(Image by Ralphs_Fotos from Pixabay)
[Editor's note: This story originally was published by Real Clear Policy.]
By Carroll Conley
Real Clear Policy
As the world transitions from COVID-19 to the developing humanitarian crisis in Ukraine, it is clear how quickly needs can change. Americans know that dire situations can overtake a community in hours and stand ready to help with shifting charitable needs. Many generous donors prepare to rise to the challenge by contributing to charitable savings accounts. Like a rainy-day fund committed to charitable giving, they allow philanthropists to ease unforeseen suffering.
One relatively new donation mechanism that allows for expedited crisis relief is the donor-advised fund (DAF). This charitable giving account allows for individuals outside of the top one percent to contribute meaningful donations to those in need and invites a variety of donors to assist with the world’s constantly changing needs.
DAFs are wildly popular as they allow donors to contribute as much as they want annually into an account, which is irrevocable dedicated to 501(c)(3) charities. Since their introduction in the philanthropic world, these funds hold $142 billion in assets with distributions to charities averaging around 20 percent per year, far higher than the 5 percent required for private foundations.
From these financial contributions, many charitable causes have received support to combat financial pressures during the pandemic and the invasion of Ukraine by Russia. Yet, there are still some that believe contributions are not doing enough and look to impose harmful regulations on these charitable accounts.
Critics include Representative Chellie Pingree (D-Maine) who recently repurposed fellow Mainer Senator Angus King’s failed senate bill and introduced it on the House floor as the Accelerate Charitable Efforts (ACE) Act. This copy-and-paste legislation has been packaged as an effort to ensure that funds donated by DAFs make it to working charities and nonprofits in a timely manner.
Simply put, the ACE Act fulfills politicians’ desire to needlessly restrict the flexibility and donor privacy protections that make DAFs so successful in supporting our communities. In Maine specifically, over 360 private and community foundations have provided more than $180 million in charitable grants throughout the world. Regulations are highly unnecessary for a system that has seen 99% of DAFs actively distributing 5-20 percent of their funds annually.
In 2019 alone, DAFs donated $27 billion worth of their assets to charities across the globe and accounted for $1 in $8 donated to charity in the United States. The result? DAFs have become more charitable than many private foundations, which are required by law to give at least 5 percent of their assets to public charities each year. Many are beginning to question the need to place more restrictions on an already effective charitable system and question strict spending timelines.
One of the chief architects of the bill, Boston law professor Ray Madoff, continues to rebut these concerns by pointing to the lack of payout rules. She argues that charitable tax reform is necessary to ensure that donations make it to charities in a timely manner.
What Madoff fails to consider is how these new rules would dampen charitable deductions for gifts to current DAFs and prevent deductions for donors that contribute non-cash assets such as property or company stocks. If enacted, this bill would chill the number of charitable donations provided by current DAF donors and hurt the communities that these charitable gifts are benefiting.
Even more troubling is how the ACE Act threatens donor privacy. Political tension and cultural divides have increased the real need for donor privacy protections. Regulations created by the ACE Act only further add to donor concerns as they would force private foundations to disclose their DAF gifts in detail. This would prevent many anonymous contributions and undoubtedly influence how donors choose to contribute to charities.
Of course, the changes proposed would have no impact on those advocating for the changes because of how their charitable vehicles are structured.
Billionaire John Arnold is one example, as he has largely supported measures to force disclosure of donor identity and monitor the spending of DAFs and private foundations. Ironically enough, recently, Arnold announced the consolidation of his 501(c)(4) nonprofit, private foundation, and DAF into Arnold Ventures, a single limited liability company (LLC). It appears that even this major bill advocate prefers donor anonymity to tax advantages.
So why the sudden push from some of the wealthiest for these new regulations on generous Americans that fall into lower income brackets? Are lawmakers truly concerned by the amount that charities are receiving, or are they instead more concerned with piercing the constitutionally protected right of privacy for average donors?
Over sixty years later, the same human nature problems exist as when the SCOTUS reviewed NAACP vs. Alabama in 1958. In that case, it was clear that the NAACP divulging the names of the supporters of the organization would have a chilling effect on their protected civil right of supporting the NAACP’s mission to overcome racism. Now is the time to build on NAACP vs. Alabama and codify into law, not undermine it and diminish democracy in the process.
While the motive for this bill remains unclear, one thing remains certain: the restrictions the ACE Act would impose on the philanthropic community will discourage donors from contributing charitable donations and may effectively end a channel of the philanthropic sector that has proven self-sufficient and generous for over twenty-five years.
Carroll Conley is the executive director at Christian Civic League of Maine.
[Editor's note: This story originally was published by Real Clear Policy.]
SUPPORT TRUTHFUL JOURNALISM. MAKE A DONATION TO THE NONPROFIT WND NEWS CENTER. THANK YOU!
The post U.S. representative wants to hit successful charitable organizations with more rules appeared first on WND.
