Nonprofit organizations play a crucial role in our society, addressing various social, environmental and humanitarian needs. More fundamentally, nonprofits represent the long-standing tradition of Americans joining together voluntarily in associations outside of government to meet the needs of our communities.  

A constitutionally protected right to associate is part of the fabric of our society. However, recent proposals, such as those outlined in a Tax Foundation report, have suggested taxing nonprofits’ net income and investment earnings.  

Recommendations like these overlook the distinct mission-driven focus and reinvestment practices of nonprofits. Imposing broad tax burdens on the nonprofit sector could disproportionately harm smaller organizations and diminish their capacity to serve communities effectively. Punishing American citizens by taxing their constitutionally protected right to freely associate is the wrong way to address government’s rampant overspending.  

Unlike for-profit businesses, nonprofits are mission-driven entities focused on benefiting the public interest or specific causes. Their primary goal is not to generate profits for shareholders but to reinvest any surplus funds into supporting the mission. This fundamental difference sets nonprofits apart from commercial enterprises and shapes their financial practices.  

As the report states, there are large, successful nonprofits that operate similar to for-profit entities. That’s how nonprofits can compete in a landscape where individual donations to charities are down. But the revenue does not flow back to shareholders’ bank accounts, as it does with for-profits.   

Nonprofits are legally obligated to serve the public good and operate exclusively for exempt purposes under Section 501(c)(3) of the Internal Revenue Code. This designation ensures revenue generated is used to sustain and expand programs that benefit society at large rather than enriching private individuals. 

How Nonprofits Can and Cannot Use Net Income 

It’s important to note nonprofits face strict regulations on how they can use their net income. For example, they are prohibited from distributing income to individuals. Nonprofits cannot distribute any of their income to officers, directors or other individuals connected with the organization. 

Nonprofit organizations typically use their net income, or surplus, in several ways: 

1. Building reserves: Many nonprofits allocate surplus funds to build operating reserves, providing financial stability and helping them weather unexpected expenses or revenue shortfalls. Experts recommend having sufficient reserves to cover six months of operating expenses. 

2. Reinvesting in programs: A significant portion of net income is often reinvested into expanding or improving existing programs that further the organization’s mission. This could involve upgrading equipment, launching pilot projects or investing in research and development. 

3. Upgrading infrastructure: Net income can be allocated to improve facilities, technology or other infrastructure that supports the organization’s operations. 

4. Staff development and retention: Some surplus may be used for staff training, professional development or improving compensation to retain talented employees. 

5. Debt repayment: Nonprofits may use net income to pay down debts and reduce interest expenses, freeing up cash flow for charitable expenditures. 

6. Future growth: Organizations may set aside surplus funds for planned future expansion or long-term strategic initiatives. 

7. Compliance with donor restrictions: Some net income may be restricted by donors for specific purposes and must be used accordingly 

A More Balanced Approach 

It’s clear there are some questionable nonprofits that compete with for-profit entities and may not be following the laws and regulations designed to ensure they are operating to further their missions. Perhaps there is reason to look deeper into the small minority of entities that generate over $1 billion in revenue each year, for example.  

But it’s crucial to keep in mind the Tax Foundation found 325 groups of this size – out of nearly two million groups. Those of us concerned with the overreach of a muscular central government surely cannot support a new tax on nonprofits to target 0.02% of the groups that may raise eyebrows. Rather than implementing sweeping tax changes, a more nuanced approach is needed to address specific concerns without jeopardizing the invaluable contributions of the charitable sector.  

Why, for example, would the government continue to fund these large nonprofits at staggering levels, only to turn around and take some of their funding back through a tax on all nonprofits? Such a scheme would make our current system even less efficient, and only serve to further grow the bureaucracy needed to administer a tax.  

Instead of punishing Americans by making association more expensive, some potential areas for review include: 

1. Examining federal funding practices for large nonprofits, particularly those with substantial endowments. 

2. Strengthening enforcement of community benefit standards, especially for large nonprofit hospitals. 

3. Reviewing overhead funding caps for federal grants to nonprofit organizations. 

4. Ensuring large nonprofit hospitals are meeting charity care standards commensurate with the value of their tax exemption. 

Nonprofit organizations play a vital role addressing societal needs and fostering innovation in service delivery. While it’s important to ensure accountability and proper use of resources in the nonprofit sector, broad tax reforms risk undermining the essential work of countless organizations. There are legitimate questions about organizations receiving substantial government funds.  

This raises fundamental questions about whether such groups are in fact outside the realm of government. But taxing a dog shelter because it sells flying discs at a farmers’ market is not going to get to the root of the problem: government is spending too much money.  

By preserving the autonomy and financial health of nonprofits, we can ensure continued innovation and impactful service delivery in addressing societal needs. A balanced approach that focuses on specific areas of concern while recognizing the unique nature and contributions of nonprofits will better serve both the sector and society as a whole. 

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The U.S. Supreme Court’s recent decision to overturn a legal doctrine called Chevron deference marks a significant shift in how federal regulations will be interpreted and applied, with potentially far-reaching implications for donors and the nonprofit organizations they support.  

This doctrine, established in a 1984 decision, compels courts to defer to federal agencies’ interpretations of ambiguous laws, essentially giving federal agencies leeway to fill in the gaps in U.S. law. The Court’s decision to overturn this doctrine will help curb the unchecked power of the administrative state and is likely to have wide ranging impact across all economic sectors, including philanthropy.   

The Chevron doctrine grants broad power to the IRS and Treasury Department, both of which shape the rules and regulations that govern the tax-exempt space.   

In overturning this doctrine, Chief Justice Roberts summarized: 

“Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do. The Framers, as noted, anticipated that courts would often confront statutory ambiguities and expected that courts would resolve them by exercising independent legal judgment.” 

Roberts added that the Administrative Procedure Act (APA) requires independent judgment by the courts, not government agencies: 

“Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. … But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.” 

Three Takeaways for Philanthropy:  

1. This decision weakens role of the federal bureaucracy: The majority opinion argued that Chevron grants undue power to unelected bureaucrats, allowing them to craft policy through opaque regulations rather than the deliberative legislative process. Associate Justice Clarence Thomas said Chevron “curbs the judicial power afforded to courts, and simultaneously expands agencies’ executive power beyond constitutional limits.”  

2. This decision paves a path for regulatory stability: Justices concurring with the majority opinion also noted how Chevron created a regulatory environment of uncertainty. Roberts argued that “Chevron fosters unwarranted instability in the law, leaving those attempting to plan around agency action in an eternal fog of uncertainty.” Associate Justice Neil Gorsuch concurred with this opinion, noting “Rather than promoting reliance by fixing the meaning of the law, Chevron deference engenders constant uncertainty and convulsive change.”  
   
   In the context of foundations, nonprofits and other tax-exempt entities, this can translate into an ever-shifting regulatory landscape, rife with ambiguity and uncertainty. For groups navigating a complex maze of IRS pronouncements and rulings only to find the ground shift with the next interpretation, such unchecked administrative power stifles innovation. It also makes it difficult for nonprofits to focus on meeting their missions and serving their local communities.  

3. This decision defends against biased rulemaking: Another important point to note in this ruling is without robust judicial oversight agencies can regulate beyond the scope of law or become susceptible to lobbying pressures, potentially skewing interpretations in favor of certain groups over others. Thomas said “Chevron deference guarantees ‘systematic bias’ in favor of whichever political party currently holds the levers of executive power.” In the world of nonprofits, this could mean regulations crafted to benefit certain organizations or punish those that fall into disfavor with the politicized bureaucracy in Washington D.C.  

For four decades, the regulatory litigation system has leaned too heavily toward agency control, leaving many tax-exempt groups struggling in a sea of ambiguity. The overturning of Chevron could usher in a new era of transparency and accountability. For organizations fighting for a regulatory environment that empowers communities to thrive, this decision represents the opportunity to remove barriers of an overreaching administrative state. 

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In 6-3 and 6-2 rulings today, the U.S. Supreme Court overruled the Court’s 1984 decision in Chevron v. Natural Resources Defense Council, which gave federal agencies unchecked power at the expense of the legislative branch and the American public.

Philanthropy Roundtable Senior Vice President Elizabeth McGuigan responded to the Court’s decision:

“In today’s landmark decision on Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, the Supreme Court sent a clear message: federal agencies have too much power,” says Philanthropy Roundtable senior vice president Elizabeth McGuigan. “While we won’t know the true impact of this decision on philanthropy for quite some time, we do know this will go a long way in curbing the power of the administrative state, preserving the freedom of Americans to give to causes they support without government intervening. The overturning of the Chevron doctrine has the potential to impact rules and tax regulations governing nonprofits and we look forward to being part of the conversation.”

More from Philanthropy Roundtable on this topic: How A Supreme Court Case about Fishing Could Impact Nonprofits

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In a guest blog published by Georgia Center for Opportunity, Philanthropy Roundtable’s Director of Government Affairs Megan Schmidt applauds the recent passage of the Donor Intent Protection Act and the Personal Privacy Protection Act by Georgia lawmakers. Schmidt details how both bills encourage charitable giving in the Peach State.  

Below are excerpts from the article entitled “Two News Laws Bring Good News for Charitable Giving in Georgia”:       

“There are over 64,000 nonprofit organizations in Georgia, and in 2021 Georgia donors gave $9.4 billion to charity, according to the IRS. These generous donations to charitable organizations are about to get important protections under two bills passed by the state legislature in 2024. 

“Gov. Brian Kemp signed the Donor Intent Protection Act and the Personal Privacy Protection Act into law. Both pieces of legislation offer donors and charities new avenues to ensure the proper use of donations, while safeguarding donors’ right to privacy in giving. 

“The two bills offer legal protections for donors and nonprofits to ensure charitable giving can continue freely and effectively in the state. When donors are free to give where and how they choose without fear of their information being unfairly released or their donations being misused, charitable organizations are better suited to help those who need their support.” 

… 

“Georgia is primed to move forward with a healthy charitable giving environment with the passage of these two bills so communities in need around the state can benefit from the generosity of Georgians.” 

To read the complete article, please visit Georgia Center for Opportunity.   

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WASHINGTON – Today, the U.S. Supreme Court narrowly ruled in Moore v. United States that the 2017 Mandatory Repatriation Tax is constitutional. By declining to address the question of whether such a tax is an unconstitutional tax on unrealized income, the Court side-stepped the broader threat of proposed wealth taxes and the negative ramifications a tax on unrealized gains would have on charitable endeavors.   

Philanthropy Roundtable’s Senior Vice President Elizabeth McGuigan responded to the decision: 

“The U.S. Supreme Court’s narrow decision in Moore is a missed opportunity to slam the door closed on future taxes on assets, including resources set aside for charitable activity. Americans’ strong and effective tradition of generosity relies on a fair and predictable tax code, and this decision undermines the transformative, nationwide work of nonprofits that private charitable giving supports. It’s disappointing that the Court declined to address the issue of whether a tax on unrealized income would be unconstitutional. The Roundtable will continue to fight wealth tax proposals that punish success and impede Americans’ abilities to support those in need.”   

The case of Charles and Kathleen Moore centered on an investment the couple made in a company empowering small-scale farmers, which left them with a $15,000 tax bill. Referred to as the Mandatory Repatriation Tax (MRT), the tax obligated the Moores to declare additional taxable income based on gains that had not been distributed to them as shareholders. They petitioned the U.S. Supreme Court challenging the constitutionality of the tax, and Philanthropy Roundtable submitted an amicus brief in support of the Moores. 

As the Roundtable has written before, charitable giving “is most effective when donors are free to give to the causes and communities they care about most. It spurs generosity and allows nonprofits to focus on their core missions.”  

Today’s decision leaves open the possibility for a future wealth tax, which is often proposed as a tax on assets rather than on income.  

More from Philanthropy Roundtable on Moore v. United States: 

• Amicus Brief: Philanthropy Roundtable Urges Supreme Court to Overrule Unconstitutional Tax on Wealth 

• Moore v. United States Oral Argument: The Slippery Slope of Taxing Unrealized Gains 

• National Review: A Tax on Unrealized Gains Would Hurt Philanthropy  

• The Hill: A Constitutional Overreach with Dire Consequences for Philanthropy 

To schedule an interview with Philanthropy Roundtable, contact media@philanthropyroundtable.org. 

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WASHINGTON – Philanthropy Roundtable published “How Tax Policy Affects Charitable Giving” today, new research that finds for every $1 the U.S. Treasury forgoes in potential revenues, the charitable tax deduction results in $1.30 making its way to public charities.  

This study examines 50 years of research on how tax policy affects charitable donations, noting that raising taxes, likewise, shows a reduction in charitable giving. Currently, Capitol Hill lawmakers are debating several expiring tax provisions in the Tax Cuts and Jobs Act (TCJA) that would have significant implications for charitable giving. The research highlights how the TCJA’s tax incentives, when combined with a thriving economy, translates to increased charitable generosity and funds available for nonprofit services. 

“Philanthropy forms the bedrock of a vibrant civil society, and the research proves it,” said the paper’s author, Philanthropy Roundtable Director of Policy Research Jack Salmon. “When America’s tax policies encourage more giving to charity, those dollars go further toward helping communities in need than when those same dollars are sent to the IRS. Policymakers should keep that in mind as they construct laws and regulations affecting giving.” 

Americans donate over $400 billion annually – $300 billion as individuals and over $100 billion through private foundations. As the paper explains, “Within this altruistic landscape lies a crucial economic reality: charitable giving is not immune to the economic impact and behavioral incentives of tax policy. Indeed, a fundamental question resonates – to what extent does the cost of giving, as influenced by tax incentives, sway the magnitude of charitable donations? This intricate relationship between tax policy and charitable behavior lies at the heart of the concept of tax elasticity of charitable giving.” 

Key Findings: 

1. For every $1 the Treasury forgoes in potential revenues, the charitable deduction results in $1.30 making its way to public charities.  

2. Charitable giving is sensitive to changes in the tax price, meaning individual donors respond to changes in the “cost” of their contributions, as influenced primarily by tax policies. 

3. For every 10% increase/decrease in income, a donor increases/decreases their charitable giving by 7%. 

As Salmon writes, “Taxpayers demonstrably respond to shifts in policy, and the benefits of the charitable deduction for individual donors and the communities they support, undeniably outweigh any potential loss of revenue.” 

Read “How Tax Policy Affects Charitable Giving”. 

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In an op-ed published by The Chronicle of Philanthropy, Jack Salmon, Philanthropy Roundtable’s director of policy research, examines the potential consequences to the philanthropic sector when the 2017 Tax Cuts and Jobs Act expires at the end of next year. Salmon says while policymakers debate proposals like a wealth tax, regulations on donor-advised funds and changes to the charitable deduction to generate revenue, they should not ignore the unintended consequences of these policy changes on charitable giving.  

Below are excerpts from the article “Expiring Tax Breaks, Charitable Giving and What’s at Stake for Philanthropy”:

“Government leaders, economists, and tax policy experts are already debating what the nation’s tax code will look like when the 2017 Tax Cuts and Jobs Act expires at the end of next year. Lost in the conversation, however, are the potential consequences for charitable giving.”

…

“Additionally, by lowering the tax burden for most Americans, the tax legislation benefited philanthropy more broadly. That’s because a fundamental link exists between tax policy and charitable giving. A thriving economy translates to increased economic activity and disposable income, which fuels charitable generosity.

“Studies show a one percentage point increase in marginal tax rates can lead to a nearly 0.8 percent decrease in gross domestic product. With charitable donations stuck at around 2 percent of GDP for several decades, any increase in taxes stemming from the expiring 2017 tax law could precipitate a significant decline in giving as economic activity slows and incomes fall. 

“The make-up of the next presidential administration could have a significant effect on what new tax legislation looks like next year. As a new Philanthropy Roundtable policy brief lays out, several tax changes under consideration by the Biden administration have the potential to inadvertently harm charitable giving. These include a proposed wealth tax, regulations on donor-advised funds, and changes to the charitable deduction.”

…

“The tax code is a complex web, and its effect on philanthropy is multifaceted. As policymakers navigate potential changes to the tax code, they need to consider the unintended consequences on charitable giving. A vibrant nonprofit world provides essential services and innovation often beyond the reach of government. Weakening it by inadvertently reducing donations would be a significant loss for millions of Americans.”

To read the complete article, please visit The Chronicle of Philanthropy.

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That 5% mandate was selected because it promotes short-term giving, while also allowing for creative, long-term work on the issues our nation faces today and tomorrow. Some argue the annual 5% payout rate isn’t high enough or fast enough but our analysis indicates forcing a higher rate will mean fewer dollars winding up with charities.  

With about 125,000 private foundations distributing over $100 billion each year to nonprofits, the United States’ charitable sector increasingly relies on foundation support to fund its charitable operations. Foundation grantmaking bolsters various societal, environmental and educational initiatives nationwide.  

We all share the goal of encouraging giving and supporting charitable organizations and the work they do for communities in need. A higher payout rate is a misguided approach to reaching this shared goal.  

To test the concept of a higher payout requirement, the Roundtable ran a simulation comparing the 5% payout rate to a steeper 12% rate. What would happen if a large foundation were forced to pay out at that higher rate? The analysis found that over the course of 50 years, charities would receive $21 billion less under a 12% payout rule. That’s a loss of $21 billion for essential aid that propels our nation’s vibrant charitable sector.  

Raising the payout requirement for private foundations would be detrimental for charities and the communities they support who depend on this reliable and consistent source of funds. The current payout rate has a successful track record of bolstering our nation’s charitable sector and, as the Roundtable’s new paper points out, “has demonstrated its efficacy in striking a delicate balance between addressing immediate charitable needs and ensuring the long-term sustainability of philanthropic endeavors.”  

A sharp incline in payout requirements will result in an equally sharp decline in future charitable dollars. The existing 5% minimum regulatory framework maintains a balance that maximizes immediate philanthropic impact with sustained support for addressing long-term societal challenges.  

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The recent unveiling of the Biden administration’s proposed budget for fiscal year 2025 serves as a manifesto of the president’s priorities, albeit one unlikely to materialize into legislative reality. While the budget encompasses a spectrum of tax and spending proposals, three provisions targeting America’s philanthropic benefactors and foundations raise the greatest concern for charities and the people they serve. 

Limiting Private Foundations Use of DAFs 

One proposal that stands out as concerning and unwarranted is a perennial call to limit how foundations can give through donor-advised funds (DAFs). This was in the last two Biden budgets and part of the failed anti-DAF legislation in the last Congress.   

At its core, the proposal aims to disallow contributions to DAFs from counting toward the foundation 5% minimum payout rate unless fully disbursed from the DAF within the subsequent year. However, this perspective fails to acknowledge myriad legitimate reasons why a foundation might opt for giving through a DAF. Such rationales range from pooling resources with other donors to safeguarding privacy when supporting contentious causes.  

Philanthropy Roundtable recently released a report that runs through a comprehensive list of all the valuable and innovative ways private foundations may use DAFs to pursue their charitable missions. While foundations rarely use DAFs as a tool, there is simply no reason to set arbitrary limits on the use of self-regulating vehicles that may lead to less efficient giving.   

Unfairly Targeting Family Foundations 

Furthermore, the budget again discriminates against family foundations with working family members. While foundations without family staff can count staff expenses as part of their annual payout, the proposal calls for family staff to be excluded from this.   

Existing regulations robustly address concerns of self-dealing within private foundations. Indeed, empirical studies have indicated family foundations typically exhibit lower administrative expense ratios compared to their nonfamily counterparts. This discrepancy underscores the unsubstantiated basis for treating family foundations disparately under the law. 

Unintended Consequences of War on Wealth 

The budget’s broader vilification of “wealth” introduces additional apprehensions.  

President Joe Biden’s advocacy for a new 25% tax on assets, including illiquid assets, coupled with proposed alterations to capital gains and carried interest taxation, poses significant ramifications for charitable giving. Such changes, alongside new reporting requirements for trusts, threaten to impede donors’ capacity to support charities effectively. 

Even if charitable resources were exempt from these proposed taxes, the collateral damage to charitable endeavors would be substantial. Previous analyses of similar proposals have shown they would cause serious economic harm and therefore diminish resources available to charities and the communities they serve. 

In response to these concerns, the Roundtable is committed to educating Congress on the potential repercussions of the anti-charitable measures embedded within the Biden budget. Following a year of reduced charitable giving, hampering America’s philanthropic spirit and impeding charities’ access to support represents a perilous misstep. 

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The following is a guest post submitted by People United for Privacy. Their vision is an America where all people can freely and privately support ideas and nonprofits they believe in so all sides of a debate will be heard, individuals won’t face retribution for supporting important causes and all organizations can advance their missions because the privacy of their donors is protected. 

In early February, People United for Privacy (PUFP) published a memo forecasting legislative threats to nonprofit advocacy and donor privacy in states across the country in 2024. Alarmingly, we expect threats to arise in as many as 31 states, with some legislatures already considering bills that would chill nonprofit advocacy and expose nonprofit members and supporters to harassment and intimidation. 

To find out if your state made the list and learn more about this year’s most prominent threats, we encourage all nonprofits and their supporters to review the full memo, available here. Below are five key takeaways as the 2024 legislative sessions intensify. 

Both Parties Pose a Threat to Privacy 

Of the 31 states featured in the memo, 14 have legislatures controlled by Democrats and 12 have Republican-controlled legislatures. The remaining five feature split control, whether between chambers or dividing the legislature and the governor. 

The top 10 threat states identified in the memo also feature a mix of Republican and Democratic control. Particularly pronounced threats to nonprofit speech and privacy rights are present in the Republican-controlled states of Idaho, Ohio, Oklahoma and Wyoming as well as the Democratic-controlled states of California, Hawaii, Michigan, Minnesota and Oregon. Virginia, which has a Republican governor and a Democratic-controlled legislature, is also one of the 10 states most at risk of adopting legislation in 2024 that would curtail nonprofit advocacy and invade citizen privacy rights. 

Election Year Threats Are Less Numerous but More Dangerous 

Historically, legislative sessions in election years witness a lower volume of activity than their odd-year, post-election counterparts. Some of the explanation is structural. Four states – Montana, Nevada, North Dakota and Texas – don’t meet in regular session in even-numbered years. Other states have shorter sessions or focus primarily or exclusively on budget matters. From a policy standpoint, privacy opponents who intend to chill education and advocacy by the nonprofit community often discover that the complexity of their schemes means they cannot take effect in time to have an impact in an election year, so they punt their efforts to the next session. 

That’s the good news. The bad news is threats which persist despite these factors are especially dangerous. While we’ll likely see fewer active legislative threats in 2024, those threats that are seriously considered are likely to be more intense, as lawmakers pushing such efforts are buoyed by a desire to chill nonprofit advocacy before their terms expire. 

Failed Proposals from Prior Sessions Will Reappear 

We know from experience that determined lawmakers will continue to reintroduce and refine their proposals until passage is secured. Just because a bill stalled or was rejected in a prior session does not mean it won’t return or gain majority support in the future. 

For example, lawmakers in Virginia have already revived previously defeated efforts to force nonprofits to identify significant supporters within public communications about policy issues and ballot referenda. We also anticipate the re-emergence of failed anti-privacy proposals in California, Idaho, Minnesota, Ohio and Wyoming, among other states. 

“Foreign Influence” Claims Mask Threats to Americans’ Privacy Rights 

Legislation banning contributions and expenditures by so-called “foreign influenced corporations” may not sound like a concern for American donors to charities and nonprofits. Yet, these bills are a clear attempt to circumvent First Amendment protections recognized by the Supreme Court by defining “foreign influenced corporation” as any company with as little as 1% of its equity owned by a foreign investor.  

In practice, this would strip First Amendment rights from many American businesses controlled and operated by American citizens, whose political engagement is in no way directed by foreign nationals. Importantly, such legislation is likely to impact the speech and privacy rights of nonprofits, particularly business associations, that receive contributions from corporations owned by a multitude of shareholders. Hawaii, Pennsylvania and Washington are three states facing such threats. 

Another somewhat nebulous threat emerging from vague concerns over foreign influence is more directly aimed at nonprofit supporters. Governors, attorneys general and legislators in multiple states have announced plans to investigate or otherwise take action in response to allegations of foreign contributions to nonprofits. This emerging threat, also unfolding in Congress, is being tied to prominent concerns over election integrity. While there seems to be little consensus on legislation, the rhetoric alone is enough to place the nonprofit community on high alert. PUFP is on guard for proposals of this nature in Georgia, Missouri, Ohio, Oklahoma and Virginia. 

Arizona’s Anti-Privacy Law Could Be Coming to Your State Next 

Arizona voters approved Proposition 211 in 2022 after a misleading campaign in which proponents argued the initiative would require the disclosure of “campaign” donors. The measure’s true impact is the forced disclosure of donors – and their donors’ donors, what the initiative terms “original monies” – to nonprofit organizations that voice opinions on public policy debates and legislative matters in Arizona. The end result will be many nonprofits choosing to self-censor and many Arizonans ceasing to give to causes they believe in, further entrenching the power of elected officials and the media while silencing the voices of everyday Arizonans. 

While multiple legal challenges to Prop 211 are ongoing, the text of the law is already spreading to states around the country. In addition to efforts in Hawaii, Maine and Oregon, an Oklahoma lawmaker recently filed a rulemaking petition with the state Ethics Commission that copies word-for-word the draconian Arizona statute. 

For more detailed information, the full memo from People United For Privacy discusses particular threats in the states and also includes links to bill text, analysis/commentary and news coverage that readers may find useful. Nonprofits of all types – and their supporters – should be on guard for harmful proposals in their state, as both parties increasingly view donor disclosure mandates as a tool for ruining their opposition and settling political scores. 

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With generous Americans increasingly giving back through flexible vehicles like donor-advised funds (DAFs), pressure is building to add new restrictions on these charitable giving accounts.   

In November, the Treasury Department and IRS issued a notice of proposed rulemaking, implementing provisions of the 2006 Pension Protection Act. As the proposed rules relate to donor-advised funds, specifically key definitions and clarifications, the Roundtable is closely monitoring the new rules and submitted a comment letter on February 15 that outlines our concerns. Here, Philanthropy Roundtable again stresses the value of DAFs as a vehicle for robust giving and urges regulators to reconsider three aspects of the proposed rule: 

1. The proposed short implementation timeline that may be virtually impossible for some DAFs to meet. 
2. The unintended consequences of proposed changes to how investment advisors may assist clients with their DAFs, potentially discouraging investment advisors from recommending DAFs to their clients. 
3. The negative implications of overly broad definitions of distributions that appear to penalize necessary expenses such as legal counsel or accounting related to a DAFs operation. 

Philanthropy Roundtable believes new rules and restrictions on how Americans can give to the causes and communities they care about will chill charitable giving and must be carefully examined. These additional rules proposed by the Treasury and IRS may impose significant restraints on DAFs and make it harder for charities to meet the public support test. Now is the time to ensure rules foster giving.  

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The Roundtable is proud to announce its support for the Safeguarding Charity Act.  

This important legislation, introduced by Sen. Marco Rubio (R-FL) and Rep. Greg Steube (R-FL), would protect the independence of tax-exempt organizations and reaffirm that tax-exempt status alone is not government assistance.  

The receipt of federal financial assistance triggers compliance with a staggering number of federal laws and regulations. Entities that do not comply with these legal requirements can have their tax-exempt status revoked by the IRS.  

America’s rapidly increasing political divide has emboldened politicians and activists on both sides to seek new ways to target their opposition. Nonprofit organizations increasingly find themselves in the crosshairs of our ongoing political and cultural wars. 

In Buettner-Hartscoe v. Baltimore Lutheran High School and E.H. v. Valley Christian Academy, the courts ruled tax-exempt status is a form of federal financial assistance. These decisions threaten tax-exempt organizations such as charities, private schools and churches with the unnecessary regulatory burden traditionally reserved for entities that receive government assistance. 

These rulings not only contradict legal precedent and congressional intent, they threaten a wide range of tax-exempt organizations that do not accept federal financial aid. The Safeguarding Charity Act would clarify that tax exempt status alone does not meet the definition of federal financial assistance.   

Targeting nonprofit organizations that exist to address community problems and provide assistance for those in need should be off limits on the political battlefield. We thank the senator and representative for working to protect nonprofits from becoming victims of our overheated political environment. 

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