Washington Snapshot - April 3, 2015
The Council’s public policy team is drafting Council comments for the working groups. We will share these with our readers once they are finalized. If your organization submits comments and is willing to share them with the Council, we would like to highlight excerpts in future editions of Washington Snapshot.
Regulatory News
Council Signs Global Regulatory Comments
In March, over 70 nonprofit organizations of all types from all over the world sent a letter to the Financial Action Task Force, calling upon FATF to widely share its "Best Practices Paper" for FATF's Recommendation 8 on Nonprofit Organizations with the global charitable sector, so that the sector can offer informed comments upon it.
As we’ve mentioned in previous editions of Washington Snapshot, the intergovernmental Financial Action Task Force (FATF) is undertaking two proceedings in 2015 which will have a significant impact on the future shape of the regulatory environment for cross-border giving. One of these proceedings, revision of its Best Practices Paper on combatting the diversion of the charitable funds to terrorist purposes, is well underway.
The Council on Foundations, working closely with partners such as the International Center for Not-for-Profit Law (ICNL) and the Charity & Security Network, is mobilizing global funders to ensure we can prevent detrimental changes and increase global philanthropic investment. We signed onto this letter on behalf of our members that engage in global grantmaking, to ensure that the Best Practices Paper reflects the interests of funders.
We will continue to update you on these and other global philanthropy developments. For more information, please contact Katherine LaBeau or Natalie Ross.
Trending in Legal Affairs
Granting to Religious Institutions
With a holiday season underway and much discussion about religious freedom in the media, we thought it appropriate this week to highlight the basics of faith-based grantmaking.
Grants to churches are legal. Under the Establishment Clause of the First Amendment to the U.S. Constitution, government actors are prohibited from advancing or inhibiting religion. However, the Establishment Clause, generally, does not apply to grantmaking foundations as private actors using private funds. So, there is no legal restriction against making grants to churches, synagogues, mosques or other religious institutions. In fact, the section of the tax code that defines charitable organizations includes the promotion of religion. Unless a foundation’s organizing documents (certificate of incorporation, trust instrument or bylaws) prohibits funding to religious organizations, grantmakers may grant to religious institutions such as churches for use with their core, religious functions.
A common inquiry the Council’s Legal Affairs team receives on religious grantmaking is whether there is a need to verify the charitable status of a church or religious organization that may not have an IRS determination letter. It is important to note that churches receive unique treatment under the tax code, and do not have to file for tax exemption for the IRS to recognize them as exempt under § 501(c)(3).
If the religious organization is something other than a church as defined in the regulations, additional due diligence may be required on the part of the grantor foundation. That due diligence can include reviewing financial and other organizational information from these institutions just as they would from other potential grantees. Similarly, grantmakers may place conditions on their grants to churches just as they would with other grantees, including imposing financial and other reporting requirements.
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
National Review Turns Nonprofit
The conservative magazine National Review is converting its business model to a nonprofit organization, POLITICO reports. We highlight this transition for our readers because with the generous support of the Knight Foundation, the Council is working to engage the sector on the challenges and opportunities presented by nonprofit media organizations.
National Review’s editor Rich Lowry said that officially becoming a tax-exempt organization allowed for the recognition that they are “a mission and a cause, not a profit-making business." Lowry went on to express optimism about receiving charitable donations moving forward, adding, "[t]he advantage of the move is that all the generous people who give us their support every year will now be able to give tax-deductible contributions, and that we will be able to do more fundraising, in keeping with our goal to keep growing in the years ahead."
National Review’s transition from business to for-profit is part of a growing trend in media organizations seeking to operate as nonprofits. As nonprofits, media organizations can play 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.
For more information on the Council’s work on nonprofit media organizations, visit our website.
Fight to Preserve the Charitable Deduction Continues in Vermont
We reported to you two weeks ago on the ongoing advocacy to maintain the full value of the charitable deduction in Vermont. This week, John Sayles, CEO of the Vermont Foodbank wrote an op-ed arguing for preserving the full value of the deduction in his state. He reminded Vermont lawmakers that “while charitable deductions are estimated to generate $5 million in additional tax revenue [for the state budget], experience in other states shows that this will cost Vermont nonprofits millions in charitable giving.” In other words, eliminating or reducing the value of the deduction will be costly for the state because fewer donations will result in a decrease in nonprofit services.
Another article in the Times Argus quoted Martha Maksym, executive director of the United Way of Chittenden County, who shared her thoughts on the value of the deduction with the Vermont Senate Finance Committee. Maksym said, the charitable deduction is “distinctly different than a mortgage or property tax deduction because the charitable tax deduction results in a benefit that goes beyond the taxpayer and really serves the greater good…”
We’ll continue to keep a close eye on this debate in Vermont, and update you accordingly.
Illinois Donors Forum Demonstrates the Value of the Nonprofit Sector
Rick Cohen at Nonprofit Quarterly wrote a piece this week on a policy campaign being run by the Donors Forum in Illinois. The campaign is called Building a Stronger Illinois, and is designed to “help policymakers understand that social impact organizations are a must-have for the state’s economy and that we can be effective partners in finding real, sustainable solutions for our state’s economic future.”
The campaign demonstrates the value of state-subsidized nonprofit programs and finds that:
- For every dollar invested in the Arts and Culture field, there is a $27 socioeconomic return.
- For every dollar invested in the Environmental field, there is a $58 socioeconomic return.
- For every dollar invested in the Youth Development field, there is a $45 socioeconomic return.
Rick Cohen sums up this policy campaign by highlighting that this evidence of economic return will help make the case for government support for the sector. “That’s where the advocacy rubber meets the road,” he says, “getting legislators to both recognize the legitimacy of investments in the nonprofit sector and see the need to fix state budget problems with sufficient revenues, not counterproductive social sector cuts.”
Events of Interest at Annual Meeting
Executive Leadership Preconference: Philanthropy and Public Policy—Executive Challenges, Leadership Opportunities
Designed for executive-level foundation leaders (CEOs, Executive Directors, C-suite executives, board members and trustees), this interactive two-day preconference from Friday, April 24th at 12:00 pm through Saturday, April 25th at 12:45 pm will explore three current challenges to philanthropy in the public policy sphere, equipping foundations with strategies to implement and navigate their own mission-driven advocacy efforts in today’s evolving policy arena.
Beginning with an exploration of philanthropy’s historic role in public policy and our significant contributions to civil society, we will explore three current challenges to philanthropy continuing to play the role.
Challenge #1 – The Current Strains on Our Democratic Process and the Implications for Philanthropy
As our regulatory and legislative processes seem strained, as civil discourse continues to polarize, and as citizens feel less connected to their governments, what does this mean for our efforts? What role might philanthropy play to rebuild our democratic process?
Challenge #2 – In the Halls of Legislatures: Challenges for Philanthropy and Reframing Our Message
Second, we’ll explore threads of scrutiny in philanthropic giving, including questioning “what should be considered charitable,” limiting incentives for individual giving, and questioning the value of endowed/long term funds to society. How could this scrutiny affect future investments by philanthropy in public policy?
Challenge #3 – Challenges to Deploying a Policy Agenda
Finally, we’ll turn the lens inward to your organization with an interactive exercise to give and take advice from peers. As foundations invest in public policy, what are the internal opportunities and challenges?
Evolution of American Philanthropy: Saturday breakouts
Join us on Saturday, April 25th from 1:00pm-5:00pm as we explore the many ways philanthropists can create positive impact beyond grantmaking. Two to Tango: New Forms of Giving in Philanthropy and New Forms of Grantees to Meet Your Mission are back-to-back breakout sessions that will allow philanthropic leaders to explore how foundations are using an array of incentives, investment vehicles, and innovative funding strategies to achieve their missions. The discussions will also involve leaders from emerging hybrid institutions that are utilizing financial capital for social entrepreneurship and business solutions to tackle some of the world's toughest challenges.
Six discussants offering different perspectives and experiences will share opportunities and challenges in learning how to work in the current environment of sophisticated program funding as well as “mixed mission” hybrid organizations. Three discussants will join the discussion from the foundation community, one each from corporate, private and community foundations. In addition, three other discussants will share their work in founding .com and .org entities seeking new forms of capital and other support to help them meet their social mission goals. The sessions will be presentations and facilitated discussion to capitalize on the shared goals of community impact by foundations and grantees alike. Expect provocative comments and questioning from all participants as we explore this new terrain.
These sessions are part of the Council on Foundation’s new Evolution of American Philanthropy initiative, focusing on “Emerging Forms of Philanthropy”.
Global Dinner on Monday
On Monday, April 27th from 6:30pm-8:30pm, join the Council for our annual Global Philanthropy Reception and Dinner as part of our 2015 Annual Meeting in San Francisco. We hope you can join us for substantive conversation about the Sustainable Development Goals and network with peers who undertake cross-border philanthropy around the world. Our global reception is also an opportunity to learn more about the work of conference attendees coming from more than 15 countries.
Find out more and register here.
Keep in Touch!
Please feel free to reach out to any of us on the public policy team with any comments or concerns, or to share an issue, article, event, or op-ed you’d like to see covered in a future Washington Snapshot.
