Public Policy Update - May 2024
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.
Georgia, Kentucky Pass Laws Addressing Donor Intent
Note: This item has been updated to correct the name of Kentucky's governor, Andy Beshear.
In legislative sessions this year, Georgia and Kentucky both passed similar bills that supporters say will protect donors by giving them a course of action when they feel a gift recipient does not honor their intent.
Both bills – SB 433 in Georgia, SB 70 in Kentucky – would apply in cases where a charitable organization or trust with an endowment fund, such as a university, accepts a gift that includes an endowment agreement with the donor.
If the donor learns the terms of the agreement have been violated, they would have four years to bring a civil action in state court. If a court agrees that an agreement has been violated, they would be able to order the gift recipient to comply with its terms. Neither bill would allow a gift to be returned, however.
While the bills are nearly identical, there are subtle differences. The Georgia bill, signed by Gov. Brian Kemp (R) on April 22, applies to both individuals and entities. It would give the donor, their legal representative, or their lineal descendants – up through great-grandchildren – the right to file suit. The Kentucky legislation, signed by Gov. Andy Beshear (D) on April 9, applies only to individual donors or their legal representative.
Similar legislation may be introduced in other states in the region – we are closely monitoring developments and may provide programming on this topic in the future. If you have questions about legislative developments in your state, please contact Jaci Bertrand at jaci@philanthropysoutheast.org.
Philanthropy Southeast Members Testify at IRS Hearing on DAF Regulations
Last week, the IRS convened a public hearing on proposed regulations that would provide definitions for DAFs, donors, distributions, and other key terms.
The hearing featured testimony from dozens of philanthropic leaders, including Frank Fernandez of the Community Foundation for Greater Atlanta and Roxie Jerde of the Community Foundation of Sarasota County. They joined others in expressing concern about the regulations and asked that the proposal be changed or withdrawn entirely.
The main concerns raised were around the definition of investment advisors as donor advisors, the broad definition of DAFs that would subject other funds to their regulations, and the lack of a transition period and retroactive nature of the proposed rules.
Stakeholders warned that finalizing the rules as is would result in less money going to charity and could push donors to create private foundations instead of using DAFs, leading to more charitable dollars going to overhead and fewer reaching communities in need.
“We create a platform that not only helps inspire donors to give more to their passions and their priorities, but also gives them a platform for flexibility, for leverage, for innovation, and for aligned and strategic giving,” Fernandez said at the hearing. “Our concern is that the overly broad definition of donor-advised funds would really hamper our ability to leverage the platform we have.”
In her testimony, Jerde said the proposed regulations would limit her foundation’s ability to support the community.
“These proposed changes would ultimately dramatically inhibit the opportunity to impact lives of our residents through localized charitable giving,” she said. “Our community would be very negatively impacted because we would no longer be able to steward charitable assets managed by financial advisers to strengthen and improve the lives of our citizens. We are the local experts to guide charitable dollars, and this would be thwarted.”
The proposed regulations have also drawn criticism from a bipartisan group of lawmakers on the House Ways and Means Committee, who wrote in an April 19 letter that the regulations “could have the unintended consequence of impeding charitable giving in our communities, particularly at our local community foundations.”
While it is not clear when the regulations will move forward, or whether they will be revised, the broad pushback from sector leaders and lawmakers may lead to significant changes.
