Donors should be able to DO charitable work, not just DONATE to existing charities
by Dr. JT Dock Houk, JD, PhD, CPhD
Some of you may have read my blog from October 18, 2007 called "KATRINA PART-DEUX," which noted sadly that the Pension Reform Act of 2006 makes it illegal for a donor to recover reasonable compensation and expenses from moneys that he may have donated to a DONOR ADVISED FUND when he assists victims of a second disaster like HURRICANE KATRINA.
And now comes the CALIFORNIA FIRES PART-DEUX! A donor who makes a donation to a Donor Advised Fun HAS NO FINANCIAL WAY TO HELP. Sure, he can go to the disaster area as a volunteer and perhaps buy a shovel at a local hardware store. But he may not even get reimbursed for the expenses of the shovel from his donations to a Donor Advised Fund. And most certainly, he cannot receive compensation at all. But the wealthy – the Bill Gates's of the world – can set up a Private Foundation and pay themselves and others to participate in the California Fire recovery effort. The wealthy – those who can afford the tremendous expenses of a Private Foundation – CAN pay reasonable compensation and expenses for such worthy charitable work, those who are not wealthy CANNOT.
This reminds me of a conversation on CNN with author John Grisham, who was asked why he did not simply make a contribution to the Salvation Army or the Red Cross to reflect his concern for the victims of Katrina. He said “My wife and I wanted to roll up our sleeves. We wanted to get our hands dirty. We wanted to help personally.” So, because Donor Advised Funds are prohibited from paying reasonable compensation and expenses in such instances, he put $5 Million in his OWN PRIVATE FOUNDATION.
If you are half as upset about this as I am, please call your Congressman and let him know. For your review, under the current law change:
- National Heritage Foundation (A Donor Advised Fund) can make gifts at the donor’s suggestion to approved (by NHF and IRS) charities and to other organizations for charitable purposes. And it can make gifts abroad to organizations that National Heritage Foundation approves on the basis that they “would be charities” if they were located in the U.S.
- Congressional District Programs (A Field of Interest Charity) is NOT a Donor Advised Fund, must be monitored by a Project Manager who is a NON Donor with Congressional District Programs' approval, and can indeed pay reasonable expenses and compensation to non-donors.
- Charity Admin, Inc. – this is a new Charity Management Company that can create and manage Public and Private Independent Charities that can indeed still pay the donor, and perhaps his nominees, reasonable compensation and expenses for their charitable activities.
Charity is everyone’s business, and it is not right to say to a small donor – well, you can't perform the work yourself, but you can just donate to (fill in the charity name).
