Romney Foundation Grantmaking Appears Politically Moderate

[trailmonkee]

Source: nonprofit quarterly

If Republican presidential candidate Mitt Romney is elected, he may be the first president of the modern era to have both a Charitable Remainder Unitrust (CRUT) and a private foundation. BusinessWeek describes the multiple mechanisms Mitt and Ann Romney have used to protect their wealth—well over $250 million by our calculations not including another $100 million in a family trust—from estate taxes and ordinary taxes (returns for which, as we noted yesterday, he has largely not released, unusual for a presidential candidate in the modern era). Through their use of the tools of charitable giving, Mitt and Ann Romney are demonstrating themselves as adept at understanding the mechanics of contemporary charity and philanthropy, or at least adept at understanding and following the advice of the man who seems to manage most of their finances, Brad Malt of the large Boston-based law firm Ropes & Gray.

CRUTs are interesting tools. Say you’re a multi-millionaire like Romney. You could set up a CRUT for a few million or so. The CRUT will then pay you (or a non-charitable beneficiary you designate) a fixed percentage of the assets every year (no less than five percent and no more than 50 percent). When you die, the remaining assets in the CRUT go to a charity or charities you specify. At least 10 percent of the CRUT must be reserved for charitable distribution.

We know that the Romneys are going to be hit with a decently sized estate tax bill when they pass on, unless a President Romney or someone else succeeds in expunging the tax code of the Republicans’ hated “death tax.” Assuming that doesn’t happen, one can anticipate that some of the Romneys’ assets will find their way into charitable bequests. When Romney retires, he can access funds from his individual retirement account, valued somewhere between $18.1 and $87.4 million. If Congress reinstates the IRA charitable rollover, a 70½-year-old Romney could make charitable contributions from his retirement account as well.

At NPQ, we tend to focus on institutional giving by foundations and corporations, so we find their family foundation, the Tyler Charitable Foundation (formerly the Ann D. and W. Mitt Romney Charitable Foundation) to be interesting. Most of the news reports on this subject dip into the foundation’s 990s for examples of their philanthropic beneficiaries, but we thought it might be more interesting to run through all twelve years of 990s for the foundation and tabulate the grantmaking reported on eleven of then, from 1999 to 2010. This chart shows all of the grant recipients above $25,000, revealing some interesting dimensions to the Romneys:




Recipient


Amount




Church of Jesus Christ of Latter Day Saints


$4,781,000




Brigham Young University


$525,000




United Way of Massachusetts


$177,000




Right to Play


$101,000




George W. Bush Library


$100,000




Center for Treatment of Pediatric MS


$75,000




Dana Farber Cancer Institute (and the Pan-Mass Challenge)


$71,000




Harvard Business School


$70,000




City Year


$65,000




Weber State University


$55,000




Deseret International Foundation


$50,000




Boys & Girls Club


$56,050




Belmont Council on the Aging


$40,000




Cystic Fibrosis Foundation


$40,000




The Heritage Foundation


$35,000




National Multiple Sclerosis Society


$35,500




The Federalist Society


$35,000




Mmofra Trom Foundation


$30,000




Homes for Our Troops


$25,000




Hoover Institution


$25,000




Hugs International


$25,000




Boy Scouts of America


$25,000




Becket Fund for Religious Freedom


$25,000




America Red Cross South Asia Earthquake Relief


$25,000



Read more: http://www.nonprofitquarterly.org/policysocial-context/20909-romney-foundation-grantmaking-appears-politically-moderate.html

---

doesn't look so politically moderate to me?

[C_U_L8R]

1. Pretty Self Serving

Rmoney only gives when he gets.

[Ms. Toad]

2. CRUTs are interesting tools

It saved my parents a bunch of taxes - and permitted them to make larger than usual charitable donations at a lower cost to them. They had farmland which had appreciated and were winding down the farm (small family working farm) so the land needed to be sold - and the tax hit would have been enormous since it was land they owned all of the time they were actively farming.

One of the interesting things - at least then - was that you could donate the land into the trust (without paying capital gains on it), then have the trust sell it - and the trust itself did not owe capital gains tax on the sale. I've forgotten some of the details, but they used theirs to fund their donations to charity for a number of years without having had to pay much in the way of taxes on the income so they were able to get more of the money in the hands of people who needed it. (I believe they had to take the 5% each year and, paid the capital gains taxes on the portion they withdrew). But they were able to make large charitable donations from the trust and exhaust it in a few years. The opposite way most people do - which is to deliberately delay the charitable function as a remainder (the R in CRUT).

We had to plow through the regs a few times to make sure the really charitable way they wanted to use it was legal (at the time I was an enrolled agent, and we ran it past another person who specialized in charitable giving). It was really useful for my parents - and the charities that benefited from it . But, most users are less altruistic than my parents (who are also not multimillionaires - they just had land that had served them well for ~40 years of farming, no kids who wanted to take it over, and money that otherwise would have gone to the government to misspend on wars they were not in agreement with funding - had it not been for this interesting device).

[joeglow3]

3. CLAT's are more interesting

A good way to pass on money tax free.

[Ms. Toad]

4. My parents didn't want to pass on the income from the corpus

the wanted to use it as a vehicle for charitable contributions, funded with a heavily appreciated asset which could then be sold without incurring capital gains tax. They were not trying to pass money on to non-charitable beneficiaries. The CRUT (used somewhat unconventionally) is a better vehicle for that.

[joeglow3]

5. I agree with that purpose

With a CLAT, the charity gets an annuity payment each year and the remainder goes to your beneficiary. It is typically structured so that the remainder is zero (based on assumed values) and the entire contribution is deducted. If the rate of return is less than expected, the charity just got screwed, but you kept your deduction. If the return is greater, the charity gets their set amount, you get the entire charitable deduction and the beneficiary gets the remainder tax free.

This was structured for those that wanted to screw the government and their charity so they could try to get great returns and pass money on tax free.

[Ms. Toad]

6. I know the two structures -

We looked at both (or at least something very similar to the CLAT - I don't think that acronym is exactly right - but one where the difference was between the charitable payout was the lead or the remainder). The CRUT was better for what my parents wanted (a 5 year payout to charities and done, with a minimum coming to them as the non-charitable beneficiary). I don't recall whether the ability to donate an appreciated asset, which the trust then sold at the stepped up basis, also played a role in which one better suited their needs or not. It's been ~15 years since I've spent much time with the tax code.

Unfortunately, most folks who use these vehicles want to screw the government in the name of looking charitable (but not really being charitable). I guess, in a sense, my parents had the former goal. They were certainly in favor of minimizing the taxes paid on the sale of the farmland - primarily because they are not in favor of their taxes going to support war efforts and ~30-50% of every tax dollar does (depending on how you count it). This was a way to shift "tax" money to organizations whose values were more in line with theirs.