Comment from Orange County Community Foundation
Orange County Community FoundationOpposeAdvocacy
Summary: The Orange County Community Foundation opposes the Proposed Regulations, arguing that expanding the definition of "donor advisor" to include "personal investment advisors" is legally unauthorized, unworkable, and disproportionately harms community foundations. They contend that existing state and federal regulations (such as those from the SEC and FINRA) already provide sufficient oversight of financial advisors and that the new rules would discourage charitable giving by forcing donors to move assets to private foundations.
This comment letter is written on behalf of the Orange County Community Foundation (the “Community Foundation”) in response to Notice of Rulemaking (REG–142338-07) regarding “Taxes on Taxable Distributions from Donor Advised Funds under Section 4966.” This letter discusses issues and concerns raised by the Community Foundation, which is a sponsoring organization with various donor-advised funds and other programs which the Proposed Regulations would negatively impact if made final. The Community Foundation is also requesting that a public hearing be scheduled on the Proposed Regulations. Below is a summary of the issues and concerns provided in this comment letter response:
• Expansion of the definition of “donor advisor” to include “personal investment advisor”;
• Default treatment of certain “financial advisors” as “donor-advisors”;
• Overly broad definition of “donor advised fund”; Sponsors already having actual control of financial advisors;
• “Designated funds” treatment;
• Economic impact of the proposed regulations, specifically, in enacting the proposed regulations pertaining to personal financial advisors;
• Definition of “distributions” and inclusion of fee-for-service arrangements
• Treatment of payment of bona fide fees and expenses, except in limited cases;
• Anti-abuse “Daisy Chain Rule” section 4966(c)(2) should be based on knowledge of the sponsoring organization; sponsoring organizations are in no position to know what a grantee does;
• Liability of fund managers under section 4966; and
• Effective date and transition period.