Business & Tech

Gift to Boston Foundation could top $28 million

Bill Brett/Globe staff

Boston Foundation president Paul Grogan.

As charitable donations go, it’s not as unique as the cruise ship it was once given.

But the Boston Foundation announced Wednesday that it expects to receive one of the largest and most unusual gifts in its 101-year history: an estimated $28 million from the sale of a Boston-area business that is effectively donating most of itself to charity.

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It’s a complicated arrangement with a speculative value and inexact payout date, and no cash will immediately change hands. But Boston Foundation president Paul Grogan says it has the potential to significantly expand his organization’s grant-giving ability.

Here’s how it works: Curriculum Associates, a private Billerica educational technology company, recently transferred the majority of its ownership, in the form of nonvoting shares, to the Iowa State University Foundation, a nonprofit at its cofounder’s alma mater.

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When the university sells those shares, which is expected to happen within five years, it will give a portion of the proceeds to the Boston Foundation, one of New England’s biggest grant-making organizations, and keep the rest. Curriculum Associates estimates the total donation is worth $120 million, with the Boston Foundation’s share pegged at $28 million, which would be the second-largest gift it has ever received.

The gift could be worth more or less if the company’s value changes over time, and the total amount of the gift will not be determined until the company is sold.

“It’s a very unusual transaction,” said Grogan, “and a very significant gift in terms of magnitude, but also in terms of how the money will be used,” since part of it will go to the foundation’s $300 million Permanent Fund, which is its unrestricted endowment that offers the most flexibility in grant-giving.

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The rest of the gift will be split between grants to individual nonprofits selected by Curriculum Associates, and a donor-advised fund (a type of charitable giving account) created by the company and managed by the foundation.

Since its founding in 1915, the Boston Foundation has received only four gifts of $20 million or more, Grogan said, including $31.6 million in 2011 from the sale of a cruise ship whose owners donated a percentage of the vessel to the foundation.

It is not out of the ordinary for the foundation to accept noncash gifts, such as stock and real estate, which it sells as quickly as possible to tap their monetary value. On rare occasions, it receives donations of art. And last year it launched Pledge 1% Boston, a corporate philanthropy campaign that encourages companies or their founders to donate 1 percent of their equity to charity if they’re sold or go public.

But it has never before been given what is basically a large chunk of a private company.

Laura Kenney, Boston-based director of the nonprofit tax practice at accounting firm BlumShapiro, described the transaction as “not very common, but not unheard of,” and said it has several tax advantages for the donors.

For example, they receive a charitable tax deduction for the shares they donate, and by reducing the number of shares they own they will pay less in capital gains taxes when the company is eventually sold, she said.

In 2011, Amar Bose, late founder of Framingham audio equipment maker Bose Corp., gave MIT the majority of his company’s stock in the form of nonvoting shares. That differed from the Curriculum Associates/Boston Foundation deal, however, because MIT was prohibited from selling its shares, and instead receives ongoing cash dividends from them.

In that transaction, Bose remained a private and independent company. Similarly, Curriculum Associates will remain private and will continue to be led by its current management, under chief executive Rob Waldron. Curriculum Associates executives will be involved in the company’s eventual sale, and Waldron will approve the buyer.

Waldron and others will retain shares of the company, so they will benefit financially when the company is sold, albeit not as handsomely as if they had kept all their shares.

Founded in 1969, Curriculum Associates makes K-8 digital and print instructional materials and is one of the state’s fastest-growing companies. It’s expanded from fewer than 200 employees and $39 million in sales in 2012 to 668 employees and $190 million in sales today, due largely to its increasing focus on technology.

The Curriculum Associates proposal came “totally out of the blue,” according to Grogan, when a law firm representing the company contacted the Boston Foundation a few months ago and said the company was “thinking about how to do something that would have a broad positive impact on the nonprofit community, and thought of us.”

Waldron is a former CEO of Jumpstart, a Boston-based early education nonprofit that received financial support from the Boston Foundation, and Curriculum Associates cofounder Frank Ferguson is a graduate of Iowa State.

“To drive social change, we need to support the nonprofit sector,” Waldron said, explaining the company’s gift, “and you need great community foundations like he Boston Foundation to support these organizations.”

Sacha Pfeiffer can be reached at pfeiffer@globe.com. Follow her on Twitter at @SachaPfeiffer.
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