New Rules Proposed for Equivalency Determinations

Treasury and the IRS have recommended a significant change in the process for determining whether a foreign nongovernmental organization (NGO) meets U.S. standards for charitable giving. “Reliance Standards for Making Good Faith Determinations” would lessen the administrative and financial burdens for U.S. grantmakers to engage in international philanthropy.

The process of evaluating whether a non-U.S. NGO is equivalent to a U.S. public charity has been subject to rules that have not changed for 20 years. Under current regulations, an equivalency determination is considered made in good faith if it is based on either (1) an affidavit of a foreign organization or (2) an opinion of counsel of the grantor or grantee. The guidance broadens the range of professionals on whose written advice a private foundation may rely when making such grants, thereby removing a key obstacle to the creation of an equivalency determination repository.

Treasury and the IRS have requested comments before adopting the proposed regulations as final. However, private foundations may rely on the proposed regulations immediately. Although the proposed regulations do not explicitly apply to public charities engaged in international grantmaking, the guidance should pave the way for public charities as well.

The Council will post an analysis of this new guidance on its website this week and will host a conference call to provide details and insights on the proposed rules on October 5 at 1 p.m. ET. Look for details in next week’s Policy Update.

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Congress Adjourns: The Fiscal Cliff Looms

Lawmakers have returned to their home districts and states to campaign for reelection for the next seven weeks. They leave behind a pile of unfinished business on major issues such as how to avert across-the-board cuts in domestic and defense spending—known as “sequestration”—and a number of expired and expiring tax provisions, including the IRA charitable rollover. Congress will reconvene on November 14 following the elections, which means that between this summer’s August recess and November, lawmakers will have been in session only eight days.

In addition to dealing with sequestration, a top priority for the Congress when it reconvenes is taking action on the Bush-era tax cuts that expire at the end of the year. Many economists say allowing the tax cuts to expire and the automatic spending cuts to take effect would plunge the U.S. economy back into a recession.

Despite the current impasse, Senate Majority Leader Harry Reid (D-Nev.) appeared optimistic as he predicted Congress will reach a deal that will forestall the cliff. For details about the potential effects of the fiscal cliff and the various policy options, read the text of a letter from President Obama to congressional leaders, as well as the Congressional Research Service report, “The Fiscal Cliff: Macroeconomic Consequences of Tax Increases and Spending Cuts.”

In addition, Federal Reserve Chairman Ben Bernanke met privately with members of the Senate Finance Committee last week, and Treasury Secretary Tim Geithner met with House Ways and Means Chairman Dave Camp (R-Mich.) to focus on the expiration of tax rates. The entire House Ways and Means Committee met on Thursday to lay the foundation for addressing the fiscal cliff after the election.

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Tax Extenders Remain Unresolved

Prior to adjourning for the August recess, the Senate Finance Committee passed bipartisan legislation to continue dozens of expired or soon-to-expire tax breaks—including the IRA charitable rollover—through 2013. The bill would reinstate the IRA rollover for two years (retroactive to January 1, 2012) allowing individuals age 70½ or older to take tax-free distributions from their IRAs (up to $100,000 per taxpayer per taxable year). It does not expand the provision to allow donor-advised funds, supporting organizations, and private foundations to qualify for this incentive.

Upon returning to Washington, D.C., the top priority for the Senate was to approve a six-month continuing resolution that would fund the federal government through the end of March. This left tax extenders provisions as unfinished business to be reviewed in November. In the meantime, House Ways and Means Committee Chair Camp has asked members to compile a list of extenders they want preserved. Camp’s decision to poll members about which provisions they want is a way to gauge the intensity of support for the provisions in order to see which have support and which could be allowed to expire.

The Council will work with committee members who support the Public Good IRA Rollover Act to ensure they include the extension of the IRA rollover provision in their list of provisions to preserve. Council members can reinforce the message by communicating with lawmakers that the IRA Rollover encourages giving and supports worthy causes in communities across the country.

The Council‘s public policy staff will continue to monitor the extenders proposal and will report on developments. Contact the Council’s director of government relations, Chatrane Birbal (703-879-0689), or Shelton Roulhac (703-879-0699), the Council’s senior policy analyst, with any questions.

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Spruill Attends White House Forum for Philanthropic Innovation

Council President and CEO Vikki Spruill joined more than 150 sector leaders at last week’s White House Forum for Philanthropic Innovation and hosted a reception for participants with the National Fund for Workforce Solutions. Forum attendees discussed the relationship between philanthropic innovation and economic opportunity, as well as how philanthropy drives economic recovery and strengthens communities.

A representative of the Cleveland Foundation, one of the 10 winners of the inaugural Secretary’s Award for Community Foundations, discussed the foundation’s award-winning project. Other topics included impact investing, community finance, public-philanthropic partnerships, and “crowdfunding.” Administration officials in attendance included Valerie B. Jarrett, senior adviser to President Obama, and Jonathan Greenblatt, director of the White House Office of Social Innovation and Civic Participation.

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Join Council Staff for a Community Foundations Public Policy Course

Don’t miss a public policy seminar in Albuquerque, N.M., November 8–9. ”Center for Community Foundation Excellence: Public Policy for Community Foundations” is designed for community foundation staff with at least two years of experience in the field and an in-depth understanding of the intricacies of their foundation, the community foundation field, and the civic infrastructure of their communities. Chatrane Birbal, director of government relations, and Kristy Tsadick, staff attorney, will speak during the event. Each community foundation can send up to three representatives. Register today!

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This Week in Congress

Congress is in recess.

Policy Update is compiled and published by the Legal and Public Policy Department of the Council on Foundations.