment for Missoula.
What a bunch of bullshit.
If Lord Checota wants to cultivate and incubate arts and culture in the Missoula community, how about not depleting the MRA piggy bank by 16.5 million dollars so that money can be used for something else.
Or how about paying a higher wage to your employees? Maybe offer more full-time jobs with benefits. Seems to me if Lord Checota was genuine in wanting to do what the above quote claims, there are better ways than creating a foundation where illiquid assets can be transformed into “charity” while conveniently avoiding fiscal nuisances like the capital gains tax.
So, like I said at the start of this post, don’t be fooled by the charitable intentions of the wealthy because altruism is NOT the driving force behind the proliferation of donor-advised funds.
Thus concludes today’s lesson in crony capitalist shenanigans. Next week, let’s review the proper use of the guillotine.
(that is intended as a joke and not a threat of violence to our benevolent Lord, who may smite me one day should I not show the proper respect for his Lordly contribution to our humble mountain town)