A few weeks ago, I wrote a post about how donor advised funds (DAF) had surpassed charities like the United Way as recipients of charitable giving. I noted this is a problem because unlike foundations and other grant making institutions, DAFs have no obligation to disburse the funds they hold. The donors get the tax benefit, but the funds are not being employed for a charitable purpose.
The good folks at the Non-Profit Law blog recently shared a link to a June 2022 Ipsos poll showing public sentiment is against such arrangements. Not only do they feel DAFs should be required to distribute the funds they hold, they feel foundations should be required to distribute twice the amount they are currently.
- With more than $1.2 trillion in charitable contributions currently sitting on the sidelines, 69 percent of adults surveyed support a 10 percent payout requirement for foundations (up from the current 5 percent) and for DAFs (which currently have no payout requirement), even if this reduces the amount of money in foundations and DAFs in the future.
- 73 percent support requiring DAFs to make grants within 2 to 5 years of receiving donations.
The biggest impediment to generating general will toward making these changes is lack of knowledge about the situation. Of those surveyed, only 17% were aware that the tax code is structured to allow tax exemptions for charitable giving while allowing so little to be distributed to non-profit entities. Once people become aware of this information, there is bi-partisan support to make changes that will see non-profits receive a greater amount of funds sooner.
Specifically, respondents across the political spectrum expressed a strong discomfort with taxpayer subsidies allowing donors to set up perpetual foundations, with conservatives objecting to such subsidies even more strongly than liberals. What is more, both liberals (74 percent) and conservatives (70 percent) favor increasing foundation and DAF payouts to 10 percent, even if it would reduce foundation assets in the future.