Patrice Onwuka in Washington Examiner: “New Red Tape Will Slow Philanthropy’s Response to Crises”

In an article recently published in the Washington Examiner entitled “New red tape will slow philanthropy’s response to crises,” Philanthropy Roundtable Adjunct Senior Fellow Patrice Onwuka wrote that nonprofits across the United States are struggling to meet rising demands for services – and at this critical time, philanthropists could be hampered in their efforts to provide relief to those in need if Congress moves forward with regulations on donor-advised funds (DAFs). She also highlighted the effectiveness and flexibility of DAFs in responding to recent crises, including Hurricane Ian in Florida.

Below are excerpts from the article entitled “New red tape will slow philanthropy’s response to crises”:

Giving vehicles such as DAFs provide donors with an avenue to give on short- and long-term horizons. DAFs are tax-advantaged giving accounts. After the initial gift is made to a sponsoring entity, from community foundations to financial institutions, donors can set aside funds to be given to charity at any time. DAFs are akin to small foundations, minus the staff and overhead. Perhaps that’s why they have exploded in popularity, especially among the middle class.

Congress’s intent to regulate DAFs places charities and the people they serve in vulnerable positions as new crises emerge, especially as economic conditions continue to deteriorate. Just this past year, the consumer price index rose at a pace of 8.2%, with grocery prices rising even faster at 13%. … From the offering plate to strategic giving plans, people donate to charity to meet immediate needs or to provide sustained, long-term support for programs. Following a natural disaster, for example, people need food, water, transportation, and shelter. Rebuilding and regaining financial stability may take years, perhaps decades.

Donors nationwide sprang to action after [Hurricane] Ian touched down in September. The Florida Disaster Fund raised $50 million to date, foundations and companies committed millions, and dozens of relief funds across southern Florida are raising support. As families piece their lives back together, many, especially retirees, realize that the storm took not only their homes but their life savings.

Philanthropy will be a key aspect of rebuilding in Florida, which is where DAFs come in. Currently, DAFs outnumber private foundations by 11 to 1 despite overseeing less than 15% of the charitable assets that foundations maintain. The grant payout rate of the nation’s over a million donor-advised funds exceeded 20% in every year on record, surpassing foundations. Giving $47.85 billion in 2020, DAFs contributed 10.1% of total giving that year.

If DAFs are serving as effective tools to raise and disburse gifts for causes, including disaster relief, why would Congress consider tampering with them? The Accelerating Charitable Efforts Act, sponsored by Sen. Angus King (I-ME) and Sen. Chuck Grassley (R-IA) and its companion bill in the House would modify existing rules for donor-advised funds to require faster payouts, among other things. The intention might be to get more resources to charities at a faster pace, but this bill could lead to counterproductive outcomes.

Please continue reading “New red tape will slow philanthropy’s response to crises” at Washington Examiner.

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