Jonathan Shugart believes most people are fundamentally charitable, but as a former tax attorney he knows the difference between an ordinary person slipping a dollar to a homeless guy and a very rich person setting up a charitable foundation. Without wandering too far into the weeds, the one major difference is that the very rich person will see a big tax advantage. Shugart’s solution is B Charitable, a convenient fintech platform which is recognized by the IRS as a tax-exempt public charity.
Shugart, like a lot of people who idealistically are drawn to law school, became disenchanted with the actual practice of law but he became quite skilled at setting up charitable legacies. He saw the need for a technology that would allow people to make both small and large donations when most tax beneficial to the donor, grow those donations tax-free, and be distributed to operating charities when the donation would be the most beneficial. In short, Shugart wanted to make it easy for everyone to create a charitable legacy and get the same tax benefits as the wealthy receive when they set up, as an example, the Gates Foundation.
Donating to help someone with medical expenses certainly has karma benefits, but when done through existing crowdfunding platforms it does not bring any tax savings. B Charitable is a tax-exempt entity whose sole purpose is to house charitable gifting funds for individuals that can only be donated to public charities. This removes any risk of the donation being spent by the individual collecting the funds for any purpose other than intended. We emailed Shugart a few questions about what motivated him to found B Charitable and how the business of charity works.
You describe yourself, I think only partly in jest, as a recovering tax attorney. Are you still practicing law?
Ha. I left the law firm life about a year and a half ago. I maintain my license, but I do very few legal projects apart from my business and philanthropic work.
From your perspective as a tax attorney, what is the difference, in terms of taxes and results, between an ordinary person making a charitable donation and the charitable giving by the very rich?
Speaking generally so this does not come across as tax or legal advice, strictly from an income tax perspective, the charitable contribution deduction is significantly more valuable to taxpayers who itemize their deductions. Above that, wealthier individuals typically have more freedom to time their charitable giving in ways that best offset their income, but the deduction rules are consistent.
As far as the giver is concerned, if the result we are talking about is joy, I see that the joy of giving is greater in the individual that has to sacrifice the most to make the gift. This sacrifice comes in many forms, but I find that the person who sacrifices in order to be more generous is more intentional with that generosity and receives more joy from seeing how that gift is used to benefit others.
What are the key differences between setting up a giving fund on B Charitable and simply writing a check to a person’s favorite charity?
The first key difference between setting up a giving fund on B Charitable and simply writing a check to a person’s favorite charity is the ease of making the charitable contribution through B Charitable. With just a few clicks, the donor can set up and name their charitable giving fund, contribute to the fund, and make a grant request for the public charity of their choice; no check, no envelope, and no stamps involved. Additionally, the donor can easily use their social influence to encourage their friends and family to give to the same charity, often increasing the final gift to the charity by twofold, or even more. Finally, while one check to one charity shouldn’t be difficult to find, if the donor makes multiple contributions to multiple charities through multiple payment sources, it is much more difficult to find and record these transactions than if the donor makes all charitable contributions to the same charities, through one platform, like B Charitable.
Online fundraising platforms are often used by individuals to raise funds in dire personal emergencies, such as funeral expenses or hospital bills. How is B Charitable different?
Peer to Peer crowdfunding platforms are great for personal gifts. As a public charity, distributions from B Charitable funds can only be made to other charities. As such, donors can have more faith that the funds are being used for charitable purposes, and each donor receives their own charitable contribution receipt for tax purposes.
It seems the idea for B Charitable was percolating in your mind for a long while before it crystalized. Can you tell us what your mental process was?
I guess my mental process is the same as it has always been: surround myself with people much smarter and more talented than I am, cast a big vision, and make sure that we stay true to our mission as we empower donors to impact the charities they care the most about.
As a tax attorney, I loved helping clients use tools like donor advised funds and private foundations to become more intentional with their charitable giving. However, I was frustrated that the cost of entry and high maintenance fees kept these tools from being viable options to so many families around the country and I knew that with use of modern technology and marketing efforts, we could eliminate these barriers. A great friend helped me realize that we were closer to these solutions than I imagined, so we got to work.