Planned Giving: A Change is Coming

While there’s been a great conversation, overall, about major changes to the tax code after the passing of the Infrastructure Bill in Congress, recent movement regarding charitable giving, at least in one sense, seems to be taking hold in our national legislative branch. I think there’s a chance it’ll pass.

Donor-Advised Funds (DAF), as well as foundations with endowments, are in the sightlines of many political leaders. Basically, without all the detail, legislators and leaders want more dollars coming out of those funds to be used in the community. What is being floated in Congress is to create a “sunset” time schedule for people to have to use funds in DAF’s and/or Foundations….about 15 years max.  And if they don’t, there are severe tax penalties. 

Their argument is that someone’s getting a tax deduction for it and the organization isn’t paying taxes because they're a nonprofit. That means foundations, both private and community foundations, should pay out more to help people in their community.

Of course, there’s another side to the argument. There are those who say doing so will cause major changes in the thought processes of donors in penalizing people for being more generous. In the end, although I am more of a libertarian by nature, I think there’s something to this. Currently, a DAF can sit with money in it without regulation as to when that money has to be allocated. And, most people know foundations must give away at least 5% of their money on an annual basis. The problem, or challenge, is if they’ve made 10 or 15% on their investments, the endowment may grow but the output of payments may be less than the investment growth.

I think we all need to pay attention to this, those of us in the nonprofit world. Now is the time to get CLOSER in relationships with those who have their own foundations or DAF’s. There may be a real push to force more resources out of those types of entities. If so, the relationships that you have with people who have their charitable intent through one of those forms will be critically important as they may be forced to make decisions quickly. The better your relationship, the better your opportunity.