Yesterday marked the first day of Community Foundation week! CF week has been celebrated every November 12th-18th since 1989 to raise awareness of the critical role of community philanthropy in supporting thriving communities across the country.
In celebration of the important work of community foundations, the Council has created several resources—including a template op-ed, template press-release, and a series of community foundation-focused webpages—to assist you in highlighting the value and impact of your work.
Update on Tax Extenders
Since Kevin Brady (R-TX-8) assumed the Chairmanship of the Ways and Means committee last week, we have heard him state his intent to take up “tax extenders” with the goal of making “key provisions” permanent.
As our readers will recall, three of the 50-plus “tax extenders” directly impact issues important to philanthropy and charity—1) the IRA charitable rollover, 2) contribution of conservation easements, and 3) donations of food inventory. As of now, all tax extenders are expired because last December’s Congressional action only renewed the provisions for one year, retroactive to January 1, 2014.
We are working closely with Members, Congressional staff and colleagues in the field to reach the best possible outcome on these provisions. We are also seeking two important enhancements:
- Expansion of the IRA Charitable Rollover to allow distribution to donor advised funds, and
- Simplification of the private foundation excise tax to a single rate.
The Council is tracking the process closely. While Chairman Brady has asserted his preference for making provisions permanent, Senate leaders and the White House prefer temporary extension. As our readers know, last year Congress and the White House agreed on a one-year extension that was retroactive—so only in place for the last couple weeks of 2014. This year, if the provisions are again extended temporarily, we’re pushing for two years (one year retroactive to cover 2015 and one year forward to cover 2016.)
With just over a month left in the Congressional year, the need to take action is growing more important by the day. Be on alert for more information from the Council about how YOU can help to get these provisions across the finish line!
Comments Coming Due on IRS Gift Substantiation Proposal
As our readers will recall, the Department of Treasury gave notice in September for a proposed rule that would impact the way charities report information about received contributions to the IRS.
Currently, under § 170(f)(8) of the Internal Revenue Code (IRC), donors who make contributions of $250 or more are required to obtain "substantiation," or proof, of the gift in the form of written acknowledgement from the charity in order to claim a tax deduction. The proposal by the IRS would create a new form—in addition to the required Form 990—that charities could complete in the absence of written acknowledgment for a donor’s gift.
Comments for this proposed rule will be accepted until December 16th. The Council is soliciting input from our members to inform our submission. Click here for more information about submitting comments.
FATF Seeks Comments from Nonprofits
As we’ve mentioned before, the Financial Action Task Force (FATF), an international body that sets standards for anti-terrorist financing and anti-money laundering laws, is currently evaluating the U.S. government’s compliance with these standards—including those relevant to charitable organizations. The Council, along with other U.S.-based charitable organizations, is strategizing how to work with the FATF evaluators to increase awareness of the challenges charitable organizations face in working with U.S. counterterrorism measures.
Additionally, we have just learned that FATF is seeking to update its Interpretive Note to FATF Recommendation 8, which sets standards for how countries can implement counterterrorism regulations that apply to nonprofits. Domestic laws inspired by Recommendation 8 can be overly restrictive and deter grantmaking from foreign funders, and this is a great opportunity to revisit the standards that lead to these laws.
FATF's purpose in updating the Interpretive Note is to make it consistent with the risk-based approach for anti-terrorist financing regulations, and to clarify which charitable organizations are covered by Recommendation 8. This process could result in a much more civil society-friendly Interpretive Note that would help reduce restrictions to cross-border grantmaking in individual countries.
FATF is conducting an open comment process on how they should revise the Recommendation 8 Interpretive Note, with comments due November 27th. Comments are limited to one page, but you can also choose to provide red-lined edits to the current Interpretive Note instead of or in addition to writing comments. You can submit comments here.
SCOTUS Will Not Hear Challenge to California Donor Disclosure Case
Back in May, the Ninth Circuit Court of Appeals upheld a California regulation that requires charities registered to solicit contributions in California to file an unredacted copy of the IRS Form 990 Schedule B—which lists donor names and identifying information—in the Center for Competitive Politics v. Harris case.
The decision was important for charities in other states because it set a precedent that might encourage attorneys general in other states to begin requiring charities to provide more information on donors.
The Center for Competitive Politics appealed the decision to the Supreme Court of the United States (SCOTUS) on the grounds that the filing requirement violated the First Amendment. On Monday, the SCOTUS denied the appeal to hear the case—rendering the decision by the Ninth Circuit final.
Honoring Veterans with Honor Flights
The Legal team at the Council received an inquiry from a community foundation about establishing a fund to support veterans. Specifically, the group of donors interested in establishing the fund wanted the grant monies to go toward providing “honor flights”—flights that transport veterans from their community to Washington D.C. to visit the memorials associated with their service at no cost to the veterans—for veterans in their community.
There is a national nonprofit, Honor Flights Network, that does this work. But, this particular inquiry specified that the fund would not be associated with that organization. The community foundation wondered whether it could make grants from its fund to pay airlines, directly, for the veterans’ transportation costs associated with their honor flights.
Community foundations are permitted—with approval by the board—to establish a fund with a designated charitable purpose, even if there is no benefitting charity for that fund (so long as the charitable purpose is not for a donor advised fund). The foundation may pay vendors directly from that fund, including airlines, as long as there were appropriate selection criteria in place for determining who may receive the benefit (i.e. veterans in the community).
The Legal team advised in order for the foundation to lawfully administer a charitable project like this, it would need to require the veterans to complete a grant application for the purpose of an honor flight in compliance with the rules for making grants to individuals. The legal team also advised that, since this would be considered a charitable activity of and by the foundation, the foundation’s staff should be primarily involved in the administration of the program.
For more information on this or any other tricky legal matters, please contact the Council’s Legal Affairs team at firstname.lastname@example.org.
Access to the Council’s legal team is a valuable member benefit. Council attorneys are available to discuss your legal questions and to provide legal information by telephone, email and through our various publications and newsletters. This information is intended for educational purposes and does not create an attorney-client relationship. The information is not a substitute for expert legal, tax or other professional advice tailored to your specific circumstances, and may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.
Exclusive from our colleagues at the National Council of Nonprofits.
2015 Election Results and Nonprofits
Election Day 2015 gave voters the opportunity to weigh in on several issues of importance to the work of nonprofits in their communities. Here is a brief roundup:
- Payments in Lieu of Taxes (PILOTs): The election of Jim Kenney as the next Mayor of Philadelphia is sure to renew the effort by city officials to extract large payments from nonprofit missions to fund new spending initiatives and satisfy campaign promises. Current Mayor Nutter, who is retiring after eight years in office, had resisted calls to demand payments in lieu of taxes from large nonprofit institutions to fund city services and pay raises for government employees. Mayor-Elect Kenney has vowed not to raise property taxes to pay for spending proposals, pointing to nonprofits as his preferred revenue source.
- Taxpayer Bill of Rights (TABOR): Several ballot measures on Election Day relate to the budget mechanism known as the taxpayer bill of rights measure that restricts government spending based on an arbitrary formula. Voters in Colorado had to expressly instruct the Legislature to retain $66 million in marijuana sales tax receipts because the state revenues grew faster than the rate of inflation and population growth. If Coloradans had not agreed to Proposition BB, the TABOR provision in the state’s constitution would have required that the marijuana tax revenues be returned to the citizens, estimated at eight dollars per person. Washington State voters approved a similar budget technique, known as Initiative 1366, which will lower the state sales tax by one percent, from 6.5% to 5.5%, unless the Legislature refers for voter consideration a constitutional amendment that imposes a two-thirds super-majority requirement for laws or other ballot measures that would raise taxes. The initiative was strongly opposed by numerous nonprofits — including AARP, the Children's Alliance, League of Women Voters, and NAMI – because it puts artificial restraints on the ability of governments to address immediate needs.
- Campaign Finance Reforms: Voters in Maine and Washington State approved campaign finance measures that were strongly touted by nonprofits dedicated to good government. Mainers passed a Clean Elections Initiative establishing a public funding system for election campaigns, a proposal that is actively supported by the League of Women Voters and numerous other groups. Seattle voters approved a unique public campaign financing initiative known as Honest Elections. Registered voters will now receive four so-called “democracy vouchers,” worth $25 each, which they can give to candidates for mayor, city council and city attorney who have agreed to abide to an overall fundraising cap. The vouchers will be funded through a property tax increase.
Philanthropy Plays Important Role with Continued Public Budget Woes
A recent article in Bloomberg Business highlights the important role that philanthropy is playing in supporting the local economy in Michigan. In particular, the article draws attention to challenges such as the lead-contaminated water system in Flint and public employee pension issues in Detroit, and how foundations such as the Charles Stewart Mott Foundation have stepped up to the plate to provide significant support.
“Government gridlock has left many communities looking for solutions to some of the big challenges they face,” states Council President and CEO Vikki Spruill in the article. “The limitations of political leaders to address the pressing needs of communities have increased pressure on foundations to assume roles that government has historically taken.”
Importantly, this article highlights the continued contributions and vitally important role of philanthropy in supporting and strengthening communities across the country following the recession.
NPT Annual Report Outlines DAF Growth
Tuesday, the National Philanthropic Trust released its Annual Report on DAFs. The report is based on data from more than a thousand national charities, community foundations, and single-issue charities. The NonProfit Times broke down the key findings:
- Grants made through DAFs hit $12.49 billion (a 27% increase from 2013)
- DAFs accounted for 7.6% of individual giving and 5.5% of gifts to charities in 2014
- Total contributions to DAFs hit $19.66 billion (a 14.1% increase from 2013)
- Charitable assets held in DAFs reached $70.7 billion
- The average account size is $296,701 (a 13.7% increase from 2013)
The Wall Street Journal reported that “stock-market gains last year helped fuel the growth of donor-advised funds for charitable giving.”