Philanthropy Notes: January 2013

At press time, President Obama and large philanthropies were negotiating over the administration’s effort to scale back the nearly century-old tax deduction on donations that charities assert is vital for their financial well-being. The Washington Post reports that White House officials are pressuring nonprofit organizations to back Obama’s plan for dealing with the year-end so-called fiscal cliff, a combination of dramatic spending cuts and tax increases that would automatically take effect January 1 if Congress fails to act. Charities such as the United Way and American Red Cross are concerned about the president’s controversial proposal to cap charitable deductions for high-income individuals and argue it would hurt charities by discouraging contributions. “It’s all castor oil,” said Diana Aviv, president of Independent Sector, an umbrella group that speaks for many nonprofits. “And the members of the nonprofit sector I represent don’t want any part of it. It’s a medicine we’re not willing to drink.”

The far-left Funding Exchange (FEX) announced that effective December 10 it would close its doors. “Across recent years the national office of the network, based in New York, has faced a continuous decline of revenues, particularly in general operating support,” the group said in a statement. Founded in 1978 to promote “Change, not Charity,” the 16 local funds that were part of the FEX network will continue to operate as free-standing philanthropic organizations.

State-level charity regulators across the country may work with each other to crack down on nonprofit groups that report highly inflated values for product donations, particularly of medications, to bolster their ledger sheet, Forbes reports. New Mexico Assistant Attorney General Elizabeth Korsmo, who runs the state’s Charities Bureau, is helping to lead the effort, and she and her out-of-state colleagues may be collaborating with the Internal Revenue Service, the magazine reports. Korsmo said states “are looking at gift-in-kind valuation issues. This is on our radar. It’s a hot issue among regulators.”

GOLDMAN SACHS WATCH

A former Goldman Sachs analyst testified December 14 that his team did an outstanding job in helping Dragon Systems Inc. sell itself to a Belgian company that failed six months later following an accounting scandal, Bloomberg News reports.  Alexander Berzofsky testified in federal court in Boston, answering questions from a lawyer representing the former owners of Dragon Systems who are suing Goldman for its allegedly imprudent advice on the transaction. “You’re saying Goldman did a great job for Dragon?” asked Alan K. Cotler, legal counsel for Jim and Janet Baker who founded the speech recognition software development firm three decades ago. “Yes,” Berzofsky replied. “The fact that Jim and Janet Baker lost their life’s work doesn’t affect your opinion that Goldman did a great job for them, right ?” Cotler asked. ‘Correct,’ responded Berzofsky, who checked out of Goldman Sachs in 2000 and now serves as a managing director at private equity firm Warburg Pincus LLC.