October 2018 Letter

Lean on Me

Volunteerism in America has a long, rich history that stretches back beyond the early days of our founding.  In 1736, Benjamin Franklin formed the Union Fire Company in Philadelphia, also known as “Benjamin Franklin’s Bucket Brigade,” believed to be the first volunteer fire department in America.  According to the 1884 book, History of Philadelphia, 1609-1884: “The Union Fire Company was an association for mutual assistance.  Each member agreed to furnish, at his own expense, six leather buckets and two stout linen bags, each marked with his name and the name of the company, which he was to bring to every fire.”  The company was limited to 30 members and they met eight times a year.  Fines were collected from members who missed meetings with the proceeds used to fund equipment purchases.  Franklin’s company became a model for other fledgling fire departments.  Volunteer firefighting is very much alive and well today.  According to the National Fire Protection Association (NFPA), as of 2015, 70% of the nation’s 1.2 million firefighters were volunteers.  In this quarter’s letter we take a deeper look at volunteerism in America today and highlight the many ways people get involved and the benefits they often feel.  We’d also like to share with you three examples of how the people of Covington give a little back.

Volunteerism in America Today

In February of 2016, the Bureau of Labor Statistics (BLS) released a comprehensive study of U.S. volunteerism for 2015.  During the year, about one-quarter of the adult population, or around 63 million people, volunteered to an organization at least once.  The majority of these volunteers (72%) donated time to one organization with about one-third of volunteers identifying that organization as religious.  The second most cited organization was education or youth related.  Collecting, preparing, distributing, or serving food was the most oft-cited activity, followed by tutoring and/or teaching.  

Volunteerism cuts across all demographics.  It’s not surprising that older Americans (55 and above), who possess time and resources, account for nearly 49% of all volunteers, but younger people (16-34) also pitch in, making up about 24% of all volunteers.  Half of all American volunteers spend at least one hour per week assisting others.  These hours spent not only help others, but studies have also shown numerous benefits for volunteers themselves.  

Earlier this year, the Mayo Clinic put out a note highlighting several health benefits from volunteering.  Among them was data from the Longitudinal Study of Aging that showed those who volunteer have a lower mortality rate than those who don’t.  The Mayo Clinic also noted lower rates of depression for individuals 65 and older who volunteer, resulting from increased social interaction and reduced loneliness.  Volunteering often times requires physical or cognitive activity that differs from daily life and helps support a better health life balance.  In short, what people typically get out of volunteering often exceeds what they put in.  We call that a win – win. 

Covington’s Turn

Please allow us to show you a few examples of how Covington people give a little back.  Angel Flight West (AFW), based in Santa Monica, CA provides free air transportation for patients and family members who have medical needs far from home, but lack the resources needed to make those trips.  AFW partners with volunteer pilots and private aircraft, along with commercial airlines to make these necessary trips possible.  AFW’s mission isn’t limited to just medical needs, other types of trips include transporting injured military personnel to therapeutic programs and children to special needs camps.  In fact, one-third of AFW passengers are children and 80% are designated at low or poverty income levels.  AFW makes these trips in 13 Western states.

AFW began in 1983 and during its first full year of operations in 1984, the group completed 15 missions.  Last year, AFW completed over 4,200 flights.  Today, AFW has more than 1,400 volunteer pilots providing their own planes and covering all expenses, along with 200 ground based volunteers who keep the organization running.  On the corporate side, Alaska Airlines annually donates 900 tickets to fly people from Alaska to the lower 48 and provides backup when weather keeps smaller aircraft on the ground.  Covington portfolio manager, Craig Burger, is an AFW volunteer pilot having logged 80 missions since 2005.  

For 25 years now, School on Wheels (SOW) has been tutoring homeless children across southern California.  SOW’s mission is to enhance educational opportunities for homeless children from kindergarten through high school.  Among SOW’s services: one-on-one weekly tutoring, school supplies, help in finding lost records and parental guidance.  Indeed, last year over 2,000 SOW volunteers fanned out over six southern California counties spending over 100,000 hours tutoring 3,370 homeless kids.  Additionally, SOW distributed over 5,000 new backpacks, other school supplies, uniforms and bus tokens.  SOW tutoring locations include public libraries, shelters, group homes, schools, and retail establishments.

One of SOW’s volunteers is our very own Chief Financial Officer, Dwight Liu. Dwight has been a SOW volunteer since 2002 and his numbers skills led to him being known as the “math guy.”  Dwight became especially valuable tutoring algebra and geometry.  When assigned a student, Dwight tutors once a week at a shelter near our office in downtown L.A.  The transitory nature of homelessness means that sometimes Dwight may only tutor a child a few times.  To Dwight, the real reward comes from seeing a student grow and progress.  In one instance, Dwight tutored a young man for six years, all the way through high school graduation.  Dwight says volunteering has been very rewarding and while SOW thanks him, he feels indebted to SOW for making him a better person. 

Our third story of community service is Covington’s long and enduring support of the California Science Center (CSC).  Covington’s efforts began with our founding CEO, Frank Ulf, and continue today with the leadership of our current Chairman, Jeff Glassman.  Opened in 1998, in Exposition Park, the CSC’s four permanent exhibition areas span over 400,000 square feet and are open, free to the public, 362 days a year.   The CSC’s first two permanent exhibition areas, World of Life and Creative World, look at life on earth through the lens of biology and creativity.  These spaces look at the commonalities of life forms and the creative means communities employ to solve problems.  In 2010, a third permanent exhibition area opened named Ecosystems, bringing the community a hands-on experience with 400 live plant and animal species. 

On July 21, 2011, the space shuttle Atlantis landed for the final time, marking the official end of the space shuttle program.  At the same time, a bidding war was underway among 21 institutions across the country to land one of three remaining orbiters for permanent display at their facilities.  Aside from a vision of how a winning institution would showcase a shuttle for the good of the community and the nation as a whole, winning bidders would also have to come up with nearly $29 million to cover NASA’s preparation and delivery costs.  Then a CSC board member, Frank and his wife, Betsy, contributed to and helped spearhead the CSC’s fund raising effort through EndeavourLA to help the CSC become the winning bidder for the space shuttle Endeavour.  Today, Jeff carries on Covington’s proud association with the CSC and EndeavourLA as it seeks to raise $250 million for a permanent facility where Endeavour will be displayed in its launch position attached to its external fuel tank and booster rockets.

Covington employees are involved in giving back to their communities and all can point to the satisfaction they get by giving time and/or resources.  And Covington supports them and provides financial contributions to many of their respective organizations.    

 Giving and Taxes

Aside from the satisfaction people get by giving, there may also be tax advantages to be had.  With the passage of the Tax Cuts and Jobs Act (TCJA) last year, the standard deduction for married couples doubled to $24,000.  The Tax Policy Center estimates the number of filers itemizing deductions could fall by more than half to around 19 million filers.  This could pose a risk to charitable giving.  However, for people who continue to itemize, the maximum amount of adjusted gross income (AGI) that charitable contributions can offset was raised to 60% from 50% previously.  So the net impact on charitable giving during the next few years remains unclear.

But charitable giving can improve your tax situation in other ways.  For instance, it may be more advantageous to gift stock with a low cost basis than simply giving cash.  By directly giving low cost shares, portfolio diversification may be enhanced and capital gains taxes are avoided, resulting in a higher net contribution to the charity.  Importantly, though, gifts of this type are limited to 30% of AGI as opposed to 60% for cash gifts.  But, contributions above 30% of AGI in a given year can be carried forward for up to five years.  Remember, if you do consider gifting low-cost shares, do not sell them first.     

An additional tax strategy to consider can lower the taxable portion of the required minimum distribution (RMD) from your IRA. At age 70 ½ and beyond, Americans are required to take a RMD from their IRAs that is added to their AGI, thereby increasing their tax liability. By making a qualified charitable distribution (QCD) directly from your IRA to a qualified charity (a check cannot be made out to you), the amount given, up to $100,000, will not be added to your AGI or modified adjusted gross income (MAGI) which could potentially lower, or eliminate, the taxation of Social Security benefits and reduce the amount of income that is subject to the Medicare Surtax.  Furthermore, taxpayers who take the increased standard deduction for 2018 will receive no benefit from charitable deductions so a QCD makes sense for them.  Certain charities are not eligible to receive QCDs, so please check with your tax preparer to ensure compliance.

Another useful tool to consider is a donor advised fund (DAF).  A DAF allows you to make a cash or securities contribution and receive a current year tax deduction, while avoiding the capital gains tax on securities held more than a year.  You can then invest the funds for growth while making qualifying gifts in future periods at your discretion.  A DAF can also be part of a strategy that has emerged in the wake of last year’s tax changes known as “bunching.”  This strategy allows you to combine multiple years of gifting upfront into a DAF, take the deduction and then make annual gifts in subsequent years, thus smoothing out a charitable organization’s receipt of future gifts.  Again, check with your tax professional.

The men and women of Covington Capital are proud to be affiliated with the following organizations:

Alzheimer’s Greater Los Angeles                


American Jewish University                       


Angel Flight West                                          


Art Center College of Design                       


Autry Museum of the American West       


Broadcom Foundation                    


California Science Center                    


Campbell Hall                          




Council on Aging; Orange County                


First Christian Church of Downey                


First Tee – Los Angeles, Pasadena                


FoodHelp Food Bank                        


Hillsides Organization of Pasadena                


Library Foundation Los Angeles              


Los Angeles Dodgers Foundation              


Los Angeles Jewish Home                    


Los Angeles Sports and Entertainment Commission        


Loyola Marymount University                


Minds Matter Los Angeles                    


National Charity League – Manhattan-Hermosa       


Navigage Foundation                        


Pacific Elementary                        


Pasadena Tournament of Roses                


Providence Saint Joseph Foundation                


Rose Bowl Legacy Foundation                


School on Wheels                        


Skirball Cultural Center                  


South Pasadena San Marino YMCA                


Southern California Grantmakers                


The Christ Child Society of Pasadena              


UC Irvine Paul Merage School of Business            


USC Leslie and William McMorrow
Neighborhood Academic Initiative                


Vistamar School                        


Wallis Foundation

Whittier Area Community Church Athletic Council        


Women’s Leadership Council