What the New Charities Law Means For You
On Aug. 17, 2006, President Bush signed into law a bill that will impact grantmakers and donors.
The new charitable provisions, part of the Pension Protection Act of 2006 (H.R. 4), include the
first comprehensive regulation of donor-advised funds, as well as reforms or incentives that will
affect private foundations, supporting organizations and individual donors.
If You're A Community Foundation
If you have one or more supporting organizations
Disqualified persons of your supporting organization(s) are now also considered disqualified persons of your foundation, even if they have no other relationship with your foundation, and you cannot enter into any transaction with these persons that will provide them with an excess benefit.
If you have any donor-advised funds
-
Your investment advisors (excluding your employees) for your donor-advised funds are now considered disqualified persons of your foundation and cannot receive more than fair market value for their services. This includes investment managers that manage or provide investment advice on assets maintained in your donor-advised funds, even if the investment pool is only partially funded by donor-advised funds. Penalty taxes are imposed on a disqualified person who receives an excess benefit and on organization managers who approve a transaction knowing that it is an excess benefit transaction.
-
You and your organization managers will be subject to penalty taxes if a prohibited distribution ("taxable expenditure") is made out of a donor-advised fund (see "If You're a Donor-Advised Fund" below).
-
You must provide donors of new gifts to your donor-advised funds with a written acknowledgement that your foundation has exclusive legal control over the assets contributed, or else the donor cannot receive a tax deduction for the gift (effective for gifts made after February 13, 2007).
-
You must report annually on your Form 900 the total number of donor-advised funds you own, the aggregate value of assets held in those funds, and the aggregate contributions to and grants from those funds during the year.
This information was made possible by the Forum of Regional Associations of
Grantmakers and its members, with valuable technical assistance provided by
Andras Kosaras, Council on Foundations.
|
|
|
