Comment from Madison Community Foundation

This comment letter is written on behalf of Madison 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 outlines Madison Community Foundation's concerns regarding the Proposed Regulations' disparate impact on community foundations as compared to commercial gift fund sponsors and private foundations. Specifically, these concerns include the following: 1. The definition of "advisory privileges" used by the Proposed Regulations is overly broad and could dissuade those most passionate about serving their communities from community-focused philanthropy; 2. The economic impact of compliance with the Proposed Regulations pertaining to personal investment advisors will almost exclusively be borne by community foundations; 3. The Proposed Regulations pertaining to personal investment advisors would require community foundations to expand compliance, which is unnecessary and could have a detrimental impact on third party asset management programs; 4. A retroactive due date would be especially difficult to implement for community foundations, as they have less compliance staff and resources than commercial gift funds; 5. The one-beneficiary limitation under the donor-designated funds exception creates an unnecessary distinction that is inconsistent with the way many community foundations administer donor designated funds; 6. The Proposed regulations do not clarify what types of expenses relate to DAF administration or grantmaking, or how to allocate or apportion expenses that relate to multiple activities; 7. The definition of "distribution" included in the Proposed regulations is overly broad and could effectively classify all of an organization's overhead costs as taxable distributions if paid out of funds held in one or more DAFs; and 8. The knowledge requirement imposed on fund managers under the distribution and anti-abuse provisions of the Proposed Regulations would place a more stringent requirement upon fund managers at a community foundation than managers at private foundations.