This week, at the American Red Cross national headquarters, First Lady Michelle Obama and Dr. Jill Biden joined Council President and CEO Vikki Spruill, Chairman of the Board of the American Red Cross Bonnie McElveen-Hunter, senior government officials, military leaders, and foundation executives from across the country to announce the Philanthropy-Joining Forces Impact Pledge.
The pledge - initiated by Blue Shield of California Foundation, the Bristol-Myers Squibb Foundation, the Lincoln Community Foundation, and the Robert R. McCormick Foundation - creates a community of funders and builds momentum for programs that will support service members, veterans and their families, in local communities as the country draws down from twelve years of war.
In her remarks, Spruill highlighted the Council's ongoing commitment to this important national priority, saying "As our men and women in uniform come home, philanthropy stands beside them to help them carry their mission forward into their communities and hometowns. The foundations in this room have funded programs that create affordable housing, that provide new health interventions, that address domestic violence, and that expand economic opportunities for veterans and military families. Many in the philanthropy community are addressing the needs and gaps in services, but there is still much more to be done."
Spruill and the First Lady also unveiled the new Veterans Philanthropy Exchange, an unprecedented clearinghouse for philanthropic funders to share best practices. In her speech, which you can watch on WhiteHouse.gov, Mrs. Obama highlighted the importance and impact of philanthropy.
“Whenever our country has needed to tackle an issue like this, we’ve looked not only to businesses and governments for solutions, but we look to our generous philanthropic organizations as well,” said the First Lady. “Throughout our history, we’ve seen donors and foundations step up again and again to help us overcome the challenges we’ve faced as a country. Whether its building schools in the segregated south, funding AIDS research, or addressing poverty and homelessness, our philanthropic institutions have always played a huge role in creating positive change.
“I am thrilled to announce that the Council on Foundations is continuing that tradition by extending that same kind of energy and support to our troops, veterans and their families long after our wars are over,” she continued. “They’re bringing together benefactors from across the country to create a stronger national funding structure for groups that support our military families. It’s called the Veterans Philanthropy Exchange, and it’s going to allow these groups to do a number of things -- share best practices, create new resources, recruit even more donors to support our military families in the years ahead.”
The First Lady and Dr. Biden reinforced the importance of philanthropy in this effort with an op-ed to the military community published in Military Times.
The White House covered the event, which also received a lot of attention in major news outlets throughout the country, such as the Washington Post, CBS News, the Huffington Post, the Chronicle of Philanthropy, and Time Magazine. You can learn more about the Veterans Philanthropy Exchange and the Council's other work to support service members and their families on our website.
The Council is pleased to announce two webinars that delve into the comprehensive tax reform proposal introduced by House Ways and Means Committee Chairman Dave Camp (R-MI-4).
Released in February, the proposal contains dozens of provisions that affect foundations, including: a payout requirement for donor advised funds; a simplified private foundation excise tax; the elimination of two types of supporting organizations; new UBIT requirements; a floor on the charitable deduction for individual taxpayers; and much more. These webinars will dive into how provisions of the bill could influence the way philanthropy operates in the future.
- Council staff and our panel of expert guests will:
- Offer insight and opinions on the political environment for tax reform;
- Navigate through both the changes proposed in the legislation and our understanding of the motivation behind those provisions;
- Identify provisions that must be challenged and those we can support;
- Suggest information and education efforts necessary to fortify our positions; and
- Explore potential advocacy approaches as the Council and colleague organizations work with Congress towards tax reform that allows philanthropy to thrive.
The Council will also highlight channels through which we’ll seek information from the field that will help shape and inform our positions.
Thursday, May 15th 2:00-3:00 PM EST
PART I: Update on current activity on Capitol Hill related to tax reform and focus on specific provisions including:
- 5-year payout requirement and subsequent excise tax for donor advised funds;
- Repeal of Type II and Type III supporting organizations;
- Simplification of the private foundation excise tax;
- Mandatory e-filing of IRS Form-990;
- The treatment of certain unrelated business income;
- Excise tax on executive compensation;
- Brief discussion of provisions related to specific types of organizations, including colleges and universities and 501(c)(4)s;
- Valuation of non-cash gifts; and
- Additional penalties for self-dealing and excess benefit transactions.
Wednesday, May 21st 2:00-3:00 PM EST
PART II: Recap of general background information and focus on specific provisions related to the charitable contributions of individual taxpayers, including:
- 2% (of AGI) floor on the charitable deduction;
- A phase-out of the deduction for higher income earners;
- The shift of nearly 25% of all taxpayers from itemizers to non-itemizers (who would take the standard deduction);
- The extension of the deadline for deductible donations to April 15th of the calendar year; and
- The fate of the IRA charitable rollover and the other charitable tax provisions that are referred to as “tax extenders.”
The Council wrote to the Department of Treasury and the Internal Revenue Service (IRS) this week to urge them to prioritize several regulations and guidance documents that impact our members. Each year, the Priority Guidance Plan identifies and prioritizes those tax issues that the agencies should address through regulations or revenue rulings, revenue procedures, notices, and guidance throughout the upcoming year. The Council’s public policy and legal team seizes every opportunity to communicate the priorities of our members and the philanthropic field to Treasury and IRS decision makers. Our comments, which are separated into domestic regulatory priorities and international grantmaking priorities, ask the agencies to include the follow items in their Priority Guidance Plan for 2014-2015:
- Guidance on the statutory provisions related to donor advised funds, which became law in the Pension Protection Act of 2006 (PPA);
- Guidance on the standards IRS officials employ to recognize nonprofit media organizations as exempt under Section 501(c)(3);
- An update to Revenue Procedure 92-94, which governs equivalency determinations for charities overseas;
- Guidance on grants to Mexican charities in light of a new U.S.-Mexico Treaty; and
- A modification of the Foreign Account Tax Compliance Act (FATCA) that will simplify the cross-border grantmaking efforts of many of our members.
We’ve been keeping you up to speed on congressional activity on the “tax extenders” that expired last year, including the IRA charitable rollover. Fresh off of spring recess, the House Ways and Means Committee voted on bills dealing with 6 separate extenders this week that relate to for-profit businesses, voting all of the bills out of the Committee. During the Committee markup, Chairman Dave Camp (R-MI-4) suggested that this markup launches his effort on extender provisions: “This is the beginning of the process for the extenders,” Camp said. As the extenders process unfolds in the House, the Council is taking every opportunity to let the Chairman know how critical the IRA charitable rollover provision is to our members.
Meanwhile, we are hearing that Senate Majority Leader Harry Reid (D-NV) will move for a floor vote on the Senate bill soon—perhaps the week of May 12th. The EXPIRE Act, the bill on the extenders that passed the Senate Finance Committee a few weeks ago, includes language expressing “the sense of the Senate that states that “comprehensive tax reform should commence in the 114th Congress and should conclude before January 1, 2016.”
The bill was placed on the Senate legislative calendar this week, which means that the Majority Leader can call for a full Senate vote on it. It includes the IRA charitable rollover in its current form and the other charitable tax extenders. It is unclear whether the Majority Leader will permit amendments to be offered on the bill, such as an amendment that would expand and enhance the IRA charitable rollover. Ultimately, the fate of the bill remains uncertain.
Foundations across the country are engaging with their lawmakers to express their strong support for the IRA charitable rollover—both extending it and expanding the bill to other philanthropic giving vehicles. This week, community foundations through the state of Texas united with letters to Representative Sam Johnson (R-TX-3), Representative Kevin Brady (R-TX-8), Representative Lloyd Doggett (R-TX-35), and Representative Kenny Marchant (R-TX-24).
The foundations asked their representatives to expand the IRA charitable rollover to other giving tools—especially donor advised funds. “Community foundation donors frequently use DAFs to engage in philanthropy that directly impacts the quality of life where they live, or where they have a historical connection. The current exclusion of DAFs directly impacts every community foundation and many potential donors. With the incredible rise in popularity of the DAFs that we manage, we believe that expanding the Rollover to these funds would channel even more dollars to address the broad range of needs in Texas,” the foundations explained.
The Council will continue to closely engage in the tax extenders process pressing for extension and possible expansion of the IRA rollover. We will report regularly to our readers.
On April 25th, the IRS released three new Letter Rulings with favorable results that may be of interest to Council members.
In Letter Ruling 201417018, the IRS found that a public charity could operate an international educational program that would be managed by a separate foreign nonprofit foundation, and could receive compensation from the foreign foundation for the program without jeopardizing its status as a public charity and without incurring unrelated business taxable income.
Another IRS decision, Letter Ruling 201417021, determined that a private family foundation with two sibling directors who had developed divergent charitable goals could successfully split into two separate private foundations with a transfer of 50 percent of the assets of one foundation to the other without adversely affecting either organization’s private foundation status, or incurring termination taxes, investment income taxes or self-dealing penalties.
Finally, in Letter Ruling 201417022, the IRS ruled that a private corporate foundation could match charitable gifts from the corporation’s employees to qualified public charities through a foundation matching gift program, and such matching gifts would be considered qualifying distributions for the foundation, would not be subject to self-dealing penalties, and would not be considered taxable expenditures.
Commentary on Donor Advised Funds
In both Forbes and the Urban Institute and Brookings Institution’s TaxVox blog, Howard Gleckman delves into Chairman Camp’s proposal for a mandatory 5-year DAF payout. He describes how DAFs operate, characterizing them as “mini private foundations for the merely wealthy,” and asks: “Are these funds a tax shelter or an effective tool to encourage well-off (but not rich) Americans to contribute more to charity?”
Gleckman then weighs the pros and cons of DAFs and the arguments made by both supporters and naysayers, and concludes by saying that “[s]ome form of minimum payout rule seems to make sense though there is nothing magic about Camp’s five years.”
The Council’s Senior Vice President for Public Policy & Legal Affairs, Sue Santa, wrote a comment responding to Gleckman’s piece in Forbes and TaxVox “Critics of donor advised funds focus on their immediate tax benefit to the individual and the possibility of a delayed benefit to the community. While it can be interesting to analyze an individual giving tool, when we step back, we have a bigger question to answer – do we want donors to have more opportunities to donate to charitable causes or less opportunities? Our charitable sector thrives because donors get to choose to donate their money to diverse causes in diverse ways. ... At the Council on Foundations, our membership of grantmaking foundations and programs is heartened by the growth and popularization of any and all charitable vehicles that promote philanthropic giving. Charitable giving, through any financial vehicle or donation, is much more than just a tax deduction.”
Steve Woolf of The Jewish Federations of North America also weighed in. “DAFs are an essential component of Jewish federation’s mission to inspire Jews to fulfill their religious duty to be charitable, help secure the financial and human resources necessary to care for those in need, rescuing Jews in danger, and, in no small part, ensure the continuity of the Jewish people. They offer an efficient and economical means for a donor to benefit the community and encourage family philanthropy, often enabling such donors to better identify their charitable goals and interests,” he said.
Community Foundations and Advocacy
In the Nonprofit Quarterly, Abby Levine and Marci Bernstein Lu of the Alliance for Justice urge community foundations to use the opportunity of their centennial to ask: “What is the one step we can take during our centennial year to deepen our engagement in public decision-making processes that impact the communities we serve?” The authors aim to remind community foundations of their history, if not “mandate,” to be public advocates.
“Because of their central role in the lives of their regions, foundations must become even more active participants in the policymaking process… As public charities, community foundations have broad legal latitude to not only support and build local advocacy capacity but also to engage in direct lobbying themselves,” the authors state.