Washington Snapshot - February 27, 2015
A Vital Pipeline: How Donor Advised Funds Engage New Donors and Boost Communities
Once again, commentator Alan Cantor has written a commentary on donor advised funds, this time for Inside Philanthropy. In the piece he reiterated comments he has made before, stating, “The surge in donor-advised funds is not increasing charitable giving, but is actually siphoning donations away from struggling nonprofits.”
The Council quickly responded. Our President and CEO Vikki Spruill wrote, “When thinking about donor-advised funds (DAFs) and the policies that surround their use, policymakers must stop focusing solely on the donation transaction.” She went on, “At the heart of recent critiques of DAFs is a troubling and misguided effort to call into question the value of endowed philanthropy. The compulsion to “pay it out now” in order to address immediate needs is woefully shortsighted. Philanthropy doesn’t think just of the latest development, the next election, or the next business cycle. It has to think of the next generation.”
Join Us For Philanthropy Week in Washington!
Empowering Communities. Together.
Mark your calendars: the second annual Philanthropy Week in Washington 2015 kicks off on Monday, March 16th!
As our readers know, Philanthropy Week in Washington is a week-long series of events and activities hosted by the Council on Foundations to highlight the role of philanthropy in our society. This year’s theme, “Empowering Communities. Together.” emphasizes the critical role of community partnerships in advancing the common good.
From large independent foundations and corporate foundations, to family and community foundations, philanthropy empowers communities. Foundations offer the timely resources, local knowledge, and strategic leadership needed to ensure complex issues are addressed in ways tailored to suit local needs. As Congress considers tax reform and a new budget, join us in telling them that your community depends on a full set of philanthropic tools to meet pressing needs.
The week will feature the centerpiece event of Philanthropy Week, Foundations on the Hill (FOTH). Philanthropy Week builds upon the longstanding, historical success of FOTH by expanding our programming and audiences and amplifying our message. This year, Philanthropy Week will include visits with our lawmakers on Capitol Hill and with the Administration officials, briefings to members of Congress and staff, a variety of unique educational programming on topics that impact philanthropy, and both traditional and social media outreach.
We are pleased to be working with several partners on these events, including the Forum of Regional Associations of Grantmakers and the Alliance for Charitable Reform, a project of The Philanthropy Roundtable. The traditional Foundations on the Hill visits with Members of Congress and congressional staff will take place on Wednesday, March 18th and Thursday, March 19th. The Alliance for Charitable Reform’s Summit for Leaders is slated for Wednesday morning, March 18th.
Event Highlight: Panel, "Nonprofit Media: Towards a More Informed Public"
Each week between now and Philanthropy Week, we will highlight one event being hosted during the week. This week, we’re pleased to announce a breakfast panel on nonprofit media organizations on Friday, March 20th.
The Council on Foundations, through the generous support of the Knight Foundation, is pleased to invite you to a breakfast panel that will explore challenges that nonprofit media organizations face in becoming tax-exempt. The breakfast is from 8:30 to 10:00 AM at Morgan, Lewis & Bockius LLP, located at 1111 Pennsylvania Avenue NW, Washington DC 20004.
Nonprofit media organizations are diverse nonprofits that serve a valuable role in educating citizens through in-depth public interest reporting, including investigative journalism, news reports, explanatory journalism, solutions journalism, and specialty journalism, in order to elevate important social topics, particularly at the local level. However, a 2013 report from a committee of experts convened by the Council on Foundations, The IRS and Nonprofit Media: Toward Creating a More Informed Public, found that these organizations often struggle with the process of obtaining tax-exempt status from the IRS. The current IRS criteria for recognizing these organizations as tax exempt does not account for an evolving digital media landscape or newly accepted nonprofit operational practices.
A legal expert will bring us up to speed on the state of nonprofit media organizations today, and will examine persistent challenges these organizations face in achieving and maintaining tax exemption. We’ll also be joined by a leader from a nonprofit media organization who will share first-hand experience from the field and explain his organization’s mission and operations, and his thoughts on the valuable role that nonprofit media organizations play in society.
Register for this Philanthropy Week event by e-mailing katherine.mclaughlin@cof.org.
News from the Hill
Senate Tax Reform Working Groups Aim for April Presentations
As we’ve shared with you, the Senate Finance Committee's working groups on tax reform have been formed and have begun to meet. The groups will meet weekly through most of April, and are expected to present recommendations in the form of a report by the end of that month. Starting at the end of March, the groups are to prepare for and conduct “roundtable presentations” for the Committee on their tax reform issues. We have not yet learned whether these presentations will be open to the public.
The Finance Committee also gave each working group a list of topics they are to address. As a reminder, the issues that impact charitable organizations and individual donors fall within the “business” and “individual” working groups. The business working group, which will address tax provisions that impact the business and operations of charitable organizations, is co-chaired by Senators John Thune (R-SD) and Ben Cardin (D-MD). The individual working group, which will address giving incentives for individuals, is co-chaired by Senators Chuck Grassley (R-IA), Mike Enzi (R-WY), and Debbie Stabenow (D-MI).
The Council will work with members of Congress and staff to ensure that philanthropy’s issues and priorities are properly addressed by the working groups, and in all policy conversations about comprehensive tax reform.
Trending in Legal Affairs
Assisting High School Booster Clubs that are not 501(c)(3)s
Recently, a local high school athletic booster club, which was not a registered 501(c)(3) charitable organization, approached a community foundation seeking fiscal sponsorship. The booster club wanted to set up a fund at the community foundation that would be used to pay expenses not covered by the school district—namely, transportation for away games, lodging and meals.
Seeking legal guidance, the community foundation contacted the Council’s legal affairs team to inquire whether such an arrangement was permissible.
In situations where organizations that are not tax-exempt are seeking fiscal sponsorships, the legal affairs team recommends establishing “field of interest” funds instead because these funds allow community foundations to control grants made from the fund, ensuring that they are made for a charitable purpose.
In this particular case, the legal affairs team suggested that the “field of interest” could be limited to the “transportation, lodging and meals for XYZ High School Booster Club’s Charitable Activities.” This would permit the fund to only support projects in that field of interest. As with any field of interest, the booster club would need to apply for grants from the fund. Reviewing these applications would enable the foundation to perform the due diligence required to ensure that the grants made from the fund are for charitable projects.
For more information on this or any other tricky legal matters, please contact the Council’s Legal Affairs team at legal@cof.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.
Philanthropy News and Op-Eds
Release: "Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations"
This week, Independent Sector released the revised version of their Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations. The release event featured nonprofit leaders from across the country, as well as Congresswoman Debbie Dingell (D-MI-12) who spoke about the importance of these principles. The Congresswoman and former head of the GM Foundation, underscored the value of trust in nonprofits and foundations, and the great impact they have had on her hometown of Detroit.
The principles, originally drafted in 2007 and revised this year by a panel of nonprofit representatives, offer guidance on executive compensation, online fundraising, financial management, and other management and governance concerns.
Among the changes from the 2007 principles, the 2015 version allows for more “overhead” costs. The principles state that administrative expenses do not have to be separate from an organization’s mission-related work. Rather, the new principles acknowledge that administrative costs can be central to carrying out an organization’s programs. While the 2007 principles suggested a target of 65 percent of expenses to be spent on program-related costs, the 2015 principles acknowledge that it can be necessary to spend more on overhead and less on direct program costs.
The new principles also update fundraising recommendations to account for changes in technology, such as online fundraising and crowdfunding. They caution that online fundraising can allow for opportunities for fraudulent solicitations, and explain that organizations should provide training and supervision for fundraisers and know how to take control of the organization’s brand should fraudulent activity occur. Beyond fundraising, the principles also indicate that when mitigating risk, an organization needs to protect its electronic data in addition to records and other property.
For more information on the revised principles, check out the Independent Sector website.
Urban Institute Survey on IRA Charitable Rollover
The Center on Nonprofits and Philanthropy at The Urban Institute is administering a short electronic survey on the IRA charitable rollover provision to assist the Council on Foundations and the Council on Michigan Foundations with understanding how this provision affects community foundations.
The IRA charitable rollover provision, which allows individuals at least 70 ½ years of age to donate up to $100,000 directly from their IRAs to public charities without tax penalties, was first introduced as part of the Pension Protection Act of 2006. Since then, the provision has expired and has been renewed multiple times, leading to some insecurity about its status.
For years we’ve been working to make the provision permanent, and on February 12th, the U.S. House of Representatives passed the America Gives More Act of 2015, which makes this provision, as well as two other charitable extenders, permanent options for donors.
If you have any questions related to this survey, please contact Nathan Dietz, who can be reached via telephone at 202-261-5775 or by email ndietz@urban.org.
Events of Interest
FEMA Listening Sessions
Not only are foundations a stakeholder in the community recovery process after disaster, but they are a critical enabler and facilitator of other stakeholders, in many instances. For those foundations operating in flood prone regions of the country, your lessons and experiences could be very informing to FEMA in their request for input in response to the recent White House Executive Order issued in January calling for a new Federal Flood Risk Management Standard and Stakeholder Input.
Under the Executive Order, “Establishing a Federal Flood Risk Management Standard and a Process for Further Soliciting and Considering Stakeholder Input,” FEMA is seeking input from stakeholders before they implement the draft Federal Flood Risk Management Standard. To carry out this process, a draft version of Implementing Guidelines is open for comment until April 6, 2015.
FEMA and federal partners are also providing a series of listening sessions on the Standard. These sessions provide the opportunity to learn more about the Standard, ask questions, and provide feedback on how federal agencies implement the Standard. Sessions will be held in Ames, Iowa; Biloxi, Mississippi; Mather, California; and Norfolk, Virginia; with additional sessions to be announced soon. For more information on the dates, times, and locations of the listening sessions, visit the FEMA website.
