A Senate bill to speed the flow of money from donors and foundations to charities has split the nonprofit world.
The measure, called the Accelerating Charitable Efforts Act, would affect charities, foundations, and donors in different ways.
Demand for changes to federal legislation has been growing as trillions of dollars sit in private foundations and, increasingly, in donor-advised funds.
Underlying the debate over the bill are questions about federal tax policy. Some argue that it is not doing enough to encourage donors to support charities and the communities they serve, yet many also recognize that philanthropies need to keep some dollars in waiting to be ready for future catastrophes.
The measure, sponsored by Angus King of Maine and Charles Grassley of Iowa, would:
- Allow donors to get an upfront tax deduction for donor-advised-fund deposits if they distribute the money within 15 years. Alternatively, donors could choose to delay the income-tax deductions and have 50 years to distribute their charitable funds. Donors could still receive immediate capital-gains and estate and gift-tax savings.
- Waive foundations’ annual excise tax of 1.39 percent of their net investment income in any year in which their payout tops 7 percent of assets. Private foundations created after the legislation takes effect could be exempt from the tax if they agree to give away all assets within 25 years.
- Excuse community foundations’ donor-advised funds worth $1 million or less from the reporting rules. Accounts larger than $1 million at community foundations would have to be distributed in 15 years or would have to contribute at least 5 percent a year.
- Prohibit foundations from meeting their payout obligations by paying salaries or travel expenses of foundation family members, as they can now.
To discuss the pros and cons of the legislation, the Chronicle gathered five experts last week for an hourlong forum, hosted by Chronicle editor Stacy Palmer.
The panelists were:
- Stephanie Ellis-Smith, co-founder of GiveBlck and senior adviser at the Giving Practice
- Kathleen Enright, chief executive of the Council on Foundations
- Melanie Lundquist, a Giving Pledge signatory
- Ray Madoff, a Boston College law professor who helped draft the Senate legislation
- Steve Taylor, vice president and chief counsel at United Way Worldwide
Some of the speakers support the measure, while others say the legislation is wrongheaded, will hurt charitable giving, and is distracting nonprofit advocates from focusing on other policy battles that would help nonprofits more.
Watch the conversation.
