New Federal Bill Could Have Unintended Consequences for Nonprofit Recipients in Indiana and Beyond
Indiana Philanthropy Alliance, the largest association serving Indiana’s philanthropy landscape, is closely watching a new bill introduced in the United States Senate that it believes, if passed, could limit future giving to charitable causes throughout Hoosier communities.
IPA, which advocates for charitable foundations, companies and individuals, is voicing its members’ concerns and raising objections to a change being proposed to donor-advised funds (DAF), which are one of the most popular charitable giving vehicles donors use to support nonprofit organizations in communities large and small throughout Indiana.
Sens. Angus King (I-Maine) and Chuck Grassley (R-Iowa) introduced Accelerating Charitable Efforts Act hoping that it speeds up payouts from these funds to nonprofit organizations. IPA believes the payout requirement in ACE Act is unnecessary because community foundations are already stewarding funds toward nonprofit organizations at a rate of 8.8 percent.
Indiana has the largest network of community foundations in the country, improving people’s lives in all 92 counties. There are more than 2,500 DAFs held at Indiana community foundations.
“Our members believe that increased regulation of this popular way of giving may have unintended consequences for the local nonprofits they support through gift distribution over the long-term,” said Claudia Cummings, president and CEO of Indiana Philanthropy Alliance. “We believe strongly that these types of proposals that reduce the tax incentive to give will discourage charitable giving, leave us ill-prepared for the future and hurt communities in need.”
Donors who create DAFs currently receive a charitable tax deduction at the time the gift is made to the community foundation. Then, they are permitted to serve as an advisor to the foundation regarding the fund’s distribution to nonprofit causes, often located in the donor’s local community. The new legislation would delay the income-tax deductions for donors who want to allow their charitable funds to appreciate beyond 15 years, in order to do even more good in the future.
Cummings said that beyond the tax implications, the new bill would limit the time necessary for the fund principle to grow thereby limiting the long-term strategic benefits.
IPA discussed its stance on the donor-advised fund debate during its recent visits with members of the Indiana Congressional Delegation at its annual Foundations on the Hill event in March. Cummings and foundation executives plan follow-up conversations on DAFs and additional provisions restricting private foundations in the coming days and weeks to provide feedback about the proposed bill.
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