California assemblywoman Buffy Wicks and donor-advised fund (DAF) critic Ray Madoff are at it again in their push to regulate charitable giving, but this time Tania Ibanez, senior assistant attorney general, who leads the Charitable Trust section in the California attorney general’s office, is here for it, most recently at the CalNonprofits annual symposium.
In 2019 and 2020, Wicks introduced two separate bills under the guise of “transparency.” In 2019, she introduced a bill that would have forced DAF sponsors to disclose information on individual accounts to the attorney general and in 2020 she introduced a bill that would have given the attorney general carte blanche to regulate DAFs. Both bills ultimately failed, due in large part to the pushback from community foundations.
California DAF sponsors may remember in 2021, they were required by the California attorney general’s office to take a mandatory survey asking invasive questions surrounding DAF accounts. Well, the results are in and guess what? While the data show no evidence of a problem in need of solving, the attorney general’s office wants to use the data DAF sponsors were forced to provide them and issue more regulations.
Looking ahead to 2023, what should nonprofits in California be worried about?
It’s all but certain a new DAF bill will be introduced during the 2023 legislative session. The contents of a bill could include codifying the definition of DAFs, modifying payout requirements, limiting tax benefits or forcing disclosure of private information. Of course, this is the EXACT opposite of protecting the privacy of donors, which is what Wicks claims she supports. The attorney general’s office could issue new filing and/or reporting requirements on foundations based on the findings of the 2021 mandatory DAF survey. Based on the results of the survey, here are three top areas of potential focus:
- Grant ratios are on the radar of Attorney General Rob Bonta’s office. Specifically, requirements could target community foundations with DAF payout rates of less than 5%, despite the fact that the low payout rates are due to the deliberate, legal structure of endowed funds.
- Private foundations and their use of DAFs is another expected issue for state officials, as it is for policymakers on the federal side. The Roundtable has written here before about the effective and legitimate ways private foundations may give through DAFs.
- There may be a call for new reporting requirements on donor intent. The attorney general’s office believes DAFs may be used as a tool by future generations to change the mission of a foundation without the attorney general’s office being aware – again, with no evidence that is a systemic problem.
While the California nonprofit community shouldn’t be surprised by this latest development, it is disappointing. The nonprofit community has repeatedly pushed back on any new DAF reforms that have been introduced and we will continue to do so. Generous Californians should be free to give where, when and how they choose to the causes they support.
See more on the history of the DAF battle in California: