Legislation has been introduced in the US Senate (Accelerated Charitable Efforts Act) which could be the most significant change to donor-advised funds since they were created 80 years ago. The proposed legislation is designed to accelerate payouts from donor-advised funds and foundations to get more money into the hands of organizations that need it more quickly, but, some have said, it is “a solution in need of a problem.”
Under the proposed ACE Act, donors making a large donation into a donor-advised fund would be required to distribute the money within 15 years to receive upfront tax benefits under current law. Alternatively, if a donor decides to delay the income tax deduction it would allow them 50 years to distribute their funds. Under this rule, the donor would still receive direct capital gains and estate and gift tax savings.
Furthermore, the ACE Act proposes new requirements on annual 5 percent payout obligations for private foundations, and certain exemptions for community foundations that hold donor-advised funds.
While most partners and fellow foundations are not taking official positions on the legislation yet, there are a few components of the proposal that the CICF sees as a barrier to successfully furthering the charitable interests of our donors. Partners, such as IPA, are watching these developments closely.
CICF’s President & CEO, Brian Payne released the following statement with regard to the ACE Act:
“For over 105 years, we have stewarded the generosity of Hoosiers’ philanthropy through a variety of charitable giving tools. Through our donor-advised funds (DAFs), we offer our community the most convenient, flexible and impactful giving accounts available in the market today— backed by unrivaled community knowledge and experience in the charitable needs and opportunities in our region. We have over 450 DAF account holders at Central Indiana Community Foundation (CICF), including our affiliates, The Indianapolis Foundation and Hamilton County Community Foundation. The collective assets of those funds totaled approximately $420 million as of December 31st of last year. In addition, our fundholders directed over $44 million in grants in 2020—10.5% of the total assets held in DAF accounts. At the same time, we understand the intent of Congress wanting Americans to activate their charitable assets into the community instead of letting them sit unused, especially since they’ve received tax benefits for doing so. CICF sees firsthand every day that DAF account holders are generously and actively putting money into the causes in the community that are important to them in a timely and impactful way.”
At this time, the CICF is advising fundholders that there are no proactive steps they need to take now, but we are committed to providing counsel on any new laws around charitable giving.