On June 9, 2021, bipartisan legislation to alter charitable gift tax laws, ensuring that philanthropic funds are made available to operating nonprofits in a timely manner, introducing the Accelerating Charitable Efforts (ACE) Act led by Senators Angus King (I-Maine) and Chuck Grassley (R-Iowa). The ACE Act provides a complicated combination of incentives and penalties to promote selfless behavior. Donor-Advised Funds (DAFs) would be divided into a variety of categories under the ACE Act, including qualified and nonqualified DAFs, with differing tax implications depending on whether the sponsoring charity is a geographically confined community foundation or a national nonprofit. This bill has several needed provisions that would impact the philanthropic sector. Some of the main provisions include:

Make sure the money wealthy people put into Donor-Advised Funds (DAFs) are spent out in a timely manner.

Currently, donors can now put money into DAFs and receive an instant tax credit, but they are under no legal duty to ever pay a dollar to nonprofits or NGOs. Donors could also store money in the DAF for 100 or 1,000 years. With the new bill in place, DAFs would have to be spent out within 15 years under the measure. Alternatively, donors can choose a timeframe of 50 years, but if they do, they won't be eligible for a tax reduction right away

Stops foundations from counting the money they transfer to DAFs as part of their legally required 5% payout minimum.

Every year, foundations are expected to distribute at least 5% of their endowments. But, for the time being, they can include money for DAFs, which, again, have no legal duties to payout at all.

Stops foundations from counting the money they spend on salaries and travel expenses of family members toward the 5% payout minimum.

In simpler terms, a family foundation hires a family member, gives them a salary, and then counts the money against their legal 5% payout minimum. This practice is cheating the system and a recipe for self-dealing, and other unethical conduct.

The ACE Act provides some other mild changes but not as big as the three listed above. Many philanthropic institutions are upset about these changes and have already begun to sign petitions and other actions against the bill which raises the question: how long have philanthropic institutions gotten away with this?

Amidst the pandemic, people of color, disabled people, the poor, and other oppressed people became poorer and perished while the wealthy, mostly white people have increased their wealth during the pandemic by nearly a trillion dollars according to CBS NEWS. They would stash their cash in DAFs or foundations, have little legal obligations to distribute it, and nonprofits have been conditioned to be grateful for the crumbs they toss over to their favorite causes.

Philanthropy can and has accomplished great things. However, it has also served as a tool of white moderation, allowing wealthy white people to continue hoarding resources while the nonprofit sector has been doing their conscience-washing and charity-washing.

For decades, philanthropy has talked about equity, ending racism, assisting vulnerable communities, and so on; and yet here we are, with those issues still very much a part of our collective reality. How can we possibly deal with much more tough and vital issues like reparation for slavery or tax reform to ensure wealthy primarily white people pay their fair share if it can't accept even this modest set of regulations?

The Accelerate Charitable Efforts (ACE) Act is an important step in the right direction, and here are some ways we can support its passage:

Simply be vocal.

Be Loud! We need to lead the charge in organizing and advancing this initiative. Otherwise, opponents of the law continue to dominate the airwaves and influence public opinion. Write articles, host webinars, appear on television, and phone your political officials.

Educate your members in support of the bill.

You play an important role. Educating people about this bill can also increase the support of the act. So gather the confidence to lead by openly endorsing this bill and encourage other state associations to do so as well.

Exhaust any philanthropic association memberships that oppose.

If your foundation is a member of a philanthropic association that opposes these legislative efforts, you can put pressure on the leadership to do the right thing by terminating your membership until they change their minds. You don't have to be a member of one of the old, dull organizations that are stifling our industry. Do you really want to be a part of a group that believes it's acceptable to include money paid to family members in the 5% legal minimum?

Our entire industry is at a fork in the road. We can continue to put up with the same inequitable methods, or we can improve and reach our maximum potential in order to address systemic injustice. This problem should not be a source of contention. Let's work together to get it passed so we may focus on other important laws in our industry.

Change the 5% Endowment Rule for Foundations