Government Relations Goals

Charitable giving among working families is critical for supporting local organizations that provide housing and food assistance, youth mentorship programs, mental health support, and more. Restoring Michigan’s charitable tax credit helps to catalyze and strengthen charitable giving among Michigan families of all income levels. It also leverages the collective power of Michigan’s community foundations to support new pathways for nonprofits to build stable, long-term funding sources to power their work now and into the future. 

Why CMF should engage: CMF has been working over the past several years to restore the charitable tax credit once available to Michiganders. Since the repeal of Michigan’s charitable tax credits, several bills have been introduced, receiving broad bipartisan support. CMF has worked with policymakers to propose a narrow and targeted credit that allows individuals to receive a tax benefit of 50% of their contribution, capped at $100 for a single taxpayer and $200 for joint filers. State research conducted by the Johnson Center for Philanthropy at Grand Page 6 of 7 Valley State University and national data support the effectiveness of these incentives, and other states have enacted similar policies to spur individual giving. Illinois passed legislation that provides a 25% income tax credit to individuals who contribute to an endowed fund at a community foundation. Passage of this important legislation in Michigan will encourage working families to give by offering a tax incentive. It will also help to create a culture of giving while boosting support for local nonprofits working to address community needs.

Over the past several years, several states have considered measures to require charitable organizations to disclose information about donors on a confidential basis. CMF and our partners will remain attentive to the policy landscape around this issue and continue monitoring the implications of donor disclosure laws in the sector.

Why CMF should engage: Although this could become an important issue if momentum builds to eliminate donor privacy, it is unclear what state action could occur in light of a U.S. Supreme Court decision preventing California from forcing donor disclosure to their state attorney general. With this in mind, the GRPPC recommends continued monitoring for any attempts at the state or federal level to reduce donor privacy through legislation or executive branch action.

Support policies that foster greater individual giving and include tax fairness for all income levels. The generosity of individuals is essential to maintaining a healthy civil society and vital to nonprofits and local governments that depend on these resources to achieve their critical missions and meet community needs. Inclusive tax policies such as expanding the IRA charitable rollover to include donor advised funds held by public charities, including community foundations, and ensuring that non-itemizing taxpayers receive a tax benefit for their charitable giving are critical for fueling a continued culture of giving. Data shows these incentives increase giving to nonprofits allowing them to carry out their critical work and create inclusive access for individuals and families at all income levels to receive a benefit for their charitable giving.

Why CMF should engage: 
Fewer individuals are donating to nonprofits. While smaller dollar gifts increased in 2020 and 2021 when the temporary non-itemizer charitable deduction was effective, we have seen a decline in small-dollar donations over the past several years. Inclusive tax policies like the universal charitable deduction and allowing IRA distributions to DAFs to be considered charitable foster more giving and support tax fairness by providing everyone the same tax benefits previously only available to families and individuals with higher incomes that itemize deductions. It makes giving more equitable and broadens revenue streams for nonprofits. The universal charitable deduction has received broad bipartisan support and has been an issue where our national infrastructure partners have been actively engaged. As a member of the Charitable Giving Coalition, CMF will continue to lend our voice among federal policymakers to advance equitable tax policies that increase individual giving.

A vibrant civil society is dependent on the right of individuals to come together outside of government to meet the needs of our communities, es including addressing longstanding inequities. CMF’s community of philanthropy understands that many of these needs require immediate support, but there is also the need for long-term sustainable private resources to invest in communities into the future. CMF is recognized as a national thought leader and key sector partner on payout rates through our efforts over the past two decades in supporting data-informed discussions through commissioned research. Our research has consistently shown that a one-size-fits-all increase to payout requirements could be detrimental for some foundations in the short term and harmful for many foundations that intend to sustain a certain level of grantmaking in the long term.

Why CMF should engage: Recent critiques of the charitable sector have come from across the political spectrum. Philanthropy is being characterized as one big monolith without understanding the varying ways that philanthropy is practiced and the historical and social role that philanthropy has and should continue to play in civil society. In addition to the proposed rules on DAFs brought forward by the U.S. Department of the Treasury, some policymakers and influencers have signaled that philanthropy may be used as a source of revenue to help pay for tax reform. The Tax Foundation and the Cato Institute have each issued reports recommending comprehensive tax changes including increasing the public support test for what constitutes a public charity, taxing endowments, taxing investment income at the corporate rate and increasing the excise tax on university endowments. There is growing concern among the sector that these proposals and others, such as the possible resurfacing of the Accelerating Charitable Efforts (ACE) Act, could be broadened to extend to other types of endowments, including those held at community and private foundations. CMF has led on the issue through our commissioned research regarding payout rates. The charitable sector generally and CMF specifically have a great opportunity to further reinforce the need for data-driven policies that consider the diversity of foundations and philanthropy and the need to communicate, through storytelling, the important role that philanthropy plays in addressing some of the most pressing issues facing our communities. Our ability to work alongside community is only made possible if we as a sector are healthy and have the tools and flexibility to respond to community needs now and into the future.

Any policies and/or regulations on donor advised funds (DAFs) should be data-informed, not impose unnecessary and overly burdensome requirements and consider community impact. DAFs have a long history of being used to help individual donors engage in strategic charitable giving to meet short-term and long-term needs in their communities. Through community foundations that work locally as convenors and bridge builders to address problems, DAFs have become an increasingly popular vehicle to connect donors of all income levels to communities allowing them to support community needs in line with their values, mobilize disaster relief aid, fill funding gaps and much more. DAFs are often a nimble, flexible tool that can be used for immediate response to crises and opportunities in ways and places that the government cannot. In 2022, grants from community foundation DAFs nationally increased by 33.1% even as contributions and assets declined. CMF's advocacy positions around any potential or pending regulatory changes to DAFs will be supported by data confirming the change's effectiveness in helping philanthropy, and individual donors be]er respond to community needs. Any regulatory changes should not create unintended consequences by reducing the effectiveness and flexibility of DAFs and other giving vehicles such as giving circles that support low-and middle-income individuals and families to engage in collective and collaborative giving. Our regulatory environment must ensure that DAFs and other innovative giving vehicles continue to be convenient, flexible and dynamic that help provide sustainable resources for community impact.

Why CMF should engage: In November 2023, the IRS issued Proposed Treasury Regulations REG-142338-07 that provide new guidance about how to interpret and apply IRC Section 4966. The new language focuses on definitions, expanding some existing definitions while adding others Treasury believes necessary to clarify the regulatory framework and prevent abuses of DAFs that could be viewed as self-dealing or giving for non-charitable purposes. CMF and several community foundation members submitted comments to Treasury on the proposed rules. Treasury’s work and the potential for some form of the ACE Act to resurface necessitates greater education on the value of DAFs as a flexible, powerful, democratic philanthropic vehicle. If adopted, some of the proposals would significantly change DAF regulation without guaranteeing increased equity in grantmaking or a better fundraising landscape for philanthropy's nonprofit partners, as proponents sometimes claim. CMF will continue to work with national infrastructure partners and other philanthropy-serving organizations (PSOs) to elevate the importance and need for flexible giving tools. The CMF-commissioned research by the Johnson Center for Philanthropy: Analysis of Donor Advised Funds from a Community Founda5on Perspec5ve, provides Michigan's philanthropic community a data-informed perspective on Michigan DAFs hosted by community foundations, their activity levels and payout rates. The research has been and will continue to be a helpful resource in advocating for data-driven policy and an inclusive discussion of policy change that reflects the diversity of foundations and philanthropy.

CMF and our partners at the Council on Foundations have advocated for legislation over the past several years to make post-graduation scholarships granted by foundations non-taxable. Removing the tax burden on recipients of post-graduation scholarships would encourage more foundations to offer this innovative model and maximize their ability to help alleviate student debt, stimulate local economies and address workforce needs in Michigan communities and across the nation. 

Why CMF should engage: The Community Foundation of St. Clair County is a national leader on this issue, and CMF is one of the leading organizations advocating for changes in policy that would allow these scholarships to be considered non-taxable income to the recipient. Since the establishment of this model in St. Clair County other community foundations in Michigan and across the nation have established these student loan repayment programs to attract and retain a skilled workforce and meet community needs. CMF should continue its leadership role in building a coalition of voices to educate and advocate for the adoption of policies that make this type of scholarship and/or program a charitable activity.

Charitable nonprofits are private organizations that share a commitment with the government to improve lives and strengthen communities. We often partner with the government to administer programs and ensure communities receive critical resources. Philanthropy, in particular, also supports innovative programs that can be brought to scale by the government. Despite the many contributions of the charitable sector, the Bureau of Labor Statistics provides employment and wage information on a quarterly basis for almost every sector of the economy, except the nonprofit sector. Regular, reliable employment and economic data coupled with policies that streamline and simplify access to and reporting for grants strengthen the charitable sector's relationship with the government, allowing us to bring our unique perspectives to policy decision-making and be better data-informed in ensuring that policies are effective, efficient and benefit the communities the charitable sector works alongside. 

Why CMF should engage: Narratives coupled with reliable data tell the story of community impact. Investments in gathering and sharing nonprofit data allow the charitable sector to benchmark outcomes against more significant trends while helping policymakers understand the challenges the sector faces and crafting responsive, responsible policy solutions. Nonprofit data would also allow us to understand the sector better, but it could be used to help inform other policies like streamlining federal grants. The charitable sector needs a regulatory environment that recognizes the contributions it makes in the communities it works alongside and one that addresses the barriers that impede communities and small nonprofits from applying for and administering federal grants. CMF has witnessed the complexities of administering federal grants without added supports and the importance of interrogating processes. A simplified and transparent process across federal agencies would help facilitate a more equitable distribution of federal grants as a broader range of communities and nonprofits could access needed resources

The charitable sector is among the most trusted sectors by Americans, with many believing that nonprofits can reduce national division and positively impact the most pressing issues facing our country. Efforts to weaken or repeal the Johnson Amendment, which prohibits charitable organizations from endorsing, opposing or contributing to political candidates and engaging in partisan campaign activities, threaten to erode the public’s trust. 

Why CMF Should Engage: A federal lawsuit was recently filed challenging the constitutionality of the longstanding Johnson Amendment, the provision in Section 501(c)(3) of the Internal Revenue Code that conditions tax-exempt status and the ability to receive tax-deductible contributions on the agreement that charitable organizations and foundations refrain from endorsing or opposing candidates for public office. The suit alleges that the Johnson Amendment violates the right to freedom of speech, which is protected by the First Amendment, by preventing endorsements of candidates. It also alleges that as enforced by the IRS, it violates due process, as protected by the Fifth Amendment, because of selective enforcement. The plaintiffs in the case allege that some groups get away with violating the law, but the IRS targets certain organizations for enforcement. While a decision has not been made in the suit filed, several national partners have expressed concerns that this could breathe new life into previous legislative proposals to repeal the Johnson Amendment. Removing the nonpartisan status of charitable nonprofits contributes to the further politicization of the charitable sector and takes away from our missions and work as nonpartisan partners in communities. CMF will join other infrastructure partners, including the National Council of Nonprofits, in opposing legal and legislative efforts to eliminate the Johnson Amendment.