22 January 2020

Washington Roundup – California DAF Legislation Advances, Treasury Weighs Regulations, Hometown Engagement in Virginia

The ACR newsletter tracks with the end of congressional sessions to highlight the most important developments here in Washington. The timing will vary, based on the congressional calendar, but you can expect a newsletter from us about once a month. In the meantime, we’ll be sharing significant developments through our email News Alerts and in real time on our Twitter feed (@ACReform) through our #HillScoop and #SectorScoop updates.

>> Federal: Donor-Advised Fund Legislation Advances in California
>> FederalTreasury: New Tax on Family Foundations and Businesses
>> State: Treasury: DAF Donor Privacy
>> FederalPresidential Politics
>> Federal: Hometown Engagement
Upcoming Webinar: Troubling Trends in Washington that Will Impact Your Philanthropy
>> National: Other News You Can Use
>> Top Reads: Most Donors of $10,000 or More Don’t Plan to Increase Giving

Donor-Advised Fund Legislation Advances in California

Last week, the California Assembly Judiciary Committee advanced legislation, A.B. 1712, that has many philanthropic organizations raising donor privacy concerns, specifically because the bill would give broad authority to the state’s Attorney General to seek donor information from donor-advised funds (DAFs).

ACR has been working with our allies in California to oppose this legislation, including submitting a letter in opposition prior to the hearing. The bill sponsor, California Assemblywoman Buffy Wicks, offered changes to the bill in an attempt to address concerns around administrative burden and donor privacy by exempting organizations with assets under a certain amount and excluding personal information from reporting requirements. However, it’s ACR’s view that it still doesn’t go far enough to protect donor privacy, as there is certain information that may not be personal in nature but could reasonably identify a donor (e.g. a large gift of stock in a well-known company).

Now that the bill has advanced out of the Judiciary Committee, it heads to the Appropriations Subcommittee, where legislators are examining its enforcement costs and will hear the bill tomorrow. We’ve heard the bill’s cost will trigger a delay in potential Senate passage, meaning opponents will have until at least May to make their case to lawmakers. We’ll keep you updated as the process unfolds.

Treasury: New Tax on Family Foundations and Businesses

You may recall, ACR began working with officials at the Treasury Department last year to address our concerns around a new tax on foundations and nonprofits that pay their officers and employees more than $1 million, which importantly includes compensation received from “related organizations.” At first blush it may not seem like it would affect many nonprofit organizations, however, Treasury is currently interpreting “related organizations” broadly to include, for example, a family business that funds a family foundation.

ACR met with Treasury officials several times last year, ultimately summarizing our concerns in a comment letter. Recent reports indicate Treasury will issue formal guidance by this fall, and we’ve heard from officials it’s likely to include some exemptions for officers of foundations.

Treasury: DAF Donor Privacy

In 2017, Treasury issued a Notice requesting comments on a variety of issues related to donor-advised funds (DAFs), with the goal of helping the IRS more easily enforce current laws around DAFs and prevent abuse. We understand Treasury had concerns that private foundations might use DAFs to avoid their 5 percent payout requirement, or that anonymous DAF donors could use the giving tool to meet the public support test for a public charity.

In response to the questions about private foundation use of DAFs, The Philanthropy Roundtable submitted comments on a host of legitimate reasons private foundations use them, including safety and security, collaborating with other organizations, funding outside normal areas and knowledge of the local community. We’re hearing Treasury plans to issue proposed regulations in the next couple months around grants to DAFs made from private foundations, so stay tuned.

We also met with Treasury officials to emphasize the importance of donor privacy when making rules around the public support test, which the Notice suggested could include looking through a donor-advised fund sponsor to the original donor when determining public support, something that poses huge donor privacy concerns. We received positive feedback, so we’re optimistic that any forthcoming regulations will maintain donor privacy.

Presidential Politics

In February, states will begin holding their caucuses and primaries for presidential candidates, starting with Iowa. ACR will be keeping a close eye on candidates’ tax proposals, specifically those that could impact the charitable sector. So far, we’ve seen a few proposals from Democratic candidates that would stifle philanthropy by capping itemized deductions, which includes the charitable deduction, and applying a wealth tax to philanthropic dollars. To read more about these proposals, see our previous newsletter here.

These candidates’ proposals will be top of mind for us during the presidential election, and we will be responding to candidates where appropriate as they release additional plans that could have negative effects on the charitable sector.

Hometown Engagement

For the past two years, ACR has hosted meetings in lawmakers’ districts for foundation leaders and grantees to discuss recent charitable trends and how Congress can help support policies to expand giving.

We’re kicking off our 2020 engagement this month in Northern Virginia with Rep. Don Beyer (D-VA), who is a member of the Ways and Means Committee and a founding chairman of a local community foundation, the Alexandria Community Trust. We’ll have more details following the meeting and as others are scheduled, so stay tuned!

Upcoming Webinar – Troubling Trends in Washington that Will Impact Your Philanthropy

On January 22, Andersen Tax will hold a webinar featuring Sandra Swirski, ACR Executive Director, and Mary Duffy, Andersen US National Tax Managing Director, who will discuss troubling trends in Washington that impact philanthropy.

Topics will include stripping privacy from donors of DAFs, the new tax on family foundations and businesses, and the growing interest around a wealth tax and what that could mean for philanthropy and foundation endowments.

If you are interested in joining the webinar for this timely conversation, you can find the registration information here.

Other News You Can Use

Lawmakers returned to Washington this month to begin the second session of the 116th Congress with a laundry list of priorities on the 2020 agenda, including impeachment. The impeachment fight shifted to the Senate this week, which means all other legislative business will be on hold in the upper chamber until they conclude their trial. The House is expected to continue business as usual.

One of the top tax priorities this year for House Democratic lawmakers, including Ways and Means Chairman Richard Neal (D-MA), is expanding refundable tax credits for individuals, such as the Earned Income Tax Credit and the Child Tax Credit. House Democrats are also expected to release an infrastructure plan this month, and Ways and Means Committee Democrats are slated to markup a green energy tax bill by the end of March. Keep in mind, there are also a handful of technical fixes to the 2017 tax bill that will need to be addressed and some of these Democratic priorities, like enhancing refundable credits, have been floated as potential trades.

Take a look at Sandra Swirski’s most recent blog post to learn where nonprofit priorities might fit into the 2020 agenda.


Top Reads

NationalMost Donors of $10,000 or More Don’t Plan to Increase Giving

NationalCharities complain about ‘giving gap’ since GOP tax law took effect

NationalCRS Report: Legislative Overview of the Charitable Deduction for Individuals (IRC §170)

NationalCalif. Bill Would Require Greater Disclosure of Donor-Advised-Fund Activity

National – Youth, Education, and Health Groups Hit Hardest by the Sharp Decline in Americans Who Give

ACR Blog Influencing Policy in 2020

Opinion – Congress Should Allow Everyone to Get a Tax Break for Giving to Charity

Opinion – The War on Philanthropy

OpinionIn 2020, Expect Many Policy Actions That Affect Nonprofits and Foundations. Here’s What to Watch.

Please feel free to email us at info@acreform.com if you have any questions, stories or topics you would like us to include in our newsletter.

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