Finance

Donor Advised Funds Receive More Giving Than Public Charities

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Earlier this month Vu Le of the Non Profit AF blog linked to a piece reporting that Donor Advised Funds (DAF) had surpassed charities as recipients of charitable revenue.  The problem with this, as I have previously written, is that unlike public charities which are required to spend at least 5% of their funding each year, donor advised funds have no such requirement but the donor gains the tax benefit of making a donation.

In other words, the government is subsidizing giving that is not necessarily providing any charitable benefit. From the Inequity.org article:

Of particular concern are DAF sponsors that are affiliated with for-profit Wall Street financial corporations. As we have documented, these commercial DAFs provide enormous publicly-subsidized tax benefits to their high-rolling contributors while actively encouraging the warehousing of charitable wealth. And commercial DAFs have been growing explosively.

In fact, the largest commercial DAF sponsors now take in more money each year than our largest public charities.

The article has an animated graphic illustrating how over time DAFs have occupied six of the top ten recipients of charitable revenue, displacing United Way Worldwide from its top spot to number four.

There has already been some discussion about how the required minimum 5% annual distribution by charities was a low bar to meet, especially since some of the charity’s administrative expenses and activities can count toward the 5% expenditure rather than purely distributed as grants.  So the fact that so much more money is being directed toward DAFs than ever before with no requirement that it be distributed is of growing concern.

All That Is Philanthropy Is Not Gold

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I have been following Lucy Bernholz, a self-described philanthropy wonk, for ages it seems. She writes the blog Philanthropy 2173 and is a senior researcher at Stanford’s Center on Philanthropy and Civic Society.  When I saw an interview with the AP about a how philanthropy isn’t all about money, I took a closer look.

And before I get into my post proper, if you are interested in hearing more, she is participating in a Zoom conversation on the topic on November 4 @4pm ET

Basically she says that there is more to philanthropy than giving money, though you wouldn’t know it from the way the news outlets and most non-profits focus on what billionaires are doing with their money. Or for that matter, the round up requests you get when you buy your groceries.  The result is that our understanding of non-monetary methods of philanthropy are pretty much stifled. Alternatives aren’t just volunteering and donating blood and organs. It can be donating genetic material for disease research or giving photographs to organizations which document historical events like the Japanese internment during World War II.

When Bernholz was asked about how tax law has impacted philanthropy, she gave the following response:

A: It never came up in our conversations. Only when we brought it up. What’s fascinating about that is only 8% of Americans bother to take the charitable tax deduction on their tax return. Now, tax policy is pretty much the only policy idea the philanthropy industry has any interest in. They’re serving 8% of the population. And I know that 8% is not Mark Zuckerberg. It’s not Pierre Omidyar. It’s not Laurene Powell Jobs. They’ve all said: “We don’t care about the tax benefit. We’re gonna do an LLC, because that gives us more control and more anonymity.” So there’s some 8% who care. In poker, they’d call that a tell. If and until the nonprofit and philanthropic industries start advocating for really rich people to pay their taxes, I think the view of that whole industry as a wealth preservation mechanism is quite justified.

It was surprising to learn that only 8% of Americans take the deduction. Gallup polling has shown about 80% of Americans donated every year pre-Covid. Granted, not everyone may donate to a level at which it makes sense to claim the deduction, but surely more than 8% donate above that threshold.

We frequently hear that the U.S. government subsidizes non-profits by allowing that deduction, but it appears the subsidy isn’t as great as we may think if so few claim the deduction.

Bernholz mentions that many wealthy people have eschewed tax deduction and formed LLCs to distribute funds to maintain tight control. But there is also increased prevalence of donor advised funds (DAF) which do provide a deduction without any mandate to distribute the funds to charities, and therefore an heightened level of control as well. If you consider that a portion of that 8% claiming deductions may have never reached a charity because it is parked in a DAF that hasn’t distributed, the government is subsidizing non-profits even less than we might imagine.

Seats Are Open, But So Are The Doors For More Diverse Stories

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On Friday one of my colleagues at work is flying to NYC to see Springsteen on Broadway, the show that re-opened earlier than pretty much all the others. She purchased the tickets months ago when they first went on sale.

Unfortunately, it doesn’t appear most people share her level of optimism. A CNBC story reported that even the most popular titles are seeing very soft sales.

Although tickets have been on sale for months, neither “Wicked” nor “The Lion King” – the top two highest-grossing musicals in history – sold out their first week of performances. “Hamilton,” which historically sold out months of performances within minutes, also has plenty of opening week availability. Between September 14, 2021, and June 5, 2022, only one performance of “Hamilton″ is sold out.

A Forbes article projects some potential doom and gloom for the production of the show Pass Over, which has been getting a lot of great press. In fact, there is a suggestion in a couple articles that they moved up the date of their opening to last Sunday in order to take advantage of the the good press they have received.

This is somewhat unfortunate for the production of Pass Over because in addition to the high quality and expectations, there are a lot of good portents associated with the show. For one, it is the first show by a Black playwright to appear in the August Wilson Theatre since the venue was named for the esteemed Black playwright in 2005. (A lot of “about time” comments on social media noting that it took 15 years for that to happen).

According to a Reuters piece, Pass Over is among a number of upcoming shows which are being supported by first time Black investors.

However, seven new plays have been announced for this fall, all by Black writers. Some are being financed by first-time Broadway investors, including co-founder of television network BET, Sheila Johnson, who is putting money behind the play “Thoughts of a Colored Man.” Johnson and celebrity chef Carla Hall are also investing in a new musical called “Grace” about Black culinary history.

Actor Blair Underwood and former basketball player Renee Montgomery are investing in the stage play “Pass Over”, a modern twist on “Waiting for Godot.”

“There is various new money that is coming into Broadway, and that money is extraordinarily helpful and it is also diverse money, which is also very interesting and new,” said Brian Moreland, producer of “Thoughts of a Colored Man,” opening in October.

Whether we like it or not, money has a big influence in terms of what stories get told so this can be a positive indication for greater representation in whose stories get told and who is involved in telling those stories.

Keep Your Eyes Open For NEA American Rescue Plan Grant Webinars

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While everyone is waiting for their Shuttered Venue Operating Grant (SVOG) application to be processed, you should be taking a look at the National Endowment for the Arts American Rescue Plan (ARP) funding. The NEA just held a webinar today about it, but most states and regional arts organizations are having one for their members. Americans for the Arts is having one on July 6.

In a nutshell, the reason why you want to apply for this is because there are far fewer restrictions than usual on the program. The only broad categories that they won’t fund are capital improvements and project grants. Usually all they fund are projects. They still don’t provide funding to individual artists.

They will pay for operational costs like salaries and non-capital equipment.  You can apply even if you have an SVOG grant pending or have received funding from other programs like PPP or EIDL.  You just can’t apply for reimbursement of the same expenses covered by another program. So if other funding covers salaries until December 31, you would need to apply salaries from January 1 onward to the ARP grant. The funding can be applied across two years which allows some time to regain momentum lost during Covid.

They have a PDF prepared with all the information you will be expected to provide. Note that everyone has the deadline of August 12, 2021 to submit a short form application on Grants.gov, but then organizations whose legal identity begins with A-L will apply through the separate NEA applicant portal August 19-25 and those with names beginning M-Z will apply August 27-September 2.

My guess is that they are trying to avoid a lot of the snafus which plagued the SVOG program.

Take a look at the information and find a webinar to attend. As you might imagine there is a ton of interest in these programs. I received an email about 2-3 hours before the webinar started that they had reached capacity with registrations and keep trying to get in if you are initially blocked so I queued up 20 minutes early in the hopes of being admitted.