NGR

League of California Community Foundation – Board Chair / CEO Retreat

Presented by: Fred Noteware

NGR

Sacramento Update:

- Housing - Immigration - Transportation - ACA repeal and replace - May Revision to the Budget - Statewide candidates

NGR

Services Performed for GAC and LCCF:

- All bills and amendments reviewed - Policy ramifications of legislation - Currently tracking 66 bills - Introductions to key policy makers in Sacramento

NGR

Senate Bill 6 (Hueso):

- Major bill on immigration; priority of leadership - Would establish funding mechanism to non-profit agencies for legal services for those facing deportation proceedings - $12 million to DSS to establish Due Process for All Act - Mechanism established to accept further (private) donations - Clarifying amendments regarding prior criminal records - LCCF has adopted a support position

NGR

Senate Bill 567 (Lara):

- Omnibus tax reform bill - One provision: Beginning 1/1/18, requires charitable remainder trusts must be at least 40% of initial fair market value (current threshold is at least 10%) - To be heard in first committee on 5/10 - 2/3 vote required for passage

NGR

Going Forward:

- Elevating profile of Community Foundations Provide specific example (i.e., Pfeiffer Canyon Bridge) - Continued education of legislators and staff is high priority - Sacramento meetings as well as locally

The Outlook for Community Foundations & and Philanthropy in the 115th Congress

M. Jeff Hamond

Van Scoyoc Associates

May 11, 2017

• Formed in 2012 to provide community foundations with their own voice in Washington, DC.

• Started with 18 foundations, now has 107 foundations in 47 states.

• Not just the big foundations: We have big and small, blue and red, urban and rural. Nearly half have under $200 million in assets.

• NOT competition for CoF – an additional voice doing different things.

Community Foundation Public Awareness Initiative

Status of Tax Reform in the 115thCongress

• The possibility of significant tax reform is uncertain. Health care has thrown a wrench into the mix. We might end up with just a big tax cut like in 2001.

• The House can pass what it wants, but unclear if House Ways and Means “blueprint” has the votes.

• Ways and Means Chairman Kevin Brady favors broad tax reform, and his members support charitable giving. But some of the changes they are pursuing would dramatically alter giving incentives.

• For long-term tax reform, what needs to give? Big sacred cows on each side. And there are some underreported big problems (e.g., taxation of business income versus corporate income).

• Even if “big” reform is not imminent, this doesn’t mean the sector should rest easy. The time to be active is BEFORE the crisis moment!

Trump Tax Plan

• Double standard deduction, married families pay zero taxes on first $24K of income (but sharply cuts number of itemizers)

• Move from 7 to 3 tax brackets (but this isn’t simplicity)

• Eliminate Alternative Minimum Tax (AMT) and estate tax

• Keep deductions for mortgage interest and charitable contributions but eliminate state and local taxes

• Maintain retirement savings incentives

• No “border adjustment”

FY18 Federal Budget

• Last week President Trump signed the Omnibus for FY17, which will expire on September 30th

• The President released a partial FY18 budget proposal on March 16; full plan expected May 22

• Details so far indicate major cuts in programs that benefit working people and the middle class: Agriculture by 21 percent; HHS by 18 percent; HUD by 13 percent; Education by 14 percent; and Labor by nearly 21 percent

• But can these cuts pass? The Omnibus signals no…

What Do Proposed Cuts Mean for California?

• Home heating and cooling assistance for nearly 219,000 people ($176 million lost to the state)

• Afterschool and summer programs serving more than 132,000 in California ($132 million)

• Legal services for 218,000 people would lose legal assistance in California ($43.5 million lost)

• Nearly 391,000 people would lose job training/employment services

• About 202,000 college students would lose Supplemental Educational Opportunity Grants

Issues for the Broad Charitable Sector

• Obviously, the charitable tax deduction is the elephant in the room. Should there be changes? Floor versus ceiling? Universal deduction?

• Other charitable issues include endowments, UBIT, executive compensation, DAFs, and IRS pursuit of politically-affiliated groups. But these are mainly second-tier.

• Staff are tired of hearing the same messages from the same charities. It creates an opportunity for community foundations to build their brand with a constituent focus.

• Take opportunities to educate! You don’t want the first time someone hears about an issue to be during a markup. Community foundations are in possibly the best position to educate because you’re active in every district!

Some Topics Covered by CFPAI

• How are community foundations and private foundations different? What do you care about? What success stories have you had in the state or district?

• What are the different ways that a CF engages with donors and with a local community?

• What are donor-advised funds, and how is a DAF at a CF different from a DAF at a commercial fund?

• What are some of the tax issues affecting CFs (e.g., DAF prohibition in IRA Rollover, gifts of property, excess business holdings, inactive funds, payout rate, PFs using DAFs, etc.)?

• We look for opportunities to be responsive to the staff so they will remember us at the right time.

Big Issues Facing Community Foundations

• DAFs generally – and how the field responds to the commercial funds. Blurring versus sharpening? New tax definition?

• If the field pursues a definition down the line, what happens as some community foundations focus less on just the local region (no judgment)?

• IRA Rollover Fix – closer and closer…

• Shift from payout to inactivity – this is good, but still smart to be wary.

• University endowments – does this bleed to affect all endowments?

• Given all of these issues, we must think about our role in “Team Philanthropy.”

Engagement Tips from a Former Staffer

• Staffers like meetings without specific asks – they like to know what’s happening in their states, districts, or policy areas.

• Unlike many private foundations, which are national or global in their reach, your work is community focused – you are constituents! Use that to your advantage. You are the subset of philanthropy they should care about MOST.

• While staff hear from lobbyists all the time, the call from the district is the call that will be remembered – particularly if you tell them something they don’t already know.

ONE KEY TAKEAWAY: These people can be your best friends!

Although a president or a board chair might have a Member-level relationship, that isn’t a substitute for knowing the staffer.

They make more decisions than you know. Engage!

Regulatory Update: League of California Community Foundations

Lara Kalwinski

Senior Counsel, ED of National Standards

Council on Foundations

May 11, 2017

Different processes for passing legislation, regulation, but same force of law

Source: Federal Register, 2013; Scales by The Noun Project; ICF Consulting; Office of Information and Regulatory Affairs, OMB, 2013.

Differences between legislation and regulation

145

181

225 217 215

242

291

117

6175

63 62 6980

48 42 46 36 38

The number of executive orders has declined

Frequency of executive orders by president

Average number of orders per year, 1900-2016

Source: Gerhard Peters and John T. Woolley, “Executive Orders,” The American Presidency Project, January 9, 2017.

Trump 32

What We’re Watching (in addition to Congress)

• Reducing Federal Regulation 2 for 1

• Travel Ban

• Regulating Financial Industry

(e.g. international grantmaking + famine/Syria)

• Protecting Police and Reducing Crime

• Pursuing undocumented immigrants

(know your rights trainings and resources)

• Promoting agriculture and rural America

(Investing in Opportunity Act)

What is the Johnson Amendment

National Council on Nonprofits Newsletter, May 9, 2017

• Section 501(c)(3) of the Internal Revenue Code allows certain groups to be exempt from federal income taxes and eligible to receive tax-deductible contributions in exchange for complying with three separate conditions. – The first condition is the most famous: that 501(c)(3) nonprofits cannot pay out profits

to benefit shareholders or individuals. The third condition states that 501(c)(3) entities may “not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”

– That condition, nicknamed “the Johnson Amendment,” was proposed by then-Senate Minority Leader Johnson to legislation passed by a Republican-controlled Congress and signed by President Eisenhower in 1954.

– In practical terms, the language protects charitable nonprofits, including religious institutions, and foundations from partisan electioneering, such as political endorsements and campaign contributions. Other speech, such as commentary on legislation, social and moral issues, is in no way touched or restricted by the Johnson Amendment.

Council on Foundations Position & Action

• The repeal or weakening of this provision (which prohibits 501(c)(3) charitable organizations from endorsing, opposing, or contributing to political candidates) would have sweeping and damaging consequences for charities and civil society writ large.

• Statement from Council President & CEO

• Members of our government relations team are in attendance at the hearing and we will plan to share new developments.

• In advance of this hearing, our government relations team reached out to every Member of both the Government Operations and the Health Care, Benefits, and Administrative Rules Subcommittees to reiterate the Council's strong opposition to repealing or weakening the Johnson Amendment

• Shared a Community Letter in Support of Nonpartisanship with signatures from 4,500 charitable organizations across the country.

• Tracking Litigation

Andrew Garrahan, Covington & Burling LLP, Washington, D.C., Covington website posting, May 5, 2017

Council to Submit Comments on IRS Priority Guidance

• The U.S. Department of the Treasury and the Internal Revenue Service (IRS) released their annual call for public comments to inform the development of their priority guidance plan — which identifies and prioritizes tax issues that they will aim to address in the coming years.

• The Council submits comments on domestic and international issues that our members have with current regulations (or the lack thereof)

• A change in this year’s comments is that we will include deregulatory ideas to assist our Treasury contacts with the renewed “two for one” regulatory policy.

• As we have in years past, the Council will be submitting comments.

• If you have thoughts or input that you would like us to incorporate in our comments, please contact our Senior Counsel for Compliance & Policy, Lara Kalwinski at lara.kalwinski@cof.org.

• Comments due to Treasury no later than June 1, but they requested an earlier submission if possible.