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 Donor-Advised Fund
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You cannot give grants to individuals.
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You cannot give grants to any entity for non-charitable purposes.
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You cannot make any grants, loans, compensation or other payments (including expense reimbursements) to donors, donor advisors, their family members and/or any entities in which they have more than 35 percent control. If a donor or donor advisor is also a service provider to your sponsoring organization, they can only receive payments from the sponsoring organization and not the donor-advised fund.
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You must exercise expenditure responsibility for grants to private non-operating foundations, Type III supporting organizations (except those that are "functionally integrated"), and Type I or II supporting organizations where the donor or advisor controls the supported organization.
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You are now subject to the same excess business holding rules that currently apply to private foundations.
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.
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New Definition of
Donor-Advised Funds
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The new charity law defines a donor-advised fund as a fund that possesses all three of the
following characteristics:
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It is separately identified with reference to the contribution of a donor or donors (for example, the fund is named after a donor or persons related to the donor, or the organization's books track contributions to the fund with respect to the specific donor(s)).
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It is owned and controlled by a sponsoring organization.
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The donor or a person appointed by the donor has, or must reasonably expect to have, the privilege of providing advice with respect to the fund’s investments or distributions.
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What The New Charities Law
Means For You
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Resources
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Pension Protection Act of 2006
COF's PPA resource page
More resources
Independent Sector
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