California AB 1712: Donor Advised Funds (Round Two)

We previously wrote about California AB 1712 when it was a spot bill, a placeholder to address the Legislature’s intent to enact legislation on the subject matter of donor advised funds (DAFs). Fast forward 10 months and AB 1712 has been amended to focus on transparency and data collection without reference to a minimum distribution requirement. It nevertheless remains controversial.

This bill would also require the Attorney General to adopt rules and regulations requiring a donor-advised fund, as defined, to include specified information in reports to the Attorney General for the purpose of helping the Attorney General determine whether the funds or accounts managed by the donor-advised fund are being administered properly. The bill would also prohibit the disclosure of the personal information that identifies an individual donor and would exempt a donor-advised fund sponsoring organization from disclosure requirements if it meets specified, self-certified conditions.

UPDATE (1/25/2020): Assemblymember Buffy Wicks will be introducing a new bill in February that will replace AB 1712. See New Bill to Replace AB 1712 (CalNonprofits).

Proposed Reporting Requirement

AB 1712 provides that the Attorney General shall, pursuant to subdivision (b), adopt rules and regulations requiring that reports filed pursuant to this section by a donor-advised fund sponsor disclose information about individual funds or accounts maintained by the donor-advised fund sponsor that will help the Attorney General ascertain whether those funds or accounts are being properly administered. The information disclosed pursuant to the rules and regulations adopted by the Attorney General shall include, but not be limited to, any of the following:

(A) Whether the donor-advised fund sponsor has a publicly available policy with respect to donor-advised funds that are inactive, dormant, or do not make distributions during a specified period of time that does not exceed 36 months.

(B) A description of the donor-advised fund sponsor’s policy for responding to funds described in subparagraph (A), including the manner in which the donor-advised fund sponsor monitors and enforces compliance, or a statement that no such policy is in effect.

(C) For the most recently completed accounting period, the value of assets invested by the donor-advised fund sponsor organization that were invested in mutual funds, exchange traded funds, or other investment vehicles or entities controlled by, controlling, or under common control with an entity that provides administrative or investment services to the donor-advised fund sponsor.

Personal Information Exclusion

AB 1712 excludes the following types of information from the reporting requirement described above: Personal information that identifies or describes any individual donor or advisor to a donor-advised fund sponsor, including, but not limited to, the donor’s or advisor’s name, social security number, account number, address, telephone number, or email address.

DAF Sponsoring Organizations Exempt from Disclosure Requirements

AB 1712 exempts from the disclosure requirements, for a given year, a DAF sponsoring organization if any of the following apply for that year:

(i) The sponsor holds less than three hundred million dollars ($300,000,000) in total donor-advised fund assets.

(ii) The sponsor granted out more than 50 percent of the aggregate value of total assets across all donor-advised fund sponsors.

(iii) The sponsor grants more than 90 percent of distributed funds to serve a geographically defined community smaller than a state.

(iv) Of the sponsor’s total distributed grants, more than 90 percent were issued to serve a geographically defined community smaller than a state.

Additional Resources:

California Looks Into Billions Held in Funds Intended for Charities (Bloomberg Tax)

Why Jack Dorsey (and you) should pay attention to this proposed charity law in California (Vox)

CalNonprofits Sponsors Bill for Transparency in Donor-Advised Funds

The League Of California Community Foundations Is Taking An Oppose Position On Bill AB 1712

Donor-Advised Funds Debate Intensifies with Proposed California Legislation (Nonprofit Quarterly)