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Mark Greer, Head of CAF American Donor Fund at the Charities Aid Foundation spoke to Michael Burland about the latest trends in Transatlantic giving, how US Citizens in the UK can make the most of their charitable giving and the CAF American Donor Fund.
About Mark Greer
Mark leads the CAF American Donor Fund team and works with private clients and their families to help achieve their philanthropic ambitions around the world. Prior to joining CAF, Mark worked as Philanthropy Director at UK Community Foundations and the CEO of the Beacon Awards for Philanthropy. Earlier in his career, Mark led programmes engaged in intercultural work and community development as well as working for a British MP and an ultra high net worth family in Miami, Florida. You can contact Mark by e-mail: firstname.lastname@example.org, telephone: +44 (0) 3000 123 150. For more details on the CAF American Donor Fund, visit the website: www.cafonline.org/cadf.
Michael Burland (MB): Welcome to The American Podcast. In this episode we're talking with Mark Greer, Head of the CAF American Donor Fund at the Charities Aid Foundation. Now the culture of giving is much more prevalent and natural to Americans than to many British people. It seems to be in their DNA, and Mark's going to answer some of the questions we've been asked by The American's audience about this important topic. Mark, welcome to The American Podcast.
Mark Greer (MG): Thanks very much.
MB: Firstly, could you just give us a few words on what Charities Aid Foundation, CAF, does, and what your role involves particularly?
MG: CAF does a lot of different things. The main focus is helping people give to charities. So we help individuals, companies, trusts and foundations to give to charities, to make their giving more effective and to take away some of the hassle and the administration that sometimes goes with charitable giving. We exist to help people make their giving really count, and we offer various services that make that easier. We do also run a bank for charities, but the side of CAF that I run is mainly for American expats in the UK, certainly people who are paying tax in the UK and in the US. We help them give to charities around the world and maximize the tax benefit to themselves, but also the impact of their giving.
MB: That's very important to our audience, we do get a lot of questions about it. How does the US' treatment of charitable donations differ to other nations?
MG: Yes, it does vary a lot between different countries, so obviously in the US there's a very long tradition of quite generous tax relief on charitable giving. When you compare that with the UK, the way that the tax relief works is quite different. In the UK we have a scheme called Gift Aid, which people probably see out and about, or when they go on charities’ websites quite a lot. That is, in effect, almost a Government match on donations, which is 25 percent of the value of the donation that gets made. That's a partial refund of the tax that the donor has paid on their donation. Then the rest of the tax, the higher 40 and 45 percent rate payers, can be reclaimed by the taxpayer, whereas obviously in the US all the tax paid on the donation can be reclaimed. Some other European countries, for example the Republic of Ireland, don't give any tax breaks to individual donors, so you as the donor don't get tax relief at all. The charity gets the tax relief, rather than the individual donors, so it does vary a lot between different nations.
MB: As an American over here can you combine Gift Aid at this end with the US style scheme, or do you have to choose?
MG: That's really where things like the CAF American Donor Fund come in. If you give straight to a UK charity, that's great on the UK side of things because the charity can get Gift Aid provided you've paid enough UK tax on your tax return that particular year. The charity can get the Gift Aid, and you can get a UK deduction on your tax return, but of course you've given to a British charity and so as far as the American side is concerned, you've given to a foreign charity, and you can't really claim US tax relief on that. And vice versa, if you were giving to an American charity, there's the US relief there but it's difficult to claim the UK relief unless you use a vehicle like CAF.
MB: We'll come on to the Donor Fund and what it involves in a minute, but just overall, how big is charitable giving in the States?
MG: In the States it's massive. In 2018, it was just over $420bn given to charities. That includes donations from individuals, also donations from companies, and grants made by trusts and foundations, so there's a lot of different types of giving in that number, but that's a huge, huge number.
MB: It certainly is, how does that compare to other nations?
MG: In the UK, the giving in the same year, 2018, was about £10bn, so on current exchange rates, call that $12bn. The UK's $12bn is completely dwarfed by the US' $420bn. Obviously there's a much bigger population but even when you break that down per capita, it's more like $1,200 per capita in the US and about $180 per capita in the UK, so giving in the US is so much bigger, particularly compared with the UK. We survey people around the world each year about their attitudes towards charity but also their involvement with charity and in our last survey, 61 percent of Americans had made a donation to a charity in the last 12 months, and 40 percent had volunteered their time to a charity, so it's a very widespread thing in the States.
MB: It certainly is - it really is significant. Why is it so significant in the States, is there cultural or historical reasons for it?
MG: I think there is. I think there's a long history of philanthropy in the States, although you could say that about the UK as well, from the Victorian philanthropists, a lot of public institutions that are set up by philanthropic funds centuries ago and endowed foundations in the UK that have been around for hundreds of years, but I think in the States it's a different social contract that really makes the difference. The concept of trickle-down economics, the concept of anyone can make it to the top, but when you make it, you have to remember your roots, remember where you've come from, and give back - the desire to have a small government and for society, wherever possible, to look after itself, I think those deep rooted cultural conventions are a big part of why giving is so big in the States. I also think a lot of people, a lot of the clients I work with, give back to the Universities that they went to, which is not really so much of a tradition in the UK, but of course even if they went to those universities twenty, thirty, forty years ago, they benefitted from the philanthropy of their predecessors, so I think because you've got that rolling long-term philanthropic tradition, people think, ‘well I benefited from the philanthropy of people that went before me, so I should also do the same for people who are studying in those institutions now and in the future’.
MB: That's very interesting. And the way that people give I guess is shifting over the years - we saw the recent CAF study on charitable giving in the USA, and it seems that cash is still very important, and donating via cash is just as popular as donating online, about 39 percent each, is that right?
MG: Yeah, exactly the same of cash versus online, or with a credit card or debit card.
MB: That seems surprising this day in age, you'd think it was all electronic now. Do you have any advice for overseas Americans on how they can donate?
MG: I would actually say, think twice before giving cash, because there's benefits both to you as a donor and to the beneficiary of sometimes not giving cash. In particular, Gift Aid, if you throw some cash into a collection bucket at a museum or someone collecting on the streets outside a station or whatever, because you haven't made a formal Gift Aid declaration to that charity, and they don't know exactly how much they got from you as an individual, they can't claim Gift Aid from it, so if you put £10 in a collection, £2.50 that that charity could collect, they can't because you've given cash and they don't necessarily know that the donation was from you, so the charity misses out a bit, but you also can't put it on your own tax return if you've just given cash and you don't have a receipt for it, you don't have any kind of documentation, so you miss out on the benefits yourself. Obviously smaller value donations, on the spur of the moment, it often feels nice to throw a bit of cash in a bucket, but on bigger value donations and if you're really trying to maximize the impact of what the charity receives and the benefit that you get on your tax return, then cash is not always the most efficient way to give.
MB: Which brings us neatly on to one of the ways that you can help which is a donor fund, what exactly is a donor fund?
MG: The donor advised funds that we run are basically like a giving account. It works a bit like a bank account, although it's really important to understand that it's not a bank account. The way that it works is you set up an account with a provider like CAF, you donate money into that account, because CAF is a charity, so you've made a donation to CAF at that point, and that means you can put it on your tax return as made when the money goes into the account. Then you can either, a bit like a foundation would, you can invest that money, allow it to grow, allow it to sustain its value and give away the returns, or give away the money over time. Or, on a more short term basis, you can give the money out. You then ask us to make donations to your chosen charities, which can be anywhere in the world. The big advantage, particularly for Americans, is where there are these dual qualified vehicles like the CAF American Donor Fund, which is both a charity in the UK and in the US, you give in to that, and you've made a donation to a British charity and an American charity, it's tax effective in both countries. Then you can give to charities anywhere in the world from that account.
MB: So the participants, your clients, they have control over everything that happens to that money?
MG: The word 'Control' is one the IRS in particular doesn't really like [laughs]... so that's why we call them Donor Advised Funds. So, technically it's the provider like CAF that ‘controls’ the funds, because the way the tax authorities look on it is, if you still have control over money in a Donor Advised Fund, then have you really given it away, and if you've not given it away, then of course you're not due any tax relief. So you give it away, you cease to have formal control over it, but you can still recommend donations to us. We, provided they comply with the various boxes we need to tick, will always follow those recommendations from our donors. So they have influence over the funds, and we don't ever take the initiative and decide to use some people's funds to use a donation to a charity that we happen to like, or anything like that.
MB: Great, it's good to get the terminology right, and apologies for getting it wrong there.
MG: No, no, it's an important point, and it's a point that is actually useful for people to understand.
MB: That does explain a lot. So if you build up a fund, and you were intending for it to go to, maybe your alma mater or something like that, but then there's a terrible tsunami in South East Asia, you could decide to do that instead and just advise you guys and you'll look after it?
MG: That's exactly right, and the other point is often people will make a donation towards the end of the tax year when they know what their position is looking like, but then you don't have the pressure of deciding exactly which charities to give it to, they can take their time to make those decisions, and make less rushed decisions.
MB: Does this benefit Americans overseas in particular?
MG: Yeah, particularly overseas Americans who have the challenge of being dual tax, based on citizenship based taxation. If they're for example in the UK and are paying tax to the UK and the US, the only real way to get tax relief on both sides of the Atlantic, on both tax returns, is to use a dual qualified fund like ourselves. That of course often means people have a lot more to give away, because it's costing them less after the tax relief has worked its way through.
MB: Are they any restrictions on the type of charitable causes they can be supported through a Donor Advised Fund?
MG: So the only restrictions that we have, are that it has to be charitable in the country where you're claiming the tax relief, or in our case, the countries where you're claiming the tax relief. So whenever we make a donation out to a charity, we do an assessment on that charity, partly the usual due diligence to look at is it well run? Are they filing their accounts? Do their accounts look normal? And if everything's ok. But also, we're looking at, would the activity of that charity be deemed charitable in both the UK definition and the US definition? Because that's basically the principle on which the two tax authorities work. They will support things around the world that fit their own definition of charitable purpose. Of course the great thing with the UK and the US is because there are such long standing, strong ties between those two countries, the definitions of charitable work are almost identical. The other way that this potentially helps Americans overseas is, even if you're an American here, and you're only paying tax in the UK, if you're not subject to US tax as well, then if you're giving to US Charities, using a fund like ours you can claim the UK tax relief on those donations back to your University in the States, or whatever different institutions people in the States might be supporting, but of course if you give directly to that institution, there's no UK relief on it and there's no Gift Aid.
MB: Right, so it is pretty flexible then in terms of how much you can put in, when the money is given to whichever causes, and indeed the causes that you want to give to – it’s quite flexible for your clients. One question I wanted to add in, actually, is that a lot of our audience may be based here for a few years, and then get moved through their work to another country, do you work in other parts of the world as well?
MG: We do, we started in the UK, but we have offices in the US, Canada, Brazil, South Africa, India, Australia, Bulgaria, Russia, and I think I got that whole list right [laughs], so we have offices around the world. The great thing, as you say, so many people these days are internationally mobile and may be Americans who are here for a few years then expect to go back to the States or maybe be moved by their employers elsewhere in the world, and with CAF, you can move funds around. So if you're just here for a few years, you can always move it back to our office in the States, and you don't end up with something stuck in a country that you lived in for a few years, but then you're stuck with it for the rest of your life.
MB: Another point was, can a Donor Fund form part of an individual's financial planning for their children and their estate?
MG: It can, yes. The responsibilities for the fund can pass down to successors, so often people will want to set up a philanthropic legacy for their family, so a Donor Advised Fund is a great way of doing that, because they can set it up and when they pass away, their children can take on responsibility for the fund, and can, I suppose, pass that tradition through multiple generations of the family. Of course you can involve your children before that happens as well, so a lot of times families will have a fund with us and Mum and Dad will be making donations out from it, but also children will be starting to get involved as well, and so it can be a great way to help to plan that. Then also people can make gifts in their wills as part of their estate planning to charities through CAF, but around the world, depending on where; if it's a British will but they want to support an American charity, we can help facilitate that kind of planning as well.
MB: You've mentioned that the closeness of our regulatory regimes when it comes to this, but overall there's the bigger 'Special Relationship' - is philanthropy a big part of that Special Relationship?
MG: I think this is a really interesting one, because usually people talk about the Special Relationship and they're talking about diplomatic ties, military ties, intelligence sharing and the traditions that in many ways go back to the Second World War, but it is a Special Relationship in so many ways beyond that. Looking at some of the stats we have, you can see that Americans love to support British charities, and not just Americans who are in the UK. Over the last 10 years, for example, we've facilitated about $120mn worth of donations from people in the US to British charities, and going the other way, people in the UK to American charities, it's pretty much double that, about $240mn from Brits to American charities, and through the American Donor Fund, Americans in the UK are supporting charities to the tune of about $100mn a year, and most of that goes to British and American charities. So there's a huge amount of Transatlantic giving that goes on, and those numbers are just what's happening that CAF is directly involved with and aware of, so there are big flows of philanthropic money across the Atlantic, and many British charities that are really well supported by American donors, and many American charities that get a lot of support from British donors as well.
MB: That's very heartening to hear. Is there anything that our two Governments can do now and in the future to strengthen charitable giving?
MG: Well, there's so much. The tax incentives that are there are really important, because they maintain that support for charities. But I also think the regulation of charities is really important as well, to give people confidence that the charities they support are well run, effective and are going to use the money that is given in a responsible way. I think that the role that those governments play is really important in maintaining confidence in the charitable sector amongst the public at large.
MB: Talking about the two Governments, the whole political situation around the world is so unstable at the moment, is philanthropy in general fairly stable at the moment, or are there any big changes happening in that area?
MG: Giving levels are pretty stable actually. We've tracked this for many years, and whilst there are little ups and downs, and recessions that are obviously impacting a little bit, there aren't huge swings and there's certainly not a decline in the amount of giving that happens, it's pretty stable and has been for quite some time. The one trend that we've noticed though is the number of people giving in the UK has fallen for the last 3 years on our survey, but it's still quite high at 65%, but that's down from 69% in 2016. There's a potential trend developing there, and we see that in other countries as well. I think a big trend that's also coming up at the moment which is particularly popular with younger people is the rise of what we call impact investing, which is people wanting to make the world a better place through their investment portfolio, and to make sustainability a core part of the companies that they're investing in. So wanting to make the world a better place through their investments as well as through their philanthropic gifts. I don't think that will replace charitable giving by any stretch of the imagination, but it's certainly a trend amongst younger people of looking at the full picture of how they deploy the money that they have in order to make the world a better place.
MB: It's interesting that you should mention 3 years, because of course 3 years ago a certain thing happened in Britain, the 'B' word which we can't get away without mentioning. Has Brexit changed the way that the US/UK Relationship has altered, and has it affected the way that charitable giving has changed?
MG: We've not really seen any effect yet. We're certainly not seeing any slowdown, for example in the number of Americans being deployed by multinational companies from the US to the UK. We've not had any noticeable number of clients moving back from the UK to the US, that's pretty stable for us and hasn't been affected by Brexit. So at the moment it hasn't made much difference. Obviously the wider economic situation and people's confidence in the economy always affects charitable giving. In many ways, charitable giving is what you might term discretionary expenditure, and so it's easy to drop when economic times get tough, or when people aren't sure about what state the world will be, in 6 or 12 months’ time, but I don't see it having a huge effect, and arguably there's potential for even stronger ties between the US and UK as a result of Brexit and the different trade negotiations that are going on, so we don't see much of an effect yet and I don't think there'll be a huge effect on Transatlantic giving.
MB: One final question, you've mentioned citizenship based taxation, which is peculiar to Americans of course, and Eritreans, but do you think a change in US tax law, people are talking about Residency Based Taxation as the rest of the world does, if there are moves in that direction, and the US moves to a Residency Based Taxation, would that affect charitable giving for Americans in the UK?
MG: Something we're certainly keeping an eye on, because obviously it would be great for Americans living in the UK, it means they would potentially have less of an issue in terms of needing to claim tax relief on their charitable giving in both countries, if they were only paying tax in one country, although of course for a lot of people, particularly when they're here temporarily, they're going to have sufficient assets in the US to still be probably paying tax in both countries, although not double tax on the same assets and the same income. I don't think it would necessarily have a huge effect, although of course if you're paying less tax you have more money to give away to charity, and I certainly think that having Residency Based Taxation would make moving abroad a much more attractive prospect for Americans, so we may even see more Americans in the UK and wanting to give to British charities and still keep giving back to American charities as well, so I think it would certainly be a huge change of something that's been a point of contention and a point of frustration for many people for, well, forever really. It would be a very fundamental change, and I think potentially some exciting outcomes could come from it.
For more details on the CAF American Donor Fund, visit www.cafonline.org/cadf.