Government Relations Goals

Action

CMF has been working over the past several years to restore the charitable tax credit for donations to endowed funds at community foundations that was once available to Michiganders. Charitable incentives at the state level are critical to ensure local nonprofits have access to the resources they need for the communities they serve. Mainly, incentivizing small gifts through charitable tax credits democratizes giving and engages younger and first-time donors who become more likely to be lifelong givers. 

Why CMF should engage: Over 20 years ago, Michigan was among the first states in the country to have a tax credit in place to encourage a culture of giving and grow the endowed assets of Michigan community foundations and nonprofit partners to meet community needs. Since the tax credit was eliminated in 2011, CMF has been leading advocacy efforts to restore it. A study conducted by the Dorothy A. Johnson Center for Philanthropy in 2014 noted a 44% decline in $200 donations to endowed funds at community foundations in the two years after the tax credits were repealed, and the number of first-time donors declined by 37.5%.

Nonprofits that previously used the tax credit to leverage more donations to do their good work saw those types of donations dwindle and often disappear, creating barriers for those nonprofits to build funds that give them budget stability in critical times. The issue has garnered broad bipartisan support, and charitable tax incentives are a concept supported by over 85% of the country. Michigan has the opportunity to join over 15 states with laws to incentivize charitable giving. CMF will continue to make this timely, important issue a priority.  

Monitor

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

Why CMF should engage: Forced donor disclosure has the potential to threaten donor privacy and infringe on the rights to free association by potentially discouraging donors from giving to causes and associations they believe in. Charities are already required to report information for donors who give over $5000 to the IRS on their Schedule B forms, but donor information is redacted when those forms are made available to the state and the public. 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.  

Monitor

Some municipalities request payment in lieu of taxes (PILOTs) from nonprofits to raise additional revenue, leaving nonprofits in a predicament that would force them to divert resources away from their direct charitable missions. With MNA's leadership, CMF continues to monitor this issue.   

Why CMF should engage: The tax-exempt status of nonprofits has been crucial over the years in helping to reinforce their missions and meet community needs. If these tax exemptions were eliminated, it would have profound equity implications since 93% of 501c3 filers have revenue less than $1 million and over half of those record less than $50,000 in revenue. Several factors, from property tax law to state revenue sharing decreases, continue to challenge local budgeting and incentivize local government units to continue challenging the tax-exempt status of nonprofits. Although the Michigan Supreme Court has set a strong precedent in two rulings, ongoing local budget challenges suggest CMF must remain vigilant on this issue. 

Action

CMF will advocate for a universal charitable tax deduction and other inclusive tax incentives that allow all taxpayers giving to charity to receive a tax benefit. Data shows that these incentives increase the number of resources available for nonprofits to carry out their mission-driven work in communities and support a culture of giving among individuals and families at all income levels.

Why CMF should engage: Democratizing giving through the universal charitable deduction provides everyone the same tax benefits previously only available to taxpayers that itemize deductions. It makes giving more equitable and broadens revenue streams for nonprofits. In the first quarter of 2022, Independent Sector’s Quarterly Review highlights the largest relative drop in donors was among small donors, down some 15% for contributions made at the $100 level and nearly 10% for contributions between $101 and $500. The policy has broad bipartisan support and has been an issue our national colleagues, such as the Charitable Giving Coalition, have been very active with. CMF should continue to lend our voice to the various coalitions working with our federal delegation to see the universal charitable deduction expanded and extended. 

Action

CMF is recognized as a national thought leader and key sector partner on mandated base private foundation 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 mandated increase to private foundation payout requirements could be detrimental for some foundations in the short term and harmful for many foundations in the long term, hindering their ability to adequately respond to unanticipated crises. Additionally, arguments supporting an increase in payout rates assume that foundations treat the 5% standard as a ceiling rather than a floor. Research data shows that nearly half of Michigan foundations disburse 6% or more of their assets each year and more than a third pay out more than 9%. 

Why CMF should engage: CMF supports a policy environment that ensures philanthropy has the tools and resources to achieve its missions and address community needs now and into the future. The introduction of the ACE Act last Congress highlights the importance of greater education on the value of endowed philanthropy. CMF has shown national leadership in commissioning research examining the practices of Michigan philanthropy, specifically around the payout issue. In isolation, policies that significantly change how endowed philanthropy operates are unlikely to achieve the equity goals sought by philanthropic leaders.

While CMF has shown leadership on the issue through our commissioned research, our national partners are also very engaged along with other philanthropy-serving organizations. Given the diverse opinions on this issue, CMF should continue to actively advocate for data-driven policies and inclusive discussions that reflect the diversity of foundations and philanthropy and advances best practices for equitable grantmaking at current payout rates.

Action

Donor advised funds (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. CMF's advocacy positions around any potential or pending reforms to DAFs will be supported by data confirming the reform's effectiveness in helping philanthropy, and individual donors better serve their communities. This is to ensure that DAFs continue to be convenient, flexible and dynamic giving tools that help provide sustainable, adaptable resources for community impact.  

Why CMF should engage: The introduction of the ACE Act last congress has necessitated greater education on the value of DAFs as a flexible, powerful, democratic philanthropy vehicle. In 2021, CMF partnered with the Dorothy A. Johnson Center for Philanthropy to launch Analysis of Donor Advised Funds from a Community Foundation Perspective which has received national attention. The research shows that most Michigan community foundation DAFs are active in a typical year. Additionally, the Community Foundations National Standards include DAF activity policies as a requirement for accreditation. While CMF’s research has helped to launch conversations, any federal proposals that would significantly alter DAF use must be accompanied by national data. Given the diverse opinions in philanthropy, CMF should continue to actively play a role in advocating for data-driven policy, inclusive discussions on policy change and supporting the adoption of equitable grantmaking practices.  

Action

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. This would not only relieve individuals who have already completed a degree or technical program of the tax burden from their post-graduation scholarship but also enables philanthropy to be part of the solution in addressing the student debt crisis and helping to fuel and strengthen local economies.  

Why CMF should engage: The Community Foundation of St. Clair County is a national leader on this issue, and CMF is one of the lead organizations advocating for the policy and the legislation. Several equity considerations within this policy align well with CMF's strategic framework, and the policy has the potential to significantly affect communities around the state in talent attraction and retention efforts in needed career fields in a given region. CMF should continue its leadership role building a coalition of voices to educate and advocate for passing legislation that makes post-graduation scholarships non-taxable, stimulates regional economic growth and helps address the growing student debt crisis.

Monitor

Program-related investments (PRIs) and mission-related investments (MRIs) help CMF members further advance their missions and can be important tools that help foundations deepen their impact. We recognize that some of our members do not use PRIs because regulations are unclear. We anticipate many more could and would leverage this investment strategy if there were clear guidelines from Treasury. In the past, CMF has partnered with legal counsel to advance recommendations to the U.S. Department of Treasury on clarifications and simplifications that could be implemented to support the use of PRIs and MRIs.   

Why CMF should engage: PRIs can help foundations make systemic, equitable investments in communities. This technical issue tends to fly under the radar for both philanthropy and policymakers, showing that CMF engagement is needed during windows of opportunity. Working with Treasury is an effective avenue to support PRIs, and CMF will continue to work with Treasury and look for opportunities to clarify the regulatory guidelines around these tools.  

Monitor

While the IRA charitable rollover is now a permanent giving incentive – a significant accomplishment for our sector – there are other charitable entities and supporting organizations that CMF members would like included as eligible entities for tax-free charitable distributions for IRAs. CMF will continue to monitor proposed legislation that seeks to broaden tax-free distributions from IRAs to increase dollars donated by individuals from their IRAs for strategic grantmaking in the communities our members serve.   

Why CMF should engage: Tax-free IRA distributions could be an important tool for helping our community foundations across the state. CMF staff has continued to advocate for the inclusion of this language in relevant legislation moving through Congress. The current retirement package from last Congress has enjoyed broad bipartisan support and represents a partial win in broadening the tax benefits as it does not include donor advised funds due to budget impact concerns. CMF will continue to monitor the federal legislative landscape and in partnership with others, look for opportunities to include DAFs.