The Telluride Foundation, along with several other organizations in the philanthropic sector across the country, recently joined the initiative to accelerate charitable giving.
The initiative proposes a federal reform of the Welfare Act. Among other things, private foundations cannot meet their disbursement obligations by paying salaries or travel expenses for foundation family members or by making distributions to foundation advisory funds; and donors cannot circumvent the status of a private foundation (with the associated rules) through funding agencies through donor-oriented funds.
“With assets of over $ 1 trillion, private foundations are a tremendous resource for meeting the immense needs arising from COVID-19 and racial inequality,” said a press release from the initiative. “Although private foundations are subject to a 5 percent payout rule, which was put in place to ensure a regular flow of money to working charities, the purpose of this rule can easily be avoided. At a time when every dollar counts, Congress should ensure that existing rules are reformed to serve their purpose by setting (the proposed reforms). “
The coalition also urges Congress to enact incentives and reforms to ensure that private foundations continue to play a “vital role in the nonprofit ecosystem by distributing more of their assets to operational charities, such as the private foundation’s dividend 7 percent or more amounts “, as well as” Elimination of excise tax for newly established, limited-term private foundations with a term of 25 years or less “.
Telluride Foundation President and CEO Paul Major stated that local organizations need resources to address the problems of their respective communities as soon as possible, and the reforms proposed by the initiative would do just that.
“Community foundations play a vital role in addressing urgent and complex issues at the local level. Hunger, climate change, racial justice, education, the digital divide and housing are among the issues that need to be addressed now and locally, ”he said. “Donor-advised funding is a great tool for community foundations and has opened up tremendous opportunities for local communities. The reforms of the Initiative to Accelerate Charitable Giving recognize the unique role of community foundations and would free up vital resources that enable them to advance their missions and address some of society’s greatest challenges. This is how philanthropy should work – tackling today’s problems rather than keeping money over time. “
The coalition was formed on Giving Tuesday in December 2020 when a policy statement was released along with the support of its first members, including the Ford Foundation and Arnold Ventures.
“Tuesday is a day when Americans get involved and charities provide vital support; This year, the Initiative to Accelerate Charitable Giving is focused on new strategies to encourage giving, including addressing inefficiencies in our charitable giving tax laws. Currently, there is $ 1 trillion in private foundations and $ 120 billion in donor-advised funds (DAFs). “Today’s tax laws do not provide sufficient incentive for these philanthropic instruments to distribute their funds to charities in a timely manner, even though donors receive tax breaks upfront, which means that tax revenue is withdrawn from the government for no benefit to society. Additionally, only about 10 percent of Americans receive tax breaks for their charitable giving.
These so-called DAFs do not set any deadlines for when the donations must be used for charitable purposes; Donors decide when and where the money goes, according to a recent report from the Associated Press.
Critics complain that because DAFs do not offer a financial incentive to donate the money quickly, much of it remains in the accounts indefinitely instead of being distributed to charities in need.
But that criticism has helped drive a Senate bill – the Accelerating Charitable Efforts (ACE) Act – that tightens the rules for DAFs and aims to expedite donations to charities. The bill, introduced by Sens. Angus King, a Maine Independent, and Chuck Grassley, a Republican from Iowa, appears to have bipartisan support in Congress.
The bill would introduce numerous reforms to DAFs, including the creation of new account categories.
One type of account would allow donors to have an instant income tax deduction on funds they donate to a charity within 15 years.
The second type would allow them to delay the distribution of their money for 50 years. These donors would not receive any income tax deduction until then. However, you could still enjoy capital gains and inheritance tax savings for donating stocks or gifts to a DAF.
DAFs sponsored by the community foundation with less than $ 1 million would be exempt from the requirement. However, donors with more than $ 1 million in such accounts would only qualify for pre-tax relief if they distribute at least 5 percent of their assets annually or donate their money to a charity within 15 years. Under current law, assets can remain tax-free in a DAF for an indefinite period of time.
“This is about as common sense law as I’ve seen it before,” said King, who is meeting with the Democrats, according to AP history.
In a press release announcing the ACE Act, Grassley praised the initiative and hopes it will gain more bipartisan support.
“Working charities do so much good in our country and abroad, and they work with the goodwill and donations of those who can give. That’s why our tax law encourages donations to charity, ”he said. “But charitable dollars should do the good they are meant to do, not stagnate, to provide some tax breaks and other administrative fees. The reform measures we propose will ensure that the incentives for charitable donations actually lead to funds flowing to charities. I appreciate Senator King’s leadership in this endeavor and hope that more of our colleagues from both sides of the aisle will join us. “