January 2020 Public Policy Update

Each month, SECF provides members with monthly updates on the latest public policy developments in Washington and state capitols around the region, analyzing their possible impact on the charitable sector. If you would like to see an issue featured in a future Public Policy Update, contact Jaci Bertrand, SECF's vice president of member engagement, at jaci@secf.org.

SECF Public Policy Committee Welcomes New Leadership, Prepares for a Busy Year Ahead

SECF's work on public policy is heading into 2020 with plenty of momentum following crucial victories in Washington to cap off 2019, including the simplification of the private foundation excise tax and the repeal of harmful changes to the unrelated business income tax (UBIT).

The year ahead promises to be busy and unpredictable, particularly with elections on the horizon. In a few weeks, SECF's Public Policy Committee will meet to discuss our strategy for the year and the priorities we will present to lawmakers at Foundations on the Hill and beyond.

Leading the committee in 2020 will be two co-chairs: Jane Alexander, president and CEO of the Community Foundation for Mississippi, and Susan DeVenny, president and CEO of the J. Marion Sims Foundation.

Jane provides a vital perspective on the many policy issues that affect not just philanthropy, but community foundations in particular. She has served as the president and CEO of the Community Foundation for Mississippi, based in Jackson, since 2012. During that time, the foundation's assets have grown to $60 million, with more than 250 funds. Jane has led the foundation in working on a number of public-private partnerships, including an initiative between the Mississippi Governor's Office, the Mayor of the City of Jackson and the W.K. Kellogg Foundation to study and identify challenges facing the Jackson Public School system, and suggest community-based solutions to address those challenges. 

"Working and living in Jackson provides examples every day of not only the challenges facing communities and people in the South, but also of how philanthropy can succeed when it works in partnership with government and benefits from policies that enhance our impact," Jane said. "I'm excited to help lead a committee of SECF members dedicated to advocating for laws and regulations that help foundations and the communities we serve."

Susan, based in Lancaster, South Carolina, leads the J. Marion Sims Foundation's day-to-day vision and operations, working in partnership with the board, community advisors and staff. She has experience in the public, private and nonprofit sectors, including working as the state director of SC First Steps to School Readiness, South Carolina's early childhood agency.

"SECF has worked hard to establish itself as a leading voice on public policy affecting philanthropy," Susan said. "In the year ahead, I'm looking forward to working with the committee, fellow members and the SECF staff to keep us on this path and move us forward, demonstrating to lawmakers the need for a strong philanthropic sector -- particularly in the Southeast."

The Public Policy Committee will hold its first meeting in February -- you can view the members of the committee, as well as tools for engaging with policymakers, at SECF.org.

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2019 Concludes with Two Big Wins for Philanthropy

Philanthropy ended the year on a strong note, winning two crucial policy victories that will help both foundations and the organizations they support.

On December 20, the president signed a consolidated government spending bill that included two provisions sought by SECF and its allies in the philanthropic sector: a repeal of a burdensome tax on nonprofit organizations and the long-sought simplification of the private foundation excise tax.

The bill (HR 1865), repeals changes to the unrelated business income tax (UBIT) that were a consequence of the 2017 tax bill. The changes to UBIT required the taxation of transportation benefits, such as parking and transit, provided by nonprofit organizations to their employees. The repeal is retroactive, meaning organizations that have already paid this tax can request and obtain a refund.

The legislation also simplifies the private foundation excise tax at a rate of 1.39 percent. SECF has called for simplification of this tax since 2013. The previous system created two tiers that could effectively penalize giving to address urgent needs while also putting an administrative burden on foundations, particularly those with small staffs.

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Register Today for Foundations on the Hill 2020!

Foundations on the Hill (FOTH) is a two-day event that brings together hundreds of foundation leaders from across the country to meet with Congress to discuss issues of critical importance to philanthropy. Speaking with a strong, unified voice is essential in early 2020 -- with elections on the horizon, we have only a few months to move forward policies that promote effective charitable giving.

SECF has a long, proud history of bringing the country's largest delegation to Foundations on the Hill -- you can make sure this tradition continues by registering for #FOTH2020 today!

'Foundations on the Hill aims to inform and educate Congress about philanthropy, create visibility for philanthropy on Capitol Hill, advocate on issues affecting foundations and communities, and encourage Congress to view foundations as a resource and partner on key public policy issues. By joining your colleagues at FOTH, you will help elected officials understand the value of philanthropy to the social and economic fabric of our country, and to stress the importance of philanthropy and government working as equal partners to ensure the continued health of our sector.

Plus, as a member of the SECF delegation, you will bring to Washington a unique policy agenda that reflects the concerns of our members and the needs of our region.

Foundations on the Hill participants will work with the SECF staff to organize and schedule meetings with representatives and senators. No matter your level of public policy experience, you'll receive all the support you need -- both the SECF staff and State Captains will provide guidance before and during our time in Washington.

Be sure to join us on March 9-11 for the most important advocacy event for philanthropy on Capitol Hill this year: Foundations on the Hill 2020.

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On the Horizon: DAF Legislation in California, Rules on Executive Compensation

SECF is keeping a close eye on legislation now under consideration by the California State Legislature that could serve as a template for other states attempting to regulate donor-advised funds.

According to an analysis by Philanthropy California, the bill would allow the California attorney general to develop reporting regulations related to donor-advised funds (DAFs). This could open the door to some loss of privacy for donors that work with DAF sponsors.

Sector leaders in California fear this legislation, if passed into law, would decrease charitable giving and create undue administrative burdens on DAF sponsors, particularly smaller community foundations. It would also make possible the disclosure of donor identity and/or private donor information. The bill could also generate new administrative costs for DAF sponsors, taking valuable resources away from community-focused grantmaking to meet compliance with new rules.

The California legislation may inspire similar action in other states, including within the Southeast. California's size can also result in its legislation having an effect well beyond its borders -- organizations often tailor their policies and practices to suit California law rather than have two sets of rules.

A hearing on the bill is scheduled for later this month. Keep an eye on this newsletter and SECF.org for further updates.

We are also closely watching pending federal regulations that could affect some family foundations and corporate foundations. The Treasury Department is working on rules that could place a 21 percent excise tax on compensation over $1 million received by a foundation staff member or trustee. The rule would consider both compensation from the foundation as well as an associated business. 

Under the proposed rule, for example, if a family foundation trustee received $10,000 in compensation from the foundation but $1 million in income from the family business, the foundation would be responsible for paying a 21 percent excise tax on a portion of the $1,010,000 in combined compensation.

SECF and its allies in the sector are concerned about the proposed rule and the possibility it could deter the creation of family foundations by business executives.  

Similarly, certain corporate employees that volunteer or provide de minimis services to the corporate foundation are also swept up in this new tax.   

The Treasury Department is expected to release a draft of the proposed rule soon. At that time, a public comment period will begin. Please keep an eye out for updates on this proposal -- we may ask SECF members to submit comments on how it could affect their foundations.

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Southeastern Council of Foundations
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Mission: The Southeastern Council of Foundations serves, connects, strengthens and champions philanthropy and philanthropic infrastructure in the South.