Reaching out to overseas donors for New Zealand causes
Pedley Management Limited
A number of New Zealand non-profit organisations have managed to secure generous support from New Zealanders living overseas. This has typically been the domain of universities and prominent schools, but has also extended to major appeals including the Christchurch earthquake appeals which received significant international support from expat Kiwis.
For those organisations wanting to create tax-effective giving opportunities with high levels of accountability and transparency for their international donors it can be difficult to do so simply and cost-effectively, especially when you are unsure of what the outcomes will be. For some, establishing the equivalent of a registered charity in the US, Canada or UK is a practical solution but does require good governance, ongoing administration and some certainty that ongoing giving will make it a sound investment of time and money.
While on recent travels to the US and the UK I had the opportunity to meet with the Charity Aida Foundation offices in Washington DC and London and learned more about how they can work for New Zealand non-profit organisations and what they services can offer to expat Kiwis wanting to make a donation to New Zealand causes they care about. The UK and US offices have been very helpful in putting the content of this article together and are genuine in wanting to increase donor outcomes for New Zealand non-profits.
An overview of Charity Aid Foundation
The Charities Aid Foundation (CAF) is a global not for profit headquartered in the UK that works to make giving more effective and charities more successful. It helps individuals, major donors and companies create the greatest impact with their giving and connect them to the causes that matter to them most. CAF enables expats to give tax effectively to charities in New Zealand and elsewhere subject to successful due diligence.
After the earthquake which struck the city of Christchurch in February 2011, the New Zealand Commissioner to the UK at the time, engaged CAF to set up a charitable trust to help expats and UK residents provide charitable support for victims of the disaster. Working with the Commissioner and expats living in the UK, CAF established the CAF Christchurch Earthquake Appeal to support initiatives and ensure donations were made to organisations helping those in need. This flexible charitable trust accepted donations and was a vehicle for structured long term giving. CAF’s ability to act fast and provide a support mechanism and legal framework allowed donors to focus efforts on their fundraising initiatives and awareness campaigns. Expat inspiration soon followed with the creation of The Step Up4 Christchurch campaign, which organised a charity climb at London’s famous Gherkin Tower, raised more than £325,000. Initiatives by London4Christchurch, which included a gala dinner at the Savoy hotel featuring a performance by Neil Finn from Crowded House, raised approximately £185,000. According to figures released in 2012, of the total NZ$100 million raised by the global appeal set up by the New Zealand Prime Minister, it was estimated that approximately NZ$7 million has come directly from expats and residents in the UK making it one of the largest sources of overseas donations.
Soliciting Tax Deductible Donations in the US: Do I Need to be a 501 (c) (3)?
In 2005 philanthropic contributions by individuals reached an all-time high, topping out at 2.4% of disposable income. In the subsequent decade we have seen that number fluctuate due mostly to economic hardship and general financial volatility worldwide. However, foreign charitable organizations have enjoyed a rapid increase in giving over the last decade. For any foreign charitable organization looking to benefit from this positive trend, the first step in attracting greater support from US-based individuals and corporations should be providing donors with the same tax benefits offered by domestic charities. Two of the options available to foreign charities when seeking to provide such tax benefits to their donors are filing for recognition as a tax exempt 501(c)(3) corporation and the alternative of setting up a Friends Fund with CAF America.
Procedure for 501(c)(3) Exemption
Many foreign charities attain this goal by incorporating a “Friends of” organization in the United States. “Friends of” charities are required by U.S. law to operate independently of the foreign organizations they support, and therefore must meet the standards of the Internal Revenue Code in order to enjoy not-for-profit status. In order to qualify for tax exemption, an organization must be a corporation, trust, or association of the following type: charitable, educational, religious, scientific, literary, fostering national or international sports competition, preventing cruelty to children or animals, and testing for public safety. The process of obtaining a 501(c) (3) tax exemption can be challenging and in addition, incorporation is slightly different in each state, but generally requires a legal business name, filing financial documents with the state’s corporate filing office, and creating by-laws that provide guidelines as to how your organization will be run and managed.
The CAF America Friends Fund
The benefits associated with membership in the Friends Fund are twofold. The first tangible benefit conferred by the Friends Fund is that of time. Participation in the Fund relieves your organization of the burdens of incorporating domestically, building a board, filing Form 1023, and supplying the accompanying supplemental documentation. Additionally, the Fund does not require that your organization form and sustain a board of directors or staff in the U.S. in order to qualify. By removing government registration, tax, and audit requirements, membership in the CAF Friends Fund allows your organization to focus on fundraising efforts rather than compliance while still broadening your appeal to American philanthropists.
A second benefit of the CAF Friends Fund, when compared to 501 (c) (3) incorporation, is that of associated cost. The Fund's one time setup fee of $1,500 and no minimum balance requirement allows your organization to begin receiving tax deductible gifts from American donors as soon as membership is approved. Comparatively, the initial cost of incorporation simply begins with roughly $1000 in filing fees, not to mention the legal fees you may need to incur and the cost of setting up a stand-alone “Friends of” board. As a member of the Fund, an annual administrative fee of $5,000 entitles your organization to unlimited donations through the online donation portal CAF will provide for you, in addition to 100 donations made by mail, email, or fax. Included, of course, is access to the expertise and advice of its professional staff. .
Organizations such as the Australian Spinal Research Foundation based in Queensland and the University of Waikato in Hamilton, have already enjoyed success using CAF America's Friends Fund program to access American philanthropists and receive tax deductible donations through their individualized giving portals.
CAF harnesses local knowledge and expertise to support sustainable giving around the world. We work with over 7,000 companies and manage £2.9 billion for donors and charities, supporting over 50,000 non-profit organisations and social enterprises in over 100 countries. CAF in Australia operates in New Zealand and to date has distributed over AU$130 million to more than 3,000 charitable organisations.
To find out more about the expat services provided by CAF visit the site.