Wednesday, April 13, 2022

DAF Update: Biden Administration Tips Toe In; Studies and More Studies

Download (1)Cherry picking an issue flagged by the IRS in 2017 (Notice 2017-73) and addressed by one provision of the pending ACE Act (section 5), the Biden Administration's FY2023 Budget includes a provision (see page 132) that would bar private foundations from counting distributions to donor advised funds toward their minimum payout requirement under IRC 4942, except in limited circumstances (for more details, see pages 58-59 of the General Explanations of the Administration's revenue proposals). While passage of this provision is of course uncertain, it is important because it indicates that the Administration is at least tipping its toe into the DAF reform area. At the same time, 12 bipartisan members of the 43-member Ways and Means Committee issued a letter supporting DAFs and opposing recent DAF reform proposals. (Hat tip: Chronicle of Philanthropy (but incorrectly identifying the signers as all Republicans, when 7 of the 12 are Democrats)).

At the same time studies of DAFs continue to accumulate. The Institute of Policy Studies recently issued the results from two studies:

  • Private Foundation Giving to Commercial Donor-Advised Funds based on the IRS returns of private foundations that filed electronically from 2016 to 2018 and a list of the 45 largest commercial DAF sponsors, with the following findings: 
    • Private foundation giving to these commercial DAFs averaged $737 million per year from 2016 to 2018.
    • From 2016 to 2018, gifts from DAF-giving private foundations to these commercial DAFs averaged about $605,000 each, while their gifts to other recipients averaged just under $119,000 each.
    • 229 foundations gave $1 million or more to these commercial DAFs from 2016 to 2018.
    • Grants to these commercial DAFs made up one hundred percent of all charitable distributions for 157 foundations from 2016 to 2018.
  • Larger Community Foundations Have Become Heavily Reliant on Donor-Advised Funds based on the electronically filed IRS returns of 206 community foundations that participated in Candid's 2019 Columbus Survey, with the following findings:
    • DAFs accounted for a median 24 percent of assets.
    • A median 41 percent of all incoming contributions consisted of contributions to DAFs.
    • A median 42 percent of all outgoing grants were grants from DAFs.
    • Larger community foundations tend to be much more heavily reliant on DAFs for their incoming revenue streams; DAFs account for a much larger proportion of their outgoing grants; and DAFs make up a much larger proportion of their total assets.

The Donor Advised Fund Research Collaborative also recently made available the result of this study:

  • Donor-Advised Fund Account Patterns and Trends (2017-2020) based on 13,000 DAF accounts from 2017 to 2020 at 21 community foundations and religiously-affiliated DAF sponsors in the United States (but not including national, commercial DAFs), with findings including:
    • While 11% of DAFs had over $1 million in assets, the typical DAF is equally likely to be a small-sized DAF with assets under $50,000 or a medium-sized DAF with assets between $50,000 and $1 million.
    • The median four-year average payout rate among all accounts was 11%; among spendable DAFs, the median payout rate was 13%.
    • Large accounts over $1 million were 11% of all accounts and represented at least 85% of the assets in the DAFRC sample.
    • The majority of DAF contributions were received in the fourth quarter, including approximately 55% of dollars contributed and 42% of contribution transactions.

The Chronicle of Philanthropy also reported that giving from two of the largest sponsors of donor-advised funds grew slower in 2021 than in 2020.

Lloyd Mayer

 

https://lawprofessors.typepad.com/nonprofit/2022/04/daf-update-biden-administration-tips-toe-in-studies-and-more-studies.html

Federal – Executive, Federal – Legislative, In the News, Studies and Reports | Permalink

Comments

Notwithstanding the studies and its reporting, the Chronicle of Philanthropy seems to believe DAF's are an important source of funds for nonprofits and is marketing a workshop on how to get them:
From: Dan Parks
Sent: Monday, April 11, 2022 10:26 AM
To: Lenkowsky, Leslie
Subject: How to Attract DAF Gifts

Chronicle of Philanthropy Webinar
Dear Leslie,

Giving to donor-advised funds is surging despite the crises of the past two years – and so are the sums flowing to nonprofits. Grants to charities from the 10 largest DAF sponsors totaled $22.41 billion in 2020. That’s roughly double the amount the 10 biggest foundations gave in the same year.

Yet billions more remain in DAFs, waiting to be funneled to nonprofits. How can your organization find and build ties with donors who give through DAFs?

Join the Chronicle on Thursday, April 28, at 2 PM ET for Building Ties With DAF Donors: Where to Start to get proven tactics from an executive at a community foundation that sponsors DAFs and the head of philanthropic gifts at a nonprofit that excels at raising money from these accounts. They’ll explain:
• How to include donor-advised funds in your outreach to attract DAF gifts
• Tips for processing and acknowledging DAF donations properly
• Ways to raise your nonprofit’s profile with fund sponsors and wealth advisers
Register today to get our early-bird rate before it expires.

This session includes live captioning and ASL interpretation. To request other accommodations, please email copevents@philanthropy.com or call 202-466-1032.

This session qualifies for 1.25 CFRE credits.

Sincerely,

Dan Parks
Senior Editor, Digital and Data
Chronicle of Philanthropy
1255 Twenty-Third St. NW
Washington, DC 20037

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Posted by: LESLIE LENKOWSKY | Apr 14, 2022 8:37:35 AM

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