Join Philanthropy Caucus member, Congressman Steve Cohen (D-TN), Adena Hill of the Southeastern Council on Foundations, and Council staff at 2pm ET on August 9th to discuss the importance of building relationships with your lawmakers.
We’ll also learn about how the Council is lifting up philanthropy during this election year.
Universal Human Rights: What are We Sharing Across Borders?
Universality is a key theme of the 2030 Sustainable Development Goals. In a time where the world is looking more and more inward, funders need to look outward. Solutions to domestic problems may come from foreign places, where the same issues are at hand.
In a new blog post, the Council’s Global Philanthropy Director, Natalie Ross, explores how the universality of the goals was a unifying theme at the 2016 International Human Rights Funders Group conference.
The new Council on Foundations report From Global Goals to Local Impact, demonstrates how and why the Sustainable Development Goals can be leveraged by U.S. foundations.
DAFs, Incapacity & Powers of Attorney
The legal team recently received a question from a community foundation member regarding the future administration of a donor advised fund (DAF). The foundation was informed that the fund’s donor was diagnosed with moderate Alzheimer’s disease, and as a result, a power of attorney (POA) was created in a named agent to handle the donor’s financial affairs. The advisory privileges to the DAF, however, was not specifically mentioned in the POA, leading the foundation to ask whether it could assume, because the POA mentioned “finances and property,” that the appointed agent was also granted the power to recommend distributions from the fund.
POAs create agency relationships where someone is appointed to handle the principal’s financial affairs in the event he or she is unable to do so. The intent of POAs, which are governed under state law, is to obviate the necessity of having to go to court to have a guardian appointed when a principal loses capacity. The scope of a POA can be either general or narrow. If the scope of the power of attorney is general, it allows the agent to act to the full extent authorized under a state’s enabling statute. If the scope is narrow, the agent’s power is limited to particular actions.
Legal Affairs advised the foundation that generally, POAs for financial affairs and property include the power to pledge, sell, gift or otherwise dispose of real or personal property. As a component fund of the community foundation, however, the DAF does not belong to the donor. The donor relinquished full ownership of the money to the foundation; and as such, the DAF could neither be considered real or personal property of the principal. The unfortunate fact of the matter is, it is rare that a principal would list the power to recommend grants from a DAF because it is just not something that is normally thought about when drafting a POA.
While POAs are a matter of state law, and the foundation was advised to seek local counsel, the legal team generally advises foundations in similar situations to look for general statements where advisory privileges to a DAF could fit. For example, where a POA includes terms like “and all other powers” or “gifts in amounts and at times that follow a pattern of giving established by me,” could effectively expand the expressly contemplated powers in the POA.
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.
Special Sessions Called to Address Unbalanced Budgets
State policymakers across the nation are being called upon to confront budget shortfalls; some taking action and many others putting off tough decisions until after the elections. The impact of their decisions could be felt by foundations and nonprofits either in prolonged uncertainty, new taxes, or increasing costs.
Last week, the Alaska House and Senate adjourned a special session without resolving a $3.2 billion structural deficit challenge that had prompted the Governor to call the Legislature back in session. The Governor’s tax-hike package will likely be a central issue in the November elections.
In recent weeks, Pennsylvania lawmakers approved a $1.3 billion revenue package to balance that state’s budget. Despite reaching agreement on a partial budget in Illinois, the State is still experiencing a deficit of a record-setting $7.8 billion and policymakers remain far apart on a solution. Nonprofits are concerned that they may never get paid the hundreds of millions of dollars stilled owed by the State for services performed pursuant to government grants and contracts.
North Dakota’s Governor, with the support of the legislative leadership, has called a special session of the Legislature in August to address a general fund shortfall of $310 million that was not anticipated when the State’s biennial budget was adopted in 2015. A key Senator in New Mexico is likewise urging a special session to address past and future deficits of up to $650 million. Governors in Virginia and West Virginia have recently announced revenue shortfalls, setting the stage for protracted tax debates in their 2017 legislative sessions
Special revenue sessions are activities nonprofits have learned to watch closely. In March, the Louisiana Legislature, meeting in emergency special session to close a nearly billion dollar budget shortfall, temporarily repealed hundreds of sales tax exemptions and exclusions and imposed taxes on many nonprofits for the first time. The backlash against the taxes was swift, leading the Governor to call the Legislature back into session to “clean up various unintended tax consequences created at the end of the 2016 First Special Session,” while addressing additional budget shortfall issues. Advocacy carried the day in Louisiana this summer, but concerns remain about the effects of special-session decision making.
Election-Year Nonpartisanship Under Scrutiny
A mayoral candidate in Hilo, Hawai`i is complaining this week that he was excluded from participating in a nonprofit-hosted candidate forum. Earlier this year, Georgetown University barred students from displaying partisan campaign signs and distributing literature on campus. Liberty University President Jerry Falwell publicly endorsed a presidential candidate, but took pains to stress that his endorsement was personal and not on behalf of the university. In May, the Chicago Sun Times reported it had found instances in which nonprofits had made campaign contributions over the past ten years.
The common thread in each of these stories is the tax-law provision that forbids charitable nonprofits and foundations from using their resources or otherwise engaging in partisan electioneering. The law is clear: Section 501(c)(3) of the Internal Revenue Code expressly directs that charities or foundations shall “not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”
This means that campaign contributions and endorsements made in the name of the 501(c)(3) organization are not allowed. In the case of the candidate forum, “It’s a best practice to invite all candidates,” said Lisa Maruyama, president and CEO of the Hawai`i Alliance of Nonprofit Organizations, when interviewed about the candidate’s complaint.
The National Council of Nonprofits has long recognized that 501(c)(3) nonprofits enjoy more power and independence to solve community problems by steering clear of partisanship. If individual organizations came to be regarded as Democratic charities or Republican charities instead of the nonpartisan problem solvers that they are, it would diminish the public’s overall trust in the sector and thus limit the effectiveness of the nonprofit community. The Council of Nonprofits’ public policy agenda pledges it will promote, support, and protect nonprofit advocacy by, among other ways, “Ensuring the integrity of charitable nonprofits by supporting the tax-law ban on electioneering and partisan political activities.”
Private Funding of Government Responsibilities on the Rise
July has seen philanthropy stepping up to address challenges that governments ordinarily confront alone, raising the question: when is grantmaking appropriate to address immediate short-term needs and when do private funds become enablers for policymakers to shirk public responsibilities?
This week the City of Kalamazoo, Michigan announced that a group of anonymous donors has agreed to contribute $70 million to a fund to help fix municipal budget problems, support “aspirational” projects, and enable the government to lower property taxes by a third.
Earlier, the Connecticut Foundation announced that it is offering financial support totaling $1 million to qualifying nonprofits that will see cuts in state funding for services the nonprofits provide on behalf of the government. Recent state budget cuts total at least $650 million.
Also this month, the Central Park Conservancy announced a $300 million fundraising drive to pay for restoration of structures in the iconic public park in New York City and establish an endowment to cover future expenses. In recent years, private foundations and donors have chipped in to address crises and spending cuts, but concern is rising that policymakers view private donors as expected saviors to solve costly public problems.
Recently, Ridgway White, president of the Charles Stewart Mott Foundation asked this question: “What is the role of philanthropy in responding to a community in crisis?” He laid out several criteria that his foundation follows and provided insights for others. Similarly, Sherry Magill, president of the Jessie Ball duPont Foundation and chair of the Council on Foundations, addressed the challenge in a recent posting: "When we confuse the private with the public, we absolve the public of its rightful responsibility for the health of the community, and worse, give up on holding elected officials responsible for the deteriorating condition of our communities." Magill also observed: "we do not have the financial resources to replace local, state, and federal tax receipts, and it is not our proper role to replace government.