Washington Snapshot - April 24, 2015
@_____ #Act4Good by supporting the work of nonprofits; support the America Gives More Act #HR644
@_____ Help our communities and the nonprofits that serve them: pass the America Gives More Act #Act4Good #HR644
@_____ Communities served by #nonprofits deserve better; #Act4Good and pass the America Gives More Act #HR644
@_____ No Excuses for delaying passage of the America Gives More Act, #HR644 #Act4Good
News from the Hill
New Ways & Means Member Announced
It was announced yesterday that Representative Robert Dold (R-IL-10) will take over the seat vacated by former Representative Aaron Schock, also of Illinois. Schock resigned from his Congressional seat last month, leaving vacant his coveted Ways and Means post. Dold's appointment to Ways and Means must be approved by the House Republican Conference on April 28th before he can begin Committee service. Representative Dold has served in Congress since 2010.
Trending in Legal Affairs
Could a Non-DAF be Converted into a DAF
A married couple established an endowed scholarship fund at a community foundation. No grants were ever made from the fund for over ten years. The couple eventually moved out of the foundation’s service area but still wanted to make use of the gift. They wanted to expand the charitable interests of the fund from scholarships to more general education. Wondering if this change was permissible, the community foundation inquired: Could the foundation convert the scholarship fund into a donor advised fund that would make education grants?
The Council’s legal team advised that, generally, a fund that is not a donor advised fund may not be converted to one, as that may be viewed as adding new restrictions to the fund. The new restriction in this instance would be the advice of the donor/advisor.
The purposes and restrictions on a fund should be established at the outset. Allowing donors to change purposes or add restrictions at a later date is viewed by the IRS as impermissible continued donor control and contrary to a completed gift to the foundation.
As a permissible alternative, the legal team suggested that the foundation’s board could exercise its variance power to change the scholarship fund to a field of interest. By changing to a field of interest, the donors would actually be broadening the fund’s purpose (e.g., education generally), rather than imposing new or additional restrictions, thus acting within the confines of the tax code. Such an arrangement would allow the donors to participate on the field of interest’s advisory committee, though they may not control it. The committee would then recommend grants within the new expanded purpose (education).
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
Opinion: DAFs Increase Charitable Giving
This week Howard Husock posted a compelling piece highlighting the value of donor advised funds as dynamic philanthropic tools. Husock responded to critics of donor advised funds in a column in Inside Philanthropy. He cites data to demonstrate that the growing use of these accounts holds the potential to raise total charitable giving by more than $60 billion per year over current rates by 2035. He further argues that criticism of donor advised funds simply masks much deeper attacks against the charitable deduction writ large. “It’s hard not to conclude,” he writes “that those who would change the rules that have allowed donor-advised funds to thrive would actually prefer that charitable giving not grow overall.”
Changes to Michigan Nonprofit Governance Rules
Ruth McCambridge published a short article in NPQ this week where she considered whether or not the recent changes to Michigan’s nonprofit government rules would have a positive or negative effect. The article describes how “one provision expands nonprofit directors’ indemnification to protect all directors from liability for gross negligence, holding them responsible only for actions that are self-serving or that are meant to intentionally harm the organization. It also extended the indemnification to paid directors.” The changes also state that a private foundation need only have one director and quorum can be had with one-third of members.
The article quoted Rob Collier, President and CEO of the Michigan Council of Foundations, saying, “People could raise questions about that, but the business of our nonprofit sector has become so complicated, to get talented people to serve on your board, they need to know there’s some protection."
We’ll keep an eye out to see if any other states begin following Michigan in this respect.
