Public Policy Update - November 2023
Philanthropy Southeast regularly provides members with updates on the latest public policy developments in Washington and state capitols around the region, analyzing their possible impact on the charitable sector. If you would like to see an issue featured in a future Public Policy Update, contact Jaci Bertrand, Philanthropy Southeast's vice president of member engagement, at jaci@philanthropysoutheast.org.
IRS, Treasury Department Release Proposed Regulations on DAF Distributions
This week, the IRS and Treasury Department released proposed regulations tied to taxable distributions from donor-advised funds. The release kicks off a 60-day period where members of the public can comment on the proposal.
The proposed regulations are years in the making: They were largely written based on comments received in 2006 and 2007 around definitions of DAFs, distributions, investments and disqualified persons. They also referenced some comments from a 2017 Notice, though the issues outlined in the 2017 notice, including pledges and bifurcation, the public support test, and private foundation use of DAFs, are not addressed in this rule.
While we are still analyzing the full notice, here are a few things worth noting:
- Disqualified persons: There are certain taxable distributions from DAFs that would be subject to excise taxes like compensation to a “disqualified person”. Some sponsoring organizations have raised concerns that the current proposed rule would consider compensation to an investment advisor as a taxable distribution if the advisor provides both DAF and personal investment advice.
- Distribution definition: The proposed rule outlines what transactions are considered distributions versus investments. There are questions around why the definition of the two is seemingly different from the definitions that apply to private foundations. A former Treasury official who helped draft the proposal indicated it could be different because DAFs aren’t subject to the same payout requirements as private foundations. However, a potential concern arises if DAFs are faced with a payout requirement in the future.
- Broadening “What is a DAF?”: The proposed rules would include giving arrangements, such as field of interest funds and giving circles, as DAFs depending on the donor-advisor relationship to the sponsoring organization. Though it doesn’t appear this would cause immediate issues for those using these giving arrangements, should future restrictions or requirements be put in place on DAFs, these arrangements would be subject to those requirements.
We understand these definitions need to be in place prior to addressing related regulations, and regulators are expected to focus on getting these definitions right before turning to other proposed rules impacting DAFs, like those from the 2017 notice on pledges, bifurcation, public support, and private foundation use of DAFs.
You can submit comments on this proposal now at the Federal Register’s website. Comments will be accepted through January 16, 2024.
Congressional Maps Throughout the Region Face Challenges
The impact of the U.S. Supreme Court’s June decision requiring Alabama to create a second congressional district with a substantial Black population continues to be felt throughout the region.
Last month, federal judges approved a new map for Alabama that establishes two districts where Black voters comprise a substantial share of the voting population. The new map, drawn by a court-appointed expert, includes a 2nd Congressional District that stretches across southern Alabama and where nearly 49 percent of the voting-age population is Black. The court-ordered map was put in place after the state legislature refused to pass a map of its own that created two districts with a large Black voting population.
Also last month, a federal judge ruled that Georgia’s congressional and state legislative maps discriminate against Black voters. The judge found that five congressional districts were in violation of the Voting Rights Act. The ruling gave the state until December 8 to draw new maps – if the state fails to meet that deadline, a court-appointed expert could step in. Gov. Brian Kemp, a Republican, has ordered a special session of the General Assembly to draw new maps that is set to begin on November 29.
In Louisiana, a federal court last week gave the state’s legislature until January 15 to draw a map with a second Black-majority district. Governor-elect Jeff Landry, a Republican, has said he would call a special session to create a new map after being sworn in on January 8, but the state constitution would make it impossible for the session to take place before the January 15 deadline. The state’s incoming Senate president has said he hopes the court will grant an extension.
Election Results Recap
Voters in several Southeastern states went to the polls in recent weeks for off-year elections – and in some cases, shifted the balance of power.
In October, Louisiana’s gubernatorial primary yielded a surprising result, as Republican Jeff Landry topped 50 percent of the vote in a contest that included candidates from multiple parties. As a result, Landry avoided a November run-off and is now governor-elect. He will replace outgoing Gov. John Bel Edwards, a Democrat, who was term-limited.
In elections held November 7, Virginia Democrats won control of both houses of the General Assembly, dealing a blow to Republican Gov. Glenn Youngkin’s agenda. The campaign for the legislature focused largely on abortion rights.
On the same day, Kentucky voters re-elected Democratic Gov. Andy Beshear, defeating Republican David Cameron in a state that leans heavily conservative. In Mississippi, Republican Gov. Tate Reeves avoided a runoff and won re-election in a tight matchup against Democrat Brandon Presley.
