Washington Snapshot: Council Launches Recommendations to Strengthen Community Philanthropy

What's Happening This Week...

• Council Launches Recommendations to Strengthen Community Philanthropy
• ACE Act Introduced in the House
• Child Tax Credit Day of Action - February 8
• IRS Issues Notices on Nonprofit Retirement Plans and Asset Basis of Former Charities
• Community Outreach Toolkit on Home Energy Cost Assistance Now Available
• New Federal Tool for State Transparency on American Rescue Plan Resources
• Department of Commerce Seeking Experts for Internet of Things Advisory Board
• Happening in the States
• News & Resources
• Upcoming Events

Council Launches Recommendations to Strengthen Community Philanthropy

This week, the Strengthening Community Philanthropy Ad Hoc Working Group, convened by the Council on Foundations, released recommendations to strengthen community philanthropy and the use of donor-advised funds (DAFs). These recommendations were developed over the course of six months, with the input of not only the Working Group but also numerous other stakeholders. This collaborative process, which was informed by both the available data and the real-world experiences of community foundation leaders, resulted in the following recommendations:

• All community foundations and other DAF sponsors should develop and enforce a standard inactive fund policy;
• Encourage the Department of Treasury to issue a rule requiring the reporting of the percentage of inactive DAFs on Form 990;
• A minimum payout requirement of 5 percent of the total assets held in DAFs should be established;
• Funds contributed to a DAF by a private foundation should be granted out within five years for the distribution to be considered part of the private foundation's qualifying 5 percent distribution;
• If recommendations are developed for managing the donations of complex and illiquid assets, they should apply to all section 501(c)(3) organizations, not just donor-advised funds; and
• Tax laws should encourage individual giving and benefit all donors by incorporating changes like the Universal Charitable Deduction or charitable tax credits for taxpayers who do not itemize distributions and count distributions from an IRA to a DAF as a Qualified Charitable Distribution (QCD).

Read more about the recommendations, and submit your feedback.

ACE Act Introduced in the House

On Thursday, Representatives Chellie Pingree (D-ME) and Tom Reed (R-NY), along with Representatives Ro Khanna (D-CA) and Katie Porter (D-CA), introduced the Accelerating Charitable Efforts (ACE) Act in the House of Representatives. This bill, which is identical to the version introduced in the Senate in June 2021, would modify existing rules relating to donor-advised funds (DAFs) and make changes to the rules for the excise tax on undistributed income of private foundations, among other provisions. Read a full summary.

The Council on Foundations opposes the ACE Act, which member feedback and Council analysis suggest would decelerate the expansion of charitable giving in the U.S. by adding complexity and costs and making it harder for foundations to address both emerging and long-term challenges. Take the Council’s Action Alert to tell your members of Congress to oppose the ACE Act.

Child Tax Credit Day of Action - February 8

The Department of the Treasury and the White House are hosting a Child Tax Credit/Earned Income Tax Credit (CTC/EITC) Day of Action on February 8 to announce actions and commitments from CTC stakeholders. Funders can submit an action commitment to the White House, such as hosting educational events or social media outreach strategies, by sending a brief description of the activity to the Office of Partnerships at the White House at ope@who.eop.gov. The revamped CTC website, ChildTaxCredit.gov, now has several new features to help taxpayers file their taxes and access the CTC as tax filing season begins.

IRS Issues Notices on Nonprofit Retirement Plans and Asset Basis of Former Charities

The IRS released two notices this week that impact the nonprofit and philanthropic sector. First, they issued notice 2022-08, which sets forth the 2022 Cumulative List of Changes to pre-approved 403(b) retirement plans. These are the retirement plans commonly used by employees at nonprofit organizations. The list includes both statutory and regulatory changes.

The IRS also issued technical advice stating that the basis of property held by a tax-exempt organization transitioning from public charity to private foundation subject to the private foundation excise tax is determined under standard income tax rules as defined in the tax code. In some cases, this means the basis of assets will not be stepped up to fair market value when the organization becomes classified as a private foundation.

Department of Commerce Seeking Experts for Internet of Things Advisory Board

The Commerce Department is seeking qualified nominations for a new Internet of Things (IoT) Advisory Board to advise a Federal Working Group. The advisory board will include a wide range of stakeholders outside of the federal government with expertise relating to the Internet of Things (IoT). Among other matters, the board will advise on the identification of federal regulations, programs, or policies that may inhibit or promote the development of IoT and how IoT could deliver significant and scalable economic and societal benefits to the United States. The National Institute of Standards and Technology (NIST) will provide administrative support to the advisory board.

Technology and broadband funders might consider submitting nominations of nonprofit leaders or consumer advocates they support. Nominations are due by February 28 and can be submitted via email to alicia.chambers@nist.gov and barbara.cuthill@nist.gov.

New Federal Tool for State Transparency on American Rescue Plan Resources

The Department of Education and its technical assistance partner the National Comprehensive Center Network released a new resource tool on January 28 to help states share their progress deploying the $122 billion American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) funds to support safe in-person instruction, address the effects of lost instructional time due to COVID-19, and meet the social, emotional, mental health, and academic needs of their students. 

Community Outreach Toolkit on Home Energy Cost Assistance Now Available

In January, the White House released a state-by-state breakdown of funding earlier for the Low Income Home Energy Assistance Program (LIHEAP). LIHEAP provides funding to states, localities, and tribes for programs that help low-income residents with home energy costs this winter. On February 1, National Energy Assistance Day, NEDA released an outreach toolkit for community organizations and stakeholders to use to raise awareness about the importance of energy affordability and the programs that can help families struggling to pay their energy bills. The Consumer Financial Protection Bureau also has information on how to connect people with resources in their communities.

Nonprofit Workforce Shortage

Nonprofits, reporters, and policymakers are making the connection between staff and volunteer shortages at charitable nonprofits and the need for policy solutions that protect the people and communities those organizations serve. At a news conference in January, the CT Community Nonprofit Alliance released the findings of a survey of nonprofits facing an unprecedented workforce crisis, bringing to light how these issues are impacting nonprofits and the people they serve. Among the findings: 59% of responding nonprofits have a waiting list for services; the average job vacancy rate is 18%; and 91% report that it’s difficult or extremely difficult to recruit employees. Read the full report here.

A Portland, Oregon television station took on the challenges nonprofits are facing with an in-depth report focusing on the real-world impact on individuals. While workforce shortages at for-profit businesses and governments may cause inconveniences, David L. Thompson of the National Council of Nonprofits said that “at nonprofits, it means a crisis,” adding, “We’re talking life and death stuff here.” The report identifies burnout among nonprofit staff and lack of pay increases, a factor Thompson explained as caused in part by inflexibility in fixed government grants and contracts.

Nonprofit service delivery is also affected by a pandemic-related decline in volunteers. A Minneapolis Star-Tribune article recounts the challenges that many nonprofits are facing in trying to maintain operations with significantly fewer volunteers. It concludes that the volunteer shortages are compounding the strain on nonprofits already reeling from staffing shortages, citing a report from the Minnesota Council of Nonprofits, and food supply chain disruptions. 

Fundraising Update: Regulating Games of Chance

Due to the pandemic-induced cancellation of many nonprofit fundraising events, lawmakers in several states have relaxed rules governing online fundraising opportunities. These can come in the form of online raffles and other games of chance that previously were highly regulated or forbidden. The potential for new fundraising opportunities is the good news. The bad news is that the laws, regulations, and practices of online payment processors, vary widely. Continue reading to learn some of the things nonprofits need to look out for and find resources to make events legal and successful where permitted by law. Read Games of Chance as Nonprofit Fundraisers.