Washington Snapshot

Washington Snapshot: Proposed DAF Regulations

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Government Affairs Team
Council Connection: Updates for Council Members

Public policy news and updates for the philanthropic sector

Breaking News

Breaking News: IRS Releases Proposed Donor-Advised Fund Regulations

Earlier this week, the Department of the Treasury and Internal Revenue Service released a long-awaited proposed rule related to donor-advised funds (DAFs).

Among its provisions, the proposal clarifies key definitions and provides for exceptions to the definition of a DAF, including rules for exceptions around scholarships and disaster relief. 

Here are some initial thoughts from our team on what the Treasury and IRS released. The list is not exhaustive, however, and as our Government Affairs and Legal Resources team continues to analyze this proposal, we’ll post more on our website in the next few weeks. Plus, be sure to join the Council’s pop-up discussion on the proposed regulations on November 30th at 2pm ET.

  • Clarifies the definition of a Donor Advised Fund (DAF): A DAF is a fund or account that is separately identified by reference to contributions of a donor or donors; owned and controlled by a sponsoring organization; and at least one donor or donor-advisor has, or reasonably expects to have, advisory privileges with respect to the distribution or investment of amounts held in such fund or account by reason of the donor's status.
  • Clarifies the meaning of separate identification by reference to contributions of donors: A fund is separately identified by reference to contributions of a donor or donors if the sponsoring organization maintains a formal record of contributions to the fund relating to a donor or donors. It also includes certain facts and circumstances that are relevant in determining whether a fund is separately identified in the absence of formal records of contributions to the fund.
  • Clarifies the definition of a donor: A donor is broadly defined to include a person who reasonably expects to have advisory privileges with respect to the distribution or investment of funds in the account. Also included is a test to determine if a donor has advisory privileges, regardless of whether they are exercised.  
  • Potentially expands the type of funds considered DAFs: Some funds that have not historically been considered DAFs by foundations will now fall under this definition, including some giving circles, field of interest, and other committee funds.  
  • Government and public charities are not donors: Government entities and many public charities are excluded from the definition of a donor. However, the definition does include private foundations.  
  • Exception for disaster relief funds and certain scholarship funds: While the Secretary of the Treasury maintains the authority to exempt a fund or account from the definition of a DAF, under certain circumstances, the proposal provides two exceptions to the definition of a DAF for disaster relief funds and scholarship funds.

Tell us what stood out to you or what questions you may have about what was included. Comments are due by January 16, 2024, so let us know how these changes could impact your foundation by responding to this email or reaching out to Jenn Holcomb, Vice President, Government Affairs and Legal Resources.  

Foundations on the Hill

Registration Open: Foundations on the Hill 
Registration is now open for Foundations on the Hill. This event, taking place from February 25th through February 28th is your opportunity to meet your peers and advocate for the issues that matter to you. Foundations on the Hill is presented by United Philanthropy Forum in partnership with the Council on Foundations and Independent Sector.

What We're Tracking in D.C.

We’ve spent most of our time this week reading and analyzing the proposed DAF regulations, but we have been monitoring a few other conversations in D.C.:

  • This week, both the House and Senate passed a continuing resolution to keep the government funded through early 2024, averting a government shutdown—for now.
  • The House Ways and Means Committee held a hearing on rising antisemitism and terror financing during which the witnesses urged Congress to fund the President’s National Strategy to Counter Antisemitism. Most of the conversation focused on universities, though some members of Congress and witnesses did raise concerns about nonprofits.
  • On November 8, the Council convened a Leadership Circle on Locally Led Development. The group spent the day in Washington, D.C. hearing from stakeholders on the topic and concluded with a meeting at the U.S. Agency for International Development. We met with Deputy Administrator Paloma Adams-Allen to discuss USAID’s commitments to locally led development and potential opportunities for partnership with foundations.  
  • President Biden announced $5 billion in support to rural communities, including $2 billion in investments aimed at economic development and $274 million to expand rural internet infrastructure. 

Happening in the States

2023 Elections Recap
Election Day 2023 produced a few surprises, sighs of relief for some, and a clearer view into the trends affecting nonprofit policy priorities. Voters in four states determined party power dynamics in state legislative chambers and governors’ mansions. Also on the ballots in many states were proposals to fund affordable housing, child care, and education, as well as expansion of property tax exemptions.

Securing American Rescue Plan Act Funding for Nonprofits 
With a December 2024 deadline for allocating funds in mind, state and local governments are ramping up their decisions on how to invest their share of $350 billion in Coronavirus State and Local Fiscal Recovery Funds. State and local governments have recognized the benefits and wisdom of directing significant spending on the work of charitable nonprofits in their regions. Governments are reporting recent investments in nonprofits in Michigan, Pennsylvania, Utah, and Wisconsin.

Federal Grants Reform – Webinar Monday
Join a nationwide webinar, The Urgency of Government Grants Reform for Your Nonprofit, on Monday, November 20, from 3:00 pm - 4:15 pm ET, to hear from experts on the consequences of bad grantmaking policies, such as nonprofit workforce shortages and organizations getting shut out of grants, and learn about legislative and regulatory solutions that you can help influence to ensure reduced burdens, greater access to funding, and better outcomes. 

Upcoming Events

Keep in Touch!

Please feel free to reach out to any of us on the Government Relations Team with comments or concerns, or to share an issue, article, event, or op-ed you would like to see covered in a future Washington Snapshot.

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