As Bill Dolan was preparing his tax return three years ago, he noted that he’d earned $3.43 in interest on a checking account. “It was just ridiculous,” Dolan recalled.
The interest would make little or no difference to his tax obligation, and trying to track such small amounts when balancing his monthly statements was simply “a nuisance.” He figured it probably cost the bank more to generate and mail out the Form 1099 tax statement than he received in interest. And he imagined that tens of millions of other taxpayers were similarly looking at pocket change earned on their checking and savings accounts.
He realized these small amounts were “found money” and thought: Why not donate it to charity?
Households and nonprofits hold more than $10 trillion in savings, checking and money-market mutual funds, according to the Federal Reserve. But most of the estimated 80-million plus households that own these accounts collect less than $10 a year in interest and dividends, according to government statistics, Dolan said. These payments, insignificant to any individual, when pooled together could funnel between $250 million and $750 million per year to charitable organizations nationwide, he estimated.
The retired Minneapolis attorney figured that “if the idea had merit, any bank I introduced it to would take it over.” He originally pitched the idea to a couple of dozen financial institutions, from large super-regional banks to small community banks and credit unions. Many were encouraging, but none would take on the idea by itself. He laughs at how naive his original assumption turned out to be.
Now, three years later, Dolan’s idea is close to becoming a reality: a nonprofit called Interest for Others. But what he first imagined would be a few days of explaining his concept to enthusiastic bankers turned into two-and-a-half years of 40 hour weeks at a time when Dolan said he expected to be enjoying retirement. Later this year, he expects to partner with a super-regional bank — though it’s not yet ready to be announced publicly — to launch a pilot program in both in the Twin Cities and Southern California.
And earlier this month, after Dolan had discussed the idea with several lawmakers, U.S. Rep. Erik Paulsen, R-Minn., introduced the Interest for Others Act, which would exclude from taxable income up to $50 in interest from each checking and savings account or dividends from money-market mutual funds donated to charity — even for taxpayers who do not itemize deductions.
But getting here was not a straight path. Most banks were enthusiastic about the concept in theory, Dolan said, not just because they could market the program to customers as a tax benefit and a community-relations program, but if they could eliminate the cost of issuing all of those tax forms, the savings would be “significant.” The IRS, he said, would see increased tax compliance, since many taxpayers do not even receive 1099 forms for amounts under $10 and therefore don’t report these small amounts. If the idea caught on, the IRS would have fewer forms overall to process, he added.
He saw his idea as a win-win, and based on his career as an attorney working with corporate clients on financial transactions, he was confident he could win easy acceptance.
But Dolan ran into a speed bump he had not anticipated. As he discussed the idea with bankers, he saw both the regulatory and internal structural impediments they faced. For instance, banks indicated that they were not anxious to be in the position of choosing nonprofit recipients or assuming the administrative burden of tracking numerous small donations.
Dolan concluded that he would have to create a program himself, act as a disinterested third party in recruiting nonprofits and invite banks to participate. Along the way, he had to learn about payment processing software and transaction processing fees.
Now on a full-time mission, he tapped his professional and personal networks, persuaded others to join him in helping to build out both the technology and organization needed to make it work, and recruited a board of advisers and directors from the corporate, financial and nonprofit worlds. Together, they raised more than $300,000 and attracted a host of corporate and nonprofit organizational backers.
Dolan’s previous law firm, Briggs and Morgan, provided office space and donated the legal work necessary to form the nonprofit. Last winter, local executives co-hosted a fundraiser at U.S. Bank headquarters in downtown Minneapolis.
Now Dolan, 79, is stepping back. He hired a paid program manager, Sophie Tremblay, to take over day-to-day operations. Congressional hearings on the Paulsen bill would increase awareness of the idea among banks across the country, Dolan said, and, if the measure were to pass, Dolan said he believes Interest for Others would become “a virtually mandatory program” for banks. “It would be hard to argue against it if you’re a bank president,” he said.
Brad Allen is a freelance journalist and former investor relations executive for companies including Imation Corp. and Cray Research. His e-mail is firstname.lastname@example.org.