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Vol. 3, No. 2 March 2007

Report on Foundations on the Hill

On February 28th, approximately 390 foundation representatives from 40 states ascended Capital Hill for the 10th annual Foundations on the Hill event.

This was by far the largest turnout in the event’s history. Arizona foundations participated for the first time and were represented well by Bob King and Joan Lowell from the Arizona Community Foundation, Don Snider and Jay Ruffner from the Flinn Foundation and Marissa Theisen of AGF. The delegation made visits to the offices of all 10 of Arizona’s congressional members, informing staff and, in some cases, representatives, about critical issues impacting the philanthropic sector.

The major focus of discussions was technical improvements to the Pension Protection Act of 2006 (PPA) – legislation that resulted in the most significant charitable reforms since 1969. The technical improvements are designed to address some of the unintended adverse consequences of that bill impacting. Three key improvements include:

1) Extending the IRA charitable distribution provision, removing the $100,000 cap, permitting distributions to donor-advised funds, supporting organizations and private foundations, and allow planned gifts.

2) Clarify and improve the regulation of donor advised funds by

• Repealing the application of the excess business holdings rule
• Excluding, with appropriate safeguards, funds that make distributions to individuals to alleviate poverty and distress
• Clarifying that sponsoring organizations may use assets held in donor-advised funds to purchase goods and services needed to carry on legitimate charitable activities
• Excluding funds created by public charities and governmental entities

3) Clarify and improve the regulation of supporting organizations by

• Permitting Type I and Type II supporting organizations to enter into transactions with supporting organization’s substantial contributor and related parties under the rules that now apply to private foundations.
• Suspend penalties for donor-advised fund and private foundation grants to certain supporting organizations until such time as the IRS can integrate classification information into IRS Publication 78.

The Arizona delegation also mentioned legislation likely to be submitted in 2007 to establish a flat one percent excise tax on private foundation investments, eliminating the current complicated formula. The Council on Foundations intends to submit proposed legislation to address these issues later this year.

Our meetings revealed that, with the exception of Senator Kyl’s staff (Kyl serves on the Senate Finance Committee), most staffers had little understanding of philanthropy or the adverse impacts of the Pension Protection Act of 2006. However most did seem interested in learning more and welcomed future contact with members of the Arizona foundation community as legislation makes it way through Congress.

Most experts feel that Congress will attempt more charitable reform measures in 2007. While it remains unclear how much impact our initial meetings may have had, we are certain that if we don’t continue to let our voices be heard, we increase the risk of more onerous legislation.

Feel free to contact AGF to get the names of congressional staffers who are most familiar with issues impacting the philanthropic sector.