Justin Zaremby, Counsel

Proposals to significantly change the rules surrounding donor advised funds (“DAFs”) and private foundations have been introduced in the House of Representatives.  The Accelerating Charitable Efforts Act (the “Act”), which was previously introduced in the Senate on June 9, 2021, was introduced in the House on February 3, 2022 by Representatives Chellie Pingree (D-ME), Tom Reed (R-NY), Ro Khanna (D-CA), and Katie Porter (D-CA).  The House Bill proposes the same legislative changes as the Senate bill introduced last year.  Like its Senate counterpart, the House bill would impose certain excise taxes and offer tax benefits to accelerate the flow of funds from DAF sponsoring organizations, donors, and private foundations to public charities. 

On June 9, 2021, United States Senators Angus King (Ind.-ME) and Charles Grassley (R-IA) introduced the “Accelerating Charitable Efforts Act” or the “ACE Act” (the “Act”) which, if adopted, would implement significant changes with respect to the rules surrounding donor advised funds (“DAFs”) and private foundations.  The proposed changes, already being hotly debated in the philanthropic community, would mandate, among other things, operational changes for DAF sponsoring organizations and offer financial incentives (in the form of both excise taxes and tax benefits) to motivate donors, sponsoring organizations, and private foundations to distribute funds to public charities at a rapid pace.

In an effort to provide additional relief in response to the COVID-19 emergency, the Internal Revenue Service and the New York Attorney General’s Charities Bureau have announced filing extensions for exempt organizations. 

As we have previously reported, charitable organizations and employers are able to play an important role in providing disaster relief in response to the COVID-19 crisis.  During this crisis, individuals may be seeking new ways to help, including by starting new charitable organizations.  We describe below some alternatives to consider before forming a new charity, as well as a high-level summary of the necessary steps to form a new charitable organization. 

The spread of the novel coronavirus (COVID-19) has caused dramatic upheaval to public health, social relations, and the economy.  The full impact of the virus remains uncertain, and the coming weeks and months will present tremendous challenges domestically and abroad.  Charitable organizations are well positioned and have a unique opportunity to help those affected by the virus.  Over the years, the Internal Revenue Service has provided useful guidance on how 501(c)(3) organizations can provide aid during times of disaster.  That guidance tends to evolve as society faces different types of disasters, and the needs of individuals differ depending on whether a disaster takes the form of a terrorist attack or a hurricane or—as we are quickly learning—a pandemic.  The summary below is based on guidance developed to date, but may evolve as charitable organizations and the federal government develop innovative and vital approaches responding to the current crisis and its unique impacts.

As we previously reported, the Tax Cuts and Jobs Act, which was signed into law at the end of 2017, imposes an excise tax on certain tax-exempt organizations equivalent to 21% of “excess compensation” (including certain severance payments) paid to certain current and former employees.  Under the new Section 4960 of the Internal Revenue Code, the tax is payable by the tax-exempt organization and, if applicable, a “related organization” (on a proportional basis).  Section 4960 defines excess compensation for such employees as (i) the amount of remuneration, other than “excess parachute payments,” in excess of $1 million and (b) any “excess parachute payment” (including severance or other payments made upon separation).

In recent months, news of Blockchain technology has filled headlines.  The ability of Blockchain—which provides a decentralized means of recording and verifying transactions—to shape the financial sector has been widely reported, as have transactions involving Bitcoin and other cryptocurrencies using Blockchain technology.  Programmers and businesses are quickly turning to various Blockchain platforms to develop new applications of this technology, even as regulatory bodies are beginning to pay increased attention to high-stakes cryptocurrency transactions.

The Internal Revenue Service (the “IRS”) has issued Notice 2017-73 (the “Notice”) which outlines approaches the Department of the Treasury (“Treasury”) and the IRS are considering with respect to the regulation of certain issues relating to Donor Advised Funds (“DAFs”).  Written comments on the issues raised in the Notice may be submitted by March 5, 2018.

Among the many elements of corporate housekeeping and compliance that demand the time and attention of directors and officers (and staff), minutes often seem like a burden.  No one doubts that minutes matter.  A well-documented board meeting creates an important historical record that can guide future deliberations and may prove useful during Board disagreements, litigation, Attorney General investigations, other governmental enforcement actions, or an audit by the IRS.  However, clients often nervously ask whether there is a legal standard regarding how much detail minutes should contain. 

During his presidential campaign, President Trump promised to repeal the “Johnson Amendment” which established the absolute prohibition on political campaign activity by 501(c)(3) charitable organizations.  After his inauguration, President Trump promised to “destroy” the amendment (specifically with respect to churches), and three bills have been introduced in the 115^th Congress to modify the prohibition or eliminate it completely for all 501(c)(3) charitable organizations.

Recently, we wrote about the absolute prohibition on political campaign activity by 501(c)(3) charitable organizations, and the importance of managing the use of social media to avoid violating these rules.  This prohibition has gained national attention during the 2016 election cycle, with Donald Trump vowing to repeal the “Johnson Amendment,” so named because then-senator Lyndon B....

As we previously reported, in April 2015 the Financial Accounting Standards Board (“FASB”) circulated a series of proposed changes to generally accepted accounting principles applicable to certain not-for-profit entities in order to provide clearer information to donors, creditors, and other users of financial statements.  On August 18, FASB issued the related accounting standards update.

On April 27, National Philanthropic Trust, a public charity dedicated to providing philanthropic expertise to donors, foundations and financial institutions, launched a website on the History of Modern Philanthropy.

The end of the year brings a flood of gifts and grants to public charities, as well as perennial questions about how the donor will benefit in return.  

In April of this year, the Financial Accounting Standards Board (“FASB”) circulated a series of proposed changes to generally accepted accounting principles (“GAAP”) applicable to certain not-for-profits.  These changes, which are intended to provide clearer information to donors, creditors, and other users of financial statements, may have a significant impact on not-for-profit financial reporting (which has remained largely unchanged for nearly twenty years) and will, among other things, (i) impact the reporting of operating performance in an entity’s statement of activities and related metrics in the statement of cash flows, (ii) require the use of the direct method for preparing the statement of cash flows, and (iii) modify the reporting disclosure of net assets and “underwater” endowments.

On September 15th, the Internal Revenue Service (the “IRS”) issued much anticipated guidance (the “IRS Notice”) that should help facilitate mission-related investing by private foundations organized as corporations.

A federal district court in New York has upheld the New York Attorney General’s policy requiring registered charities to disclose the names, addresses and total contributions of their major donors.  This is the second federal court to rule on this issue, after the United States Court of Appeals for the Ninth Circuit upheld a similar requirement by California’s Attorney General in May in a suit brought by the Center for Competitive Politics, a 501(c)(3) public charity.

On June 16, 2015, the White House issued a press release highlighting private sector commitments and a series of executive actions related to investment in clean energy innovation.  The release coincided with yesterday’s clean energy investment summit, at which Vice President Joe Biden described more than $4 billion of independent commitments by major foundations, institutional investors, and other long-term investors to fund climate change solutions, including innovative technologies with the potential to reduce carbon pollution.