Friday, March 25, 2022
HomeLife InsuranceNew Bill Creates 2 New Types of Donor-Advised Funds; Philanthropy Group Balks

New Bill Creates 2 New Types of Donor-Advised Funds; Philanthropy Group Balks

What You Need to Know

  • The bill would create DAFs from which donations would need to be distributed within 15 years and within 50 years.
  • DAFs allow donors to get tax breaks without ever actually giving the money to charity, lawmakers say.
  • A philanthropy group said the bill would reduce charitable giving.

Legislation introduced Thursday by Reps. Chellie Pingree, D-Maine, and Tom Reed, R-N.Y., the Accelerating Charitable Efforts (ACE) Act, would “reform federal law to ensure funds donated to donor-advised funds (DAFs) are made available to working charities within a reasonable period of time and provide incentives to speed up donation timelines” by creating two new types of DAFs.

The Philanthropy Roundtable is coming out against the bill, arguing that it would restrict charitable giving, ultimately reducing the funds available to U.S. charities.

“The House version of the highly controversial ACE Act imposes arbitrary payout deadlines on DAF gifts, enforced with a 50% tax on the funds’ charitable assets, ignoring the importance of individual freedom and the choice to give how, when and where a donor sees fit,” Elizabeth McGuigan, director of policy at the Philanthropy Roundtable, told ThinkAdvisor on Thursday in an email. “This is not the time to be restricting charitable giving vehicles.”

“Restricting charitable giving, as this bill does, will diminish charitable giving overall,” McGuigan said.

Pingree argued that “the coronavirus pandemic highlighted just how important working charities are to our communities. …. Yet, $1 out of every $8 donated to U.S. charities goes to donor-advised funds, giving the wealthy generous tax breaks for their charitable contributions but not ensuring those funds help anyone in need. Our half-century old philanthropy laws must be reformed to correct this fundamental flaw in our current system.”

DAFs, the lawmakers explained, “currently have more than $140 billion set aside for future charitable gifts — but under current tax laws, the funds have no requirement to ever distribute these resources to working charities. Accordingly, DAFs can accept and hold charitable donations that have generated a federal income tax deduction, but never devote the resources to charitable work.”



Please enter your comment!
Please enter your name here

Most Popular

Recent Comments