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Market Plunge Hasn't Crimped the Big Donors : Tax Laws Contribute to Charities' Well-Being

October 29, 1987|JESUS SANCHEZ | Times Staff Writer

As the stock market nose-dived last week, the Los Angeles Music Center wasted no time mobilizing its crack team of about 100 fund-raising volunteers.

The fund-raisers telephoned wealthy prospects to make sure that the upheaval in the financial markets wouldn't frighten them into reneging on pledges to the music center's year-end fund-raising drive, which usually nets about $6.5 million. The volunteers were pleased to report that no patrons had been lost.

Music Center Executive Vice President Esther Wachtell said she never expected a serious drop-off but decided to launch the telephone campaign "just in case."

And for good reason. The stock crash came at a time when many charities and nonprofit groups began or were about to begin important year-end fund-raising campaigns. Tax rate changes being phased in under federal law make 1987 a better year than 1988 for charitable contributions for many taxpayers, but some fund-raisers fear that factor will be washed out by stock market worries.

The timing of the crash "could not have been much worse," said James R. Burnham, president of the Society for Nonprofit Organizations in Madison, Wis. "It's going to have a significant negative impact on philanthropic giving."

A Big Business

So far, major Los Angeles area institutions--including United Way, Catholic Charities, the National Kidney Foundation, public television station KCET (Channel 28), the Museum of Contemporary Art, the City of Hope and the University of Southern California--say there has been no noticeable decline in contributions. But no one is certain what will happen down the road.

"It's too early to tell," said Irwin J. Kaplan, who is in charge of fund raising at the Permanent Charities Committee of the Entertainment Industries, which sent letters soliciting donations on Oct. 9, 10 days before the market crash. "Hopefully, by the time they get around to mailing in their contributions, the market will climb back to normal."

The Los Angeles chapter of United Way, which began its six-month campaign to raise $85 million on Oct. 19, the same day the New York Stock Exchange dropped 508 points, believes that the stock market crash "might affect our large individual givers," said spokesman Anthony W. Harris. But it could be two months before his group knows for sure.

Fund raising in America is big business. In 1986, $87.22 billion was donated to charities nationally, according to the American Assn. of Fund-Raising Counsel, a consulting organization. The lion's share--$71.72 billion--consisted of contributions from individuals. The rest came from bequests, foundations and corporations.

Social Life a Factor

Americans do not necessarily cut back on charitable contributions when the stock market sinks. During stock market declines in 1974-75 and 1977-78, contributions to the United Way actually increased, Harris said.

Richard Bryant, spokesman for the Orange County Performing Arts Center, said: "Philanthropic giving has increased every year since 1950, regardless of the condition of the market."

Jack Schwartz, past president of Fund-Raising Counsel, said: "The real thing that affects giving is the growth of personal income," rather than gains--or losses--from investments.

Also working in favor of charities this year is tax reform, which will cut the top tax rate in 1988 to 33% from 38.5% this year. As a result, tax-deductible contributions benefit wealthy individuals more this year than they will in 1988.

Tax deductions for charity might prove attractive even to investors who lost heavily in the stock market. Under current tax law, no more than $3,000 in stock losses can be written off against investors' normal, or earned, income. Consequently, even people with big investment losses may be looking for tax breaks.

Moreover, accountants and fund-raisers say that taxes and swings in stock prices aren't the only considerations.

"A lot of these people are probably going to make their contributions anyway," said Peter E. Goldberg, a certified public accountant in Santa Monica. "Their social life is geared into these charities."

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