News for Nonprofits: Summer 2022

How federal legislation may affect DAF distribution timelines

A bipartisan group of legislators has introduced the Accelerating Charitable Efforts (ACE) Act in the U.S. House of Representatives. The ACE Act mirrors a bill introduced in the Senate in June 2021. It would create two new types of donor-advised funds (DAFs) — 15-year (or qualified) and 50-year (nonqualified) — with the timing and availability of various tax benefits hinging on how quickly the funds are distributed after donation.

The ACE Act would allow a donor to hold up to $1 million in DAF funds at any community foundation without being subject to payout rules. For amounts over $1 million, a donor could receive upfront tax benefits if the DAF requires a 5% annual payout or if donations must be distributed within 15 years of contribution. The bill also would reform rules for private foundations.

Better understanding donor motivations and expectations

Several new research reports released simultaneously by the Indiana University Lilly Family School of Philanthropy stress the need for fundraisers to demonstrate impact and cultivate empathic responses from donors — without making them feel guilty. The reports reflect the results of donor focus groups, a donor survey and a donor engagement experiment, all part of the school’s research project report series The Giving Environment.

The findings make “unmistakably clear” that donors want to understand the impact of their gifts but also value those organizations that foster meaningful relationships with them. Their expectations for how organizations build connections with them and communicate impact has intensified. The most effective fundraising messaging will highlight needs while also evoking a positive sense of connection. Of the various channels researched, video messages scored the highest connection rates with recipients.

Foundations expect to continue some pandemic practices

A study from the Center for Effective Philanthropy (CEP) suggests that COVID-19 may have accomplished what years of calls for change couldn’t: convincing foundations they should adjust some of their long-standing practices. As part of the “Foundations Respond to Crisis: Lasting Change?” study, CEP collected survey responses from 284 foundation leaders and conducted in-depth interviews with 33 foundations and 32 nonprofit organizations.

Among other things, foundation leaders signaled that, post-pandemic, they plan to continue to reduce administrative burdens for grantees, such as grant application and reporting requirements. They’ll also increase unrestricted funding and pursue efforts to advance racial equality. Most foundation leaders say that racial equity is a more explicit consideration in how they do their work and, as a result, many are modifying their practices (for example, changing how they identify applicants and funding more organizations supporting black and Latino communities).

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