The following letter in support of the IRA Charitable Rollover was sent by Philanthropy Northwest Vice-President Ann Saxton to the following recipients:
- Mr. Joshua Sheinkman, Staff Director, Senate Committee on Finance 219 Dirksen Senate Office Building Washington, DC 20510-6200
- Ms. Kara Getz, Tax Counsel, Senate Committee on Finance 219 Dirksen Senate Office Building Washington, DC 20510-6200
- Senator Ron Wyden, Ranking Member, Senate Committee on Finance 221 Dirksen Senate Office Building, Washington, DC 20510
- Senator Michael Crapo Senate Committee on Finance, 239 Dirksen Senate Office Building Washington, DC 20510
- Senator Mike Enzi, Senate Committee on Finance, 379A Senate Russell Office Building Washington, DC 20510
- Senator Maria Cantwell Senate Committee on Finance, 511 Hart Senate Office Building Washington, DC 20515
July 9, 2015
It is my understanding that the Senate Finance Committee may soon consider tax extenders, including the extension of the IRA charitable rollover. As the Vice President and head of public policy for Philanthropy Northwest, the regional network of foundations, corporations, collectives and individuals dedicated to cross-sector collaboration to build resilient, equitable and inclusive communities in Alaska, Idaho, Montana, Oregon, Washington and Wyoming, I am writing to Jet you know that we wholeheartedly support the issue with the IRA Charitable Rollover that several community foundations have discussed with your staff, and we hope that you will be helpful in fixing it.
As you may know, community foundations and their donors frequently use a tool called a donor-advised fund (DAF) as an efficient charitable tool to achieve their philanthropic goals. During consideration of the Pension Protection Act (PPA) of 2006, Senator Grassley had concerns about isolated abuses in the DAF space (not with community foundations), and he authored a number of reforms that were approved as part of the PPA with bipartisan support. For example, DAFs are prohibited from making distributions to individuals or for any non-charitable purpose, or distributions that result in more than an incidental benefit to the donor, advisor or any related person.
Now, eight years later, these reforms have been a success, and DAFs continue to serve as a vital giving vehicle to support many charitable causes and organizations in Washington and elsewhere. Yet DAFs are still excluded from the IRA Rollover despite the fact that other types of endowments with much lower payout rates are included. For example, as currently drafted, donors can use the IRA Charitable Rollover to give to a university, hospital, or art museum endowment but they can't build community endowment by contributing to a DAF at their local community foundation. This exclusion also means that smaller donations are not getting to local charities, because in practice taxpayers use the rollover to make a single large gift. Allowing DAFs would mean that a Washington resident could in effect pick several smaller charities for a rollover gift.
The DAF fix should be fairly easy in the context of any extension of the rollover (temporary or permanent) because it would simply mean removing a few words from the statute; it would not require a wholesale redrafting of the provision. Moreover, we don't expect that the expansion would have a revenue cost. Rarely does an opportunity come along to do so much good for communities across Washington by enacting such a simple, straightforward policy change.
In short, there is no longer any clear policy rationale for excluding OAFs from the types of entities that can receive an IRA Charitable Rollover. This prohibition places the community foundations in Washington at a disadvantage compared to other public charities, and cuts off a potentially powerful source offunding for the charities that would ultimately benefit from the OAF grant distributions. The current prohibition doesn't promote greater giving - it actually restricts donor flexibility by codifying a preference of one type of charity over another.
Fixing this provision when the IRA Charitable Rollover is extended in the Finance Committee would have a positive impact in communities all across your state. It is one of the top policy priorities for the roughly 760 community foundations in the country. Removing the prohibition will help promote community philanthropy at a time when the charitable sector is being asked to do more to help those in need.
Thank you very much for your attention to this matter, and we all stand ready to answer any questions that you or your staff may have. Thank you for your leadership, and we hope you will do what you can to end the prohibition for donor-advised funds.