WELLINGTON, Ohio — When it comes to giving, it often makes sense to give of the thing you have the most.
And for grain farmer Jim McConnell, who farms about 2,700 acres with his brothers Mark and Frank, that would be grain.
During the 2014 harvest, Jim and his brothers became the first farmers to participate in the Gift of Grain program at the Community Foundation of Lorain County.
They grew and harvested their crop as usual, and transported it to the local Sunrise Cooperative elevator. But instead of receiving payment in full, they pre-selected a dollar amount that they wanted to donate to the foundation, for a specific fund.
Memorial fund
In the McConnell’s case, they chose a memorial fund set up to honor the life of the late Jonathan Eppley, who died in August 2013, at 22. Jonathan was the son of Mike Eppley, who owns one of the farms that the McConnell family rents.
When it came time to negotiate a higher land rent rate, Mike Eppley and Jim McConnell worked out a deal, where Jim would donate the increased dollar amount, in the form of grain donated to an account held by the community foundation.
The community foundation then communicated directly with the grain elevator, to sell the grain and transfer the proceeds into the memorial account.
The transaction helped create a win-win situation, and one that the community foundation hopes other farmers will consider.
Tax benefits
McConnell benefited because he was able to avoid paying the full cost of the rent increase, and he doesn’t have to show the donated portion of his crop as income — in the way that he would if he had sold all of his crop, and later donated the cash.
And the Eppley family benefited — in the most obvious way — because they secured funds for their son’s memorial fund, which supports charitable, scientific, literary and educational programs in Lorain County.
“It seemed to be pretty straightforward, and it was easy to recognize that there was a tax advantage to us in just donating the grain, as opposed to receiving payment for the grain and then turning around and writing a check to the community foundation,” said McConnell.
He can still record the costs of growing the crop, but he doesn’t have to show the costs of selling the part that he donated.
“To us, it’s a no-brainer,” he said. “If you have an inclination to make a charitable donation, I think this is a smart way to do it.”
More opportunity
Lisa Rupple, communications coordinator for the community foundation, said she’s hopeful other farms will see this as a way of making charitable donations.
“It might make something feasible that wasn’t feasible for them before,” she said.
The foundation has more than 560 programs to choose from, and gives out more than $4 million in grants every year.
They also operate a program in Huron County, called Forever Farmland, in which the community foundation leases donated farmland, and uses the proceeds for charitable funds.
About a decade ago, the foundation was given a donation of 300 acres, from local donors Myron and Elinor Kolbe. Instead of selling the land, the foundation kept it in farm production, by leasing the acreage.
Rupple said programs like these give farmers more flexibility to consider donations.
Consult professionals
She and McConnell both said a donation should start with the farmer’s visit to tax professionals. That will help ensure any perceived benefits to the individual farm are realistic, and that all procedures are followed.
Then, the farmer should contact the community foundation about making a specific donation.
McConnell said he didn’t have any surprises along the way, and that the program worked the way he thought it would. He received the receipts and notifications he needed for his records, and the transaction went smoothly.
In his first year, he donated a little under 1,000 bushels of grain. He said he anticipates continuing the program, and might consider some additional funds he and his brothers would like to support.
The Community Foundation of Lorain County is certainly not the only entity that participates in grain gifting programs — but is one of few community foundations to do so. Similar programs are offered by some churches and schools.
How grain gifting works:
• The first conversation would be with the donor’s CPA, to get more information on personal tax implications.
• Then, contact the Community Foundation of Lorain County to confirm details and complete a gift letter prior to delivering the grain.
• The gift must be from unsold grain inventory — there can be no prior sale or pricing commitment. The grain must be physically delivered farm commodities and cannot have a lien against it. If it does, a lien waiver from the lender is required.
• When the producer delivers the grain to the grain elevator, the producer informs the elevator of the value of the donation desired, and directs the elevator to deposit the equivalent number of bushels into the community foundation’s account. The agricultural producer has then transferred legal ownership of grain to the Community Foundation of Lorain County.
• The community foundation communicates directly with the grain elevator to give instructions to sell the grain and disburse the proceeds. The co-op applies that day’s price and then sends the payment from the sale of the grain to the community foundation. The payment is identified as a donation from the farmer to the particular fund he or she wishes to support.
• The producer does not realize the taxable income from the sale, thus avoiding taxes. The producer is still able to deduct the entire cost of the production of the commodity on his or her Schedule F tax return.
• Depending on the producer’s circumstances (and every producer’s situation is unique), savings may be realized on federal as well as self-employment tax. Producers must consult with their tax adviser to determine whether a contribution of commodities is appropriate to their tax situation.
• For more information about this program, contact the Lorain County community foundation at 440-984-7390. You can also visit them online at www.peoplewhocare.org.
Great article Chris. I am very proud of the Community Foundation of Lorain County and its efforts to reach out to the entire community and find ways for all people to donate and make a difference. I am happy the McConnell brothers were willing to work with us to make this happen.