In an op-ed published in The Chronicle of Philanthropy entitled “For Most Charity Fundraisers, DAFs Are a Useful Tool for Attracting Gifts — Not a Problem in Need of More Regulation,” Indiana University Lilly School of Philanthropy Professor Emeritus Leslie Lenkowsky wrote about a recent Chronicle of Philanthropy webinar for fundraisers focused on building ties to DAF donors. Lenkowsky noted that, during the event, none of the participants mentioned the so-called Ace Act, proposed legislation that Philanthropy Roundtable believes would handcuff givers who have donor-advised funds, threaten donor privacy and discriminate against family foundations. While the topic has received considerable attention from academics and in the media, Lenkowsky said there seems to be little worry among the fundraising community about the unfounded charge DAFs are more beneficial to donors than to charities.
Below are excerpts from the op-ed entitled “For Most Charity Fundraisers, DAFs Are a Useful Tool for Attracting Gifts – Not a Problem in Need of More Regulation”:
“There are several possible explanations for [the lack of discussion about] this, including that the purpose of the webinar, as stated in promotional materials, was to help organizations ‘find and strengthen ties with supporters who give through DAFs.’ … But characterizing the program as a professional-development opportunity reveals something else: Despite the controversies swirling around DAFs on Capitol Hill, for most nonprofit professionals, these funds have increasingly become just another useful tool for obtaining resources.
That shouldn’t be surprising. DAFs, after all, are no more than restricted accounts set up to make gifts to charities. They can be managed by community foundations, investment companies, such as Fidelity and Vanguard, and other organizations, which set policies for allowing donors to designate recipients. Donors can claim tax deductions when they make contributions to establish these funds, but no laws govern when they must designate charities to receive the money, as the annual payout requirement does for private foundations.
That is why DAFs, which have been around for decades but have recently grown in popularity, have become controversial. Critics claim that donors benefit by lowering their taxes when they set up their accounts, but charities may get no benefits until much later when the donors choose recipients for their funds. In response, DAF defenders note that the money put into these funds must go to charities sooner or later and cannot go back to the donors. In any case, they argue, the actual distribution rates of the funds from the approximately 1 million DAFs in the United States compare favorably to those of private foundations.
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Supporters of the ACE Act might argue that the bill aims to make DAFs more useful to charities than they are already. However, the consequences of new government regulations are often hard to foresee. The 1969 Tax Act, for example, which rewrote federal rules for foundations, initially resulted in a ‘lower propensity to form a foundation in one’s lifetime,’ noted Elizabeth Boris, previously with the Council on Foundations — even if donors did eventually get used to the new requirements.
The Chronicle of Philanthropy’s webinar suggests that nonprofit professionals are well along in figuring out how to use DAFs. It would be a pity if a complicated new law set them back.”
Please continue reading “For Most Charity Fundraisers, DAFs Are a Useful Tool for Attracting Gifts – Not a Problem in Need of More Regulation” at The Chronicle of Philanthropy.
In an op-ed published in The Chronicle of Philanthropy entitled “For Most Charity Fundraisers, DAFs Are a Useful Tool for Attracting Gifts — Not a Problem in Need of More Regulation,” Indiana University Lilly School of Philanthropy Professor Emeritus Leslie Lenkowsky wrote about a recent Chronicle of Philanthropy webinar for fundraisers focused on building ties to DAF donors. Lenkowsky noted that, during the event, none of the participants mentioned the so-called Ace Act, proposed legislation that Philanthropy Roundtable believes would handcuff givers who have donor-advised funds, threaten donor privacy and discriminate against family foundations. While the topic has received considerable attention from academics and in the media, Lenkowsky said there seems to be little worry among the fundraising community about the unfounded charge DAFs are more beneficial to donors than to charities.
Below are excerpts from the op-ed entitled “For Most Charity Fundraisers, DAFs Are a Useful Tool for Attracting Gifts – Not a Problem in Need of More Regulation”:
“There are several possible explanations for [the lack of discussion about] this, including that the purpose of the webinar, as stated in promotional materials, was to help organizations ‘find and strengthen ties with supporters who give through DAFs.’ … But characterizing the program as a professional-development opportunity reveals something else: Despite the controversies swirling around DAFs on Capitol Hill, for most nonprofit professionals, these funds have increasingly become just another useful tool for obtaining resources.
That shouldn’t be surprising. DAFs, after all, are no more than restricted accounts set up to make gifts to charities. They can be managed by community foundations, investment companies, such as Fidelity and Vanguard, and other organizations, which set policies for allowing donors to designate recipients. Donors can claim tax deductions when they make contributions to establish these funds, but no laws govern when they must designate charities to receive the money, as the annual payout requirement does for private foundations.
That is why DAFs, which have been around for decades but have recently grown in popularity, have become controversial. Critics claim that donors benefit by lowering their taxes when they set up their accounts, but charities may get no benefits until much later when the donors choose recipients for their funds. In response, DAF defenders note that the money put into these funds must go to charities sooner or later and cannot go back to the donors. In any case, they argue, the actual distribution rates of the funds from the approximately 1 million DAFs in the United States compare favorably to those of private foundations.
…
Supporters of the ACE Act might argue that the bill aims to make DAFs more useful to charities than they are already. However, the consequences of new government regulations are often hard to foresee. The 1969 Tax Act, for example, which rewrote federal rules for foundations, initially resulted in a ‘lower propensity to form a foundation in one’s lifetime,’ noted Elizabeth Boris, previously with the Council on Foundations — even if donors did eventually get used to the new requirements.
The Chronicle of Philanthropy’s webinar suggests that nonprofit professionals are well along in figuring out how to use DAFs. It would be a pity if a complicated new law set them back.”
Please continue reading “For Most Charity Fundraisers, DAFs Are a Useful Tool for Attracting Gifts – Not a Problem in Need of More Regulation” at The Chronicle of Philanthropy.
