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NONPROFITS ARE BENEFICIARIES


Recipients have choice of charities to donate to BY YLAN Q.MUI


Gift cards long have been her-


alded as the savior of last-minute shoppers during the holiday sea- son. Now, they also are coming to the rescue of the procrastinating philanthropist. The newest version of the gift


card allows recipients to donate the money on the card to a non- profit group of their choice. These so-called charitable gift cards are issued by nonprofit organizations such as GlobalGiving and TisBest that vet the charities to ensure they are legitimate. The groups estimatethat theyhaveraisedmil- lions of dollars for causes ranging from teaching entrepreneurship to women in India to promoting humane farming. “We just sawthat itdidn’tmake


any sense that you would walk into Safeway or go shopping on Barnesandnoble.com and you could give a gift card,” saidDonna Callejon, chief business officer for GlobalGiving, based in Washing- ton. “Why didn’t that concept translate into the charitable sec- tor?” GlobalGiving began issuing the


cards four years ago, just as gift cardsbeganexploding inpopular- ity. Online sales are up about 23 percent from a year ago, Callejon said, and the group has sold about 26,000 cards this year — with an


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on washingtonpost.com The art of giving to the giving


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Some gift cards take on new meaning 6


A new type of gift card lets a recipient donate the money on the card to a charity of his choice. postbusiness.com


additional 1,000 orders expected in the two days before Christmas. Another service, CharityChoice, recently began allowing users to send gift cards for donations as small as$2 throughFacebook. Charitable cards are a sliver of


the nearly $25 billion in holiday gift card sales forecast by the Na- tional Retail Federation, a trade group. Shoppers are expected to spendanaverageof$145.61onthe cards, up 4 percent fromlast year. The group’s surveys also showgift cards are themost requested item on consumers’ Christmas lists for the fourthyear ina row. Brent Watters, an analyst with


financial services research firm Mercator, said the charitable gift card sector remains too small to track. But nonprofit groups say there is growing interest in the trend, and some sales have risen despite—orperhapsbecauseof— the tougheconomy. Overall, charitabledonations to


the nation’s largest nonprofit groups plummeted during the re- cession. According to an analysis by the Chronicle of Philanthropy, contributions declined a record 11 percent in 2009, the largest drop inthe twodecades since the annu- al surveywas launched. This year, donationswere expected to recov- er by justmore than1percent. Still, some groups said they


found a silver lining in the down- turn: Faced with tighter budgets, manyholiday shoppersare reeval- uating their spending. “We see a lot of people looking


at the difficult economic times and saying, ‘Rather than just giv- ing my grandchildren another thing, I’m going to encourage themto do something good in the world,’ ”Callejonsaid. That philosophy is what


prompted TisBest to launch what it dubbed the “51 Bucks Chal- lenge,”which calls on shoppers to donate 10 percent of the $510 that the NRF estimates households will spendonholidaygifts.TisBest was launched in 2007 and has grown at an annual rate of about 50percent,ExecutiveDirectorJon Siegel said. The groupworkswith about 250 charities andhas raised nearly$2million.Abouthalf of its gift cards are bought by business- es as presents for employees and clients touse todonate to charity. “We’rekindofwrappingthegift


of charity,” Siegel said. Butevencharitycomesatacost.


For example, TisBest charges $1.95 for the plastic cards, though e-mailed gift cards are free. And mostorganizationsalsosubtracta processing fee of roughly 3 per- cent for donations made with a credit or debit card. However, those feesare chargedfor creditor debitcardpurchasesofanykindat any retailer and have faced scruti- ny fromCongress and theDepart- ment of Justice. In addition, many charitable


gift cards are never redeemed—a problem with traditional gift cards, as well. Callejon said that less than half of recipients of GlobalGiving cards log on to the


China’s race to the top


site to pick a charity. The group’s cards expire after a year, and any unused money moves to Global- Giving’s general fund or to cam- paigns tomatch donations, or the money is redistributed to other nonprofit organizations. Other groups, such as TisBest,


said their cards do not expire but the funds also may be used for otherpurposesafterasetperiodof time. The cards still can be re- deemedany time. “We tried to create vehicles to


make sure those funds don’t re- mainidle,” Siegel said. Susan Messina of the District


said the cards have been a boon in both her personal and profession- al life.Confrontedwiththeage-old dilemma ofwhat to get the person who has everything, she bought a charitable gift card from TisBest for her mother’s birthday this spring.Messina said she was sur- prised when her mom chose to donatethemoneytoanonprofit in Connecticut that helps children withcancer and serious blood dis- eases attendcamp. “I didn’t knowshe had a partic-


ular interest inthatarea,” shesaid. “NotonlydidIhave a chance todo some good in the world . . . but I actually learnedsomething.” Also,Messinaworks as director


of communications at a nonprofit groupthathaspartneredwithTis- Best. Although the cards have raisedonlyafewthousanddollars, she saidtheyhavehelpedincrease awareness about her organiza- tion, the National Hospice Foun- dation, and about charitable giv- ing overall. “Itmakesagreatdealofsenseto


take some of Americans’ vast wealth. . . and give a card that can actuallydo some good,” she said. muiy@washpost.com


AUTOMOTIVE Carmakers contest new ethanol standard


U.S. carmakers and engine manufacturers asked an appeals court Monday to force the Envi- ronmental Protection Agency to reconsider its October decision allowing the sale of gasoline with 15 percent ethanol. Organizations including the


Alliance of AutomobileManufac- turers requested the federal ap- peals court in Washington to re- view whether the EPA’s “partial waiver” allowing so-called E-15 fuels violates the Clean Air Act. In October, the EPA granted a


request from ethanol producers to increase concentrations of the


TELECOMMUNICATIONS


corn-based fuel additive in gaso- line for vehicles made for 2007 and later. The previous limit was 10 percent. The manufacturers said the


testing EPA used for its decision was put in the administrative record too late for meaningful comment, that the regulator’s own statute says fuels can’t be approved that could cause fail- ures, and that E-15 has been shown to adversely affect en- gines. The EPA did not immediately


return calls for comment. —Bloomberg News


TUESDAY, DECEMBER 21, 2010


10-YEAR TREASURY DOWN$0.20 PER $1,000, 3.33% YIELD


CURRENCIES $1 = 83.75 YEN, EURO = $1.312


DIGEST


APPLE


AT&T, which provides wireless service for the iPhone, is upgrading its third-generation network to allow for higher speeds.


AT&T buys spectrum for 3G wireless service


AT&T, the second-largest U.S. wirelesss provider, agreed to buy wireless spectrum from Qual- commfor $1.93 billion as custom- ers increasingly use bandwidth- hogging services such as video downloads. The spectrum covers 300 mil-


lion people in the United States, thecompaniessaid in a statement Monday. Chipmaker Qualcomm had acquired the spectrum for its


ALSOINBUSINESS l Former OCC chief to rejoin


old lawfirm: Former comptroller of the currency John C. Dugan, who led one of the nation’s top banking regulators during the 2008 financial crisis and its after- math, will be rejoining District- based Covington & Burling next month, the firm announcedMon- day.


Appointed in 2005 by Presi-


dent George W. Bush, Dugan steered the Office of the Comp- troller of the Currency through


mobile-TV service, which it plans to shut down inMarch. AT&T is upgrading its third-


generation network to allow for higher speeds while it works on building out its fourth- genera- tion network to debut next year. Larger rival Verizon Wireless turned on 4G service earlier this month.


—Bloomberg News


the bank-sector bailouts and the drafting of financial regulatory reform legislation. He left office in August. The agency charters and regulates more than 1,500 U.S. commercial banks Dugan will chair Covington’s


financial institutions group, drawing on his experience shap- ing the Dodd-Frank Act and from his membership on the Basel Committee on Banking Supervi- sion, a global panel of regulators . —Amanda Becker


Toyota to pay U.S. additional $32.4 million in safety probe


BY KEN THOMAS VINCENT YU/ASSOCIATED PRESS


An FT-EV II concept electric car, right, and a Prius hybrid are displayed at the Toyota booth at the Guangzhou 2010 Auto Show in China’s southern city of Guangzhou. China’s second major auto show kicked offMonday, capping a year of record sales for the country’s booming auto market even as it faces the prospect of slowing growth. Sales growth in China could outstrip theUnited States again in 2011.


New tax law shows futility of Social Security trust fund I used to joke about the


government “solving” Social Security’s long-term problems


by creating Treasury IOUs out of thin air and sticking them in the program’s trust fund.My point, of course, was to show that no matter how many Treasury securities there are in the trust fund—currently about $2.6 trillion—the fund is merely an accounting fiction that has no economic value when it comes to protecting Social Security beneficiaries. Now, with last week’s passage


of the much-ballyhooed tax deal between President Obama and Republican lawmakers,my sarcastic joke has become public policy. It all has to do with the provision cutting payroll taxes in 2011. Letmeshow you how this


works:Next year, as you probably know, workers subject to Social Security taxes will pay only 4.2 percent of their “covered wages” —wages up to $106,800—rather than the normal 6.2 percent. This will reduce Social Security’s cash proceeds by $112 billion, according to Congress’ Joint Committee on Taxation. What impact will this cash


shortfall have on the Social Security trust fund?None. Zero.


ALLAN SLOAN Deals


Zip. How can a $112 billion cut in


Social Security revenues not affect the trust fund? Because Treasury will give the trust fund the same amount of bonds it would have gotten if the two- percentage-point tax holiday didn’t exist. In other words, Treasury isn’t


selling bonds to Social Security; it is creating them out of thin air and putting them into the trust fund. The missing cash?Uncle Sam will just borrow $112 billion from somewhere. My problem with the trust


fund is that it’s a snare and a delusion for people who think that it makes Social Security financially sound. It doesn’t do that, because having government IOUs in a government trust fund doesn’t make it any easier for the government to cover Social Security’s cash shortfalls than it


would be if there were no trust fund. This year, with Social Security


collecting less cash than it pays out for the first time since the 1980s, Treasury had to borrow money from investors to redeem the securities that the trust fund cashed in to meet Social Security’s obligations. So what use was the trust fund, other than symbolic?None. The same thing will happen next year. Fromthemid-1980s through


last year, Social Securitywas a cashcowfor the federal government thanks to tax increases andbenefit cuts adopted after theGreenspanCommission’s 1983 report. Social Security collectedmore intaxes thanit paidout inbenefits, turning the surplus over toTreasury,which usedthe cashtomeet various obligations, andgave the trust fundsecurities inreturn. The fact that Social Security


was funding the rest of the government to the tune of trillions of dollars gave beneficiaries a moral claim on the trust fund, economically useless though it is. But now, Social Security isn’t


even buying Treasury obligations that go into the trust fund. The government is merely printing


IOUs and stuffing them into the trust fund in order to make the fund look better. It’s nonsense. The same game has been going on this year, but less noticed—at least, less noticed byme—with the now-expiring HIRE Act. Under that legislation, employers didn’t have to pay Social Security their 6.2 percent share of covered wages for hires thatmet the act’s requirements. To make up for the lost revenue, Treasury agreed to give the trust fund IOUs equal to employers’ savings. There have been endless


screeds written, blogged and babbled about the newly minted tax law, but most of that talk has overlooked how the measure reinforces the trust fund’s economic futility. Though I’ve kidded around in


the past about the trust fund, Washington’s latest trust fund maneuvers aren’t funny. Rather, they showwhy “Social Security trust fund” is a contradiction in terms. It’s not social, it’s not secure, you can’t trust it, and it has no real funds.Nomatter how many bonds the Treasury prints for it.


asloan@fortunemail.com


Allan Sloan is Fortune magazine’s senior editor at large.


ToyotaMotor has agreed to pay


the government a record $32.4millioninadditional fines to settleaninvestigationintoitshan- dling of two recalls at the heart of its safety crisis. The Transportation Depart-


ment said Monday that the civil penalties will settle probes into howToyota dealtwith recalls over accelerator pedals that could get trappedinfloormats,andsteering relay rods that could break and leadtodrivers losing control. The latest settlement, on top of


a $16.4 million fine Toyota paid earlier in a related probe, brings the total penalties levied on the company to $48.8million. It caps a tough year for the automaker, which recalled more than 11 mil- lion vehicles around the world since the fall of 2009 as it scram- bled to protect its reputation for safety andreliability. Steve St. Angelo, Toyota’s chief


quality officer for North America, said in a statement that the com- pany has “worked very hard over the past year to put these issues behind us and set a new standard of responsiveness to our custom- ers.” In April, Toyota agreed to pay


themaximumfine allowed under law for a single case — $16.4 mil- lion—for failing topromptly alert U.S. regulators to safety problems over sticking accelerator pedals. Under federal law, automakers mustnotify theNationalHighway Traffic Safety Administration within five days of determining that a safety defect exists and promptly conduct a recall. The latest fines involve twosep- arate safety problems affecting


certainToyotapassenger vehicles. The first deals with recalls in


2009 and 2010 of about 5 million Toyota and Lexus vehicles with gas pedals that could become en- trapped in floormats. Toyota had recalled 55,000 all-weather floor mats in 2007 to address pedal entrapment, but the government said its investigation found that simply removing the floor mats was insufficient. In the second, Toyota in 2004


recalled Hilux trucks in Japan withsteering relay rods that could break. Toyota told U.S. regulators in 2004 that the problemwas lim- ited to vehicles in Japan and the company had not received similar complaints intheUnitedStates. But a year later, Toyota told


NHTSA that the steering defect was also found in several U.S. models and recalled nearly 1 mil- lion vehicles. NHTSA said inMay it learned about complaints from U.S. consumers that Toyota failed to disclose to the government when it conducted the recall in Japan. “I am pleased that Toyota


agreedtopay themaximumpossi- ble penalty and I expect Toyota to workcooperativelyinthefutureto ensure consumers’ safety,” said Transportation Secretary Ray La- Hood. Toyota says the recalls have ad-


dressedthe safetyproblems. The automaker has found no


link to electronic problems, an issue raised by safety groups as a potential cause of the vehicle problems. A separate investiga- tion by the Transportation De- partment and NASA has not un- covered any electronic problems, but the probe is expected to con- tinue into 2011.


—AssociatedPress


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