The Law of Fundraising. Bruce R. Hopkins

on-street solicitation is less common today because of limited volunteer time, some organizations benefit from “cold calls” during neighborhood drives because the public recognizes the organization's name (e.g., the American Cancer Society's “Women's Walk”) or has come to trust the organization's purposes (e.g., the Salvation Army's bell-ringers, chimney box, and red pot for collections at Christmastime). The difficulty in recent years has been abuse of public trust by a few organizations or individuals who “hustle” the public too hard or who run afoul of local regulations restricting solicitation, such as in airports and other public areas.Sweepstakes and Lotteries. Where legal, charities can benefit from such forms of public solicitation as sweepstakes and lotteries. Most charities, however, prefer to avoid areas of questionable practice, which too often are viewed by the public as forms of gambling. Bingo remains the exception, but it too is carefully regulated and supervised.Las Vegas and Monte Carlo Nights. Again, where legal, Las Vegas and Monte Carlo nights can develop gift revenues for a charity. State and local regulations for conduct of these events are strict, and may include a 5 to 10 percent fee taken from net proceeds. Like other special and benefit events, “casino” nights are hard to manage profitably because of high direct costs and overhead expenses.⁵¹Mailings of Unsolicited Merchandise. The theory behind the practice of mailing unsolicited merchandise is that it engenders guilt in the recipients—presumably, recipients would feel guilty keeping something of value sent to them and thus would be more likely to respond with gift support. This type of method is less popular today because postage and material costs, along with public resistance (lack of response), are rising.In-Plant Solicitations. Public solicitation in the workplace is usually controlled by the employer. Where in-plant solicitations are permitted, some employees resist being “cornered” and “pressured” to give. Usually, only United Way or other federated campaigns have been allowed into the workplace for this type of solicitation.Federated Campaigns. Federated campaigns are communitywide solicitations organized to support a large number of civic, social, and welfare organizations in the community with a single, once-a-year fund drive. Public acceptance is high, management and fundraising costs are low (under 20 percent), and a “campaign period” is observed. Federated campaigns, such as those of the United Way and the Combined Federal Campaign, are usually directed to local corporations for annual gifts and to their employees (or to government employees), who are allowed to use payroll deduction. These campaigns require cooperation from those charitable organizations being supported, who must refrain from their own solicitations during the campaign period.

(b) Special-Purpose Programs

      A successful base of annual giving support permits the charitable organization to conduct more selective programs of fundraising that will secure major gifts, grants, and capital campaigns toward larger and more significant projects. A request for large gifts differs from annual gift solicitation because the request is for a “one-time” gift, allows a multiyear pledge, and is directed toward one specific project or urgent need. Likely donors are skillful “investors” who will respond to a major gift request only after researching the organization and determining whether the project justifies their commitment. If the request fails their examination, it is likely to receive only token (or no) support.

      Following is a brief explanation of how the three forms of special-purpose fundraising are employed.

      1 Major Gifts from Individuals. It takes courage to ask someone for $1 million. Current and committed donors are the best prospects. Before the request is made, careful research should ascertain the prospect's financial capability, enthusiasm for the organization, preparedness to accept this special project, and likely response to the team assembled to make the call. Also important is an early resolution of the donor recognition to be offered (election to the board, name on a building, or both). The project must be a “big idea,” worthy of the level of investment required, perceived as absolutely essential, and a unique opportunity offered only once. In short, major gift solicitations should be performed as though they are a request for the largest and most significant gift decisions from these donors at this point in their lives.

      2 Grants from Government Agencies, Foundations, and Corporations. Separate skills and tools are required to succeed at grant-seeking. Grants are institutional decisions to provide support based on published policy and guidelines that demand careful observance of application procedures and deadlines. The decision is made by a group of people and, because of limited dollars, only one grant may be given for every 25 to 50 requests received. Usually, for a grant proposal to be accepted, the organization and its project must perfectly match the goals of the grantor.

      3 Capital Campaigns. A capital campaign is clearly the most successful, cost-effective, and enjoyable method of fundraising yet invented. Why? Because everyone is working together toward the same goal, the objective is significant to the future of the organization, major gifts are required (all through personal solicitation), start and end dates are goal markers, activities and excitement exist, and more. A capital campaign is the culmination of years of effort, both in design and consensus surrounding the organization's master plan for its future, which depends on experienced volunteers and enthusiastic donors. When everything comes together in a capital campaign, the result is success.

(c) Estate Planning Programs

      An increasingly active area of fundraising involves gifts made by a donor now, to be realized by the charitable organization in the future. The term gift planning best describes this concept. These gifts either transfer assets to the charity now, in exchange for the donor's retaining an income for life, or transfer the remaining assets at the donor's death. This planning allows donors to remember their favorite charities in their estate and to plan gifts of their assets, now or at death. These gift decisions are usually made by donors who have some history of involvement and participation with the charities named in their estate and speak loudly of the donors' trust and confidence in the organizations and their future.

The four broad areas of planned giving are guided by income tax, gift tax, and estate tax law, plus layers of changing regulations. Estate planning is perhaps the single area of fundraising in which the tax consequences of giving are most prominent.

      1 Wills and Bequests. The easiest way for donors to leave a gift is to specify in their will or living trust that “ten percent (10%) of the residue of my estate is to go to XYZ Charity.” Organizations should provide donors with suitable but simple bequest language, to encourage them to include the organization in their will. These gifts may be outright transfers from the estate or may involve funding by means of a charitable trust created by a will.

      2 Pooled Income Funds. A “starter gift” to show donors how gift planning works can be made by means of a pooled income fund. Individuals may join a “pool” of other donors whose funds are commingled, with interest earnings paid out according to a pro rata shares distribution based on the annual value of the invested funds. Similar to mutual funds, pooled income funds require donors to execute a simple trust agreement and transfer cash or securities to the charity, which adds their gift to the pooled income fund. Upon a donor's death, the value of their shares is removed from the fund and transferred to the charity for its use.

      3 Charitable Remainder Gifts. Major gifts of property with appreciated value make excellent assets to transfer to a charitable organization in exchange for a retained life income based on the value of the gift at the time of transfer. These gifts are especially valuable to donors planning their retirement income and distribution of their assets. The structure of the trust agreement may be as a unitrust, annuity trust, or gift annuity. While the legal structure of the three agreements is slightly different, the charity in each case assumes responsibility to manage the asset or its cash value and to pay the donor an income of 5 percent at least annually.

      4 Life Insurance/Wealth Replacement Trust. Any individual may name his or her favorite charity as a beneficiary, in whole or in part, of a life insurance policy. This decision qualifies the value as a charitable contribution deduction. Some charitable organizations offer their own life insurance product, and premiums paid to the charity represent annual gifts for tax-deduction purposes. The charity uses the funds to