Wednesday, July 18, 2012

Donor Advised Funds ... Let's get ready to rumble!

In the red corner - The US Treasury

In the blue corner -  The Congressional Research Service

The bout - mandatory payouts from donor advised funds

In December, 2011, Treasury issued the long awaited "Report to Congress on Supporting Organizations and Donor Advised Funds," which was mandated by the Pension Protection Act (PPA).  In general, the Treasury report took the position that many of the reforms implemented as part of the PPA were sufficient to address the abuses seen in the area.  With specific regard to DAF distributions, Treasury noted favorably that the average payout rates for donor advised funds exceeded the private foundation 5% requirement, although Treasury did indicate that it was premature to make any recommendation based on the paucity of available data (DAF information was added to the Form 990 in 2008)(Treasury Report pp. 81-82).

Fast forward six months.  On July 11, the Congressional Research Service issued, "An Analysis of Chariable Giving and Donor Advised Funds," using many of the statistics regarding donor advised funds cited in the Treasury report.  Unlike the more cautious but generally favorable Treasury report, the CRS report concluded that donor advised funds should have a mandatory distribution requirement - and further, that it should be applied on a per fund basis.  The CRS report focuses on the fact that although average distribution rates among donor advised funds are quite high, there are many DAFs that make little or no distributions at all.  Janne Gallagher at the Council on Foundations (CoF posted the CRS report linked above, which is not generally available online) wrote a critique of the CRS report, posted at the CoF site here.  

Interestingly, the Summary section of the CRS report notes that "The Treasury study was released in 2011.  Senator Chuck Grassley, Senate Finance commitee chairman at the time of the 2006 legislation, has criticized the study as being 'disappointing and nonresponsive.'"

Despite all the statistics and analysis, however, it seems to me that the case has not been made from a policy perspective as to why we should (or should not) require a payout from DAFs.  I find myself saying, "well, so there are a few DAFs not making annual distributions - so what?"  To some degree, the CRS report comes the closest to reciting a reason - that DAFs are in fact under the functional control of their donors and therefore, they should be regulated similarly to private foundations.  Treasury appears not to assume donor control; CRS assumes donor control because the DAF sponsoring organizations generally follow donor suggestions.  Clearly, the parties disagree on factual nature this issue - I guess we will see more in Round 2.

Hat tip to my friend Chris Hoyt at the University of Missouri (KC) Law School (you know him... really, really terrible jokes!) for pointing me to the CoF materials.



July 18, 2012 in Federal – Executive, Federal – Legislative | Permalink | Comments (1) | TrackBack (0)

Tuesday, July 17, 2012

DISCLOSE Act of 2012 stopped in Senate

According to the Washington Post, Senate Republicans blocked to the DISCLOSE Act of 2012 on a party line procedural vote, which prevented the legislation from moving to the floor for full consideration.

The DISCLOSE Act of 2012 (which stands for the "Democracy Is Strengthened by Casting Light On Spending in Elections Act of 2012’’)* would have required covered organizations to make additional disclosures regarding their political expenditures and their donors.  While the legislation would amend the Federal Election Campaign Act, the definition of a covered organization was mostly drafted in connection to the organization's tax status.  Generally, the expanded disclosures would have covered (1) all corporations (other than 501c3 organizations), (2) all organizations exempt under 501(a)(other than 501c3 organizations), (3) certain labor organizations, and (4) 527 organizations.  (See page 12 of the linked Act) In addition, there were specific provisions addressing affiliated organizations.


 *(Author's Opinion: really, how much legislative staff time is spent coming up with these not-really-so-witty-anymore acronyms for bills?  Seriously, enough already.)

July 17, 2012 in Federal – Legislative | Permalink | Comments (0) | TrackBack (0)

Monday, July 16, 2012

Yet another restricted gift case....

The NonProfit Times reports that another restricted gift case is winding its way through the courts - now, a trial date has been set in a dispute over land transferred to Johns Hopkins University in a part sale/part gift transaction by Elizabeth Beall Banks (John Timothy Newell, et. al v. Johns Hopkins University).   Miss Banks, who died in 2005, was a land advocate who was concerned about the potential development of her property, known as the Belwar Farm, a 108 acre tract along Interstate 270.   In 1989, she sold the property at a deeply discounted price to Johns Hopkins, subject to the condition that only 30 acres of the land could be developed for  “. . .  agricultural, academic, research and development, delivery of health and medical care and services or related purposes only.”  According to The Washington Post, this language was contained in the two page deed that conveyed the property - it does not appear that there was another gift instrument.   The family contends that the planned science center development is much denser and more commercial than what Miss Banks intended, and is suing have these wishes enforced. 

Is it just me, or are there more of these cases around these days, where a donor's full wishes are not incorporated into the gift instrument but are later asserted as conditions to be respected?  (Garth Brooks, I'm looking at you!)  It would certainly have been possible to draft something that incorporated a current development plan for Belwar Farm or something similar into the terms of the gift instrument - it would seem to me that donors would want the certainty, and that charities would like to stay out of court.  Is it just that UPMIFA's definition of a record - which doesn't include oral representations but does include ancillary marketing material and correspondence - hasn't caught up with these cases or otherwise doesn't apply?  Do we think UPMIFA will help or is this trend (if indeed it is a trend) a side effect of institutions and people scrambling for dollars wherever then can find them in a down economy?  Or is it just bad drafting coupled with charities wanting to maintain as much vagueness as possible?



July 16, 2012 in Current Affairs, In the News, State – Judicial | Permalink | Comments (0) | TrackBack (0)

Russia - New Law Passes Parliament, Goes to Putin for Signature

President Vladimir Putin is expected to sign into law a bill adopted by Russia’s parliament, which labels many foreign-funded, non-governmental organizations operating within the country as “foreign agents.”  The Kremlin has stated that it believes such a bill is appropriate for protecting Russia from external attempts to influence internal politics. The new law has also been given some financial teeth. Human rights activists are already enraged by the legislation, as the Duma also voted to impose fines of up to 5m rubles ($153,000) and a potential two year prison sentence for any organizations or individuals found to be in violation of the new law. Lyudmila Alekseeva, head of the Moscow Helsinki Group, believes that their new ‘foreign agent’ status will force the organization to fold as a result of having to refuse foreign grant money. Alekseeva explains, “The non-wealthy are not used to donating money to non-profit organizations, while the rich fear they may lose their business [by doing so].” In response to his government’s critics, Prime Minister Dmitry Medvedev has assured those affected that state funding will be increased for any NGOs whose activity “as a whole is deemed useful and positive for our country.”  For more see



July 16, 2012 in International | Permalink | Comments (0) | TrackBack (0)

China - First National Charity Fair Held in Shenzhen

China’s first ever charity fair was held in Shenzhen on July 13 and 14.  It was hosted by the Ministry of Civil Affairs and the local Shenzhen government.  Attended by over 400 people, the opening ceremony featured a major speech by Minister Li Liguo, which stresses the importance of charity for China’s development. See  Another story about the event can be found at


July 16, 2012 in International | Permalink | Comments (0) | TrackBack (0)