Growing Concerns Over Charities: Tax Havens For The Rich | WGN 720 radio

0

The spotlight is on the wealth and the power of their wealth, and fear is growing among philanthropists.

Wealthy Americans have long sought to use charitable donations to reduce their tax burden. However, the Pandora Papers report, released Sunday by the International Consortium of Investigative Journalists, is beyond the reach of governments by world leaders and millionaires using shell companies and offshore accounts deemed legal. He revealed he was hiding billions of dollars.

An operation described in the report, “Dynasty Trust,” may exist permanently in states like South Dakota. These trusts can be used by Americans to legally protect themselves from property and other taxes, removing a major incentive for charitable giving.

When the wealth of an American individual or couple exceeds a threshold ($ 11.7 million or $ 23.4 million, respectively), the value of every dollar above that level, once bequeathed, represents up to 40% of federal wealth per generation. It is subject to tax.

However, a carefully crafted dynasty trust helps posterity avoid these taxes. Also, the longer the trust, the longer the user can avoid taxes and the less financial incentive they have to donate to charity.

Experts say some Americans can also legally circumvent state income tax on income generated from their assets by creating a trust in a state that does not impose income tax. One of them is South Dakota. South Dakota does not have its own real estate, capital gains, or inheritance taxes, which makes it a particularly attractive destination for wealth parking.

Professor Rey Madov of Boston College Law School, who teaches philanthropy, said: And taxes. “The impact on the philanthropic sector is probably already underway, but will increase over time.

After all, tax policy systematically affects charitable giving. The Treasury reported that charitable giving in 2018 fell 1.3% year-on-year after President Donald Trump called for tax law revisions through Congress in 2017. In general, these donations tend to grow at about the same rate as the gross domestic product, which grew 5.2% this year.

As the Biden administration pushes for a plan to raise taxes for wealthy Americans, it includes in its estimates that many people affected by the tax increase will donate more to charities to reduce their tax burden . .. But for many wealthy people, trusts such as those described in the Pandora document will reduce their tax burden without charitable donations.

The trust allows a settlor to transfer the assets to the trustee, who manages the asset and sends it to a third beneficiary. However, in states like South Dakota, Alaska, and Nevada, the person transferring the assets can call themselves the beneficiary of the trust. Mitchell Gunns, a professor at Hofstra University specializing in tax law, said these so-called “self-settlement trusts” could further reduce the tax burden by protecting creditors’ assets and moving assets from property. taxable real estate. Declared.

South Dakota has also introduced strict privacy laws to keep the trust out of the public eye. This is a characteristic that wealth advisers use to attract potential clients with multigenerational wealth growth. State trust assets have skyrocketed to $ 360 billion in the past decade alone, according to research reports.

It is difficult for charities to know what the long-term consequences of a trust will be. Many charitable and lobbying officials declined to comment on the impact of the Pandora Paper revelation on charitable giving. Because there is a lack of data on the extent of the use of these tax havens.

However, some studies suggest that there could be some impact. According to a recent survey by consultancy firm CCS Fundraising, 25% of donors cite tax credits as the motivation for charitable giving. A collaborative study between Bank of America and the Lilly Family School of Philanthropy at Indian University found that 22% of wealthy donors surveyed would cut their giving if charitable tax credits were abolished. According to the same survey, 51% of wealthy donors can donate to charities for tax incentives.

Patrick Rooney, professor of economics and philanthropy at Indiana University, said he believed dynasty trusts would undermine philanthropic giving. Removing incentives for charitable giving essentially increases the price of giving, he said. Meanwhile, Rooney pointed out that the tax cuts could prompt donors to contribute more to causes of concern for their conditions.

“Most high net worth individuals are donors to different types of charities for different reasons,” he said. “So I think some of these people have a philanthropic urge despite their tax evasion attempts, but I don’t know for a while.”

Chuck Collins, director of the Inequality and Common Goods program at the Progressive Think Tank Policy Institute, said many wealthy Americans see their philanthropy as part of their wealth conservation skills. Yet, he said, some charitable people may still want to avoid taxes.

“I think that’s probably a pretty big category (of people),” he said.

___

AP Business Writer Glenn Gamboa contributed to this report.

___

The Associated Press is supported by Lily Donations for philanthropic and nonprofit coverage. AP is solely responsible for all content. For all AP philanthropy coverage, please visit https://apnews.com/hub/philanthropy.

Source link Growing Concerns About Charities: Tax Havens for the Rich | WGN 720 radio

Share.

Comments are closed.