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Even The IRS Is Questioning Value of DAFs

October 21, 2025

by:

Joe Patti

Last week Alan Harrison did an analysis on Donor Advised Funds (DAF), the relative value of the funds disbursed and some of the loopholes provided by DAFs.

One of the things he notes is that when someone puts money into a donor advised fund, they receive the tax deduction credit for that amount today, but unlike foundations there are no requirements to disburse any of the funds in any particular year.

I have discussed this and other issues in other posts I have made over the years.

Harrison notes that if you assume 3% inflation, by the end of 10 years $100 in a DAF is only worth $78.30 in buying power. On the other hand, the value of that tax deduction will be worth $134.39 in 2034 dollars due to that same inflation.

He also notes that while you can’t use DAF money to lobby, you can direct money to the lobbying arm of a non-profit which can spend up to $1,000.000/year on lobbying. So you are essentially getting a deduction to support lobbying. Generally, non-profit lobbying groups aren’t classified in such a way as to allow a tax deduction.

I have not double checked this suggestion that DAFs are permitted to give to non-profits without tax deductible status, but Harrison cites a piece on Rice University Baker Institute for Public Policy includes this among other abuses of DAFs including:

…, “DAF to DAF transfers” offered a particularly rotten result:

“…although they were recorded as grants to charities, charitable organizations did not receive funds as a result of these transfers.”

Other abuses include:

“Private foundations are not allowed to lobby, whereas publicly supported entities can spend up to $1 million per year on lobbying without penalty. If funds flow relatedly from DAFs to a variety of recipients, the donors can greatly expand the $1 million threshold.”

“the funds can remain in the DAF indefinitely because there is no required timeframe for distributions.”

“counting private foundation to DAF distributions as qualifying distributions has become a way for private foundations to circumvent the 5% minimum distribution requirement”

“a small group of donors may have disproportional impacts on charitable giving — including the cause, timing, and amounts.”

Source

Apparently even the IRS has been having doubts about the value of DAFs according to a link to an IRS publication Harrison provides.

“The IRS is aware of a number of organizations that appeared to have abused the basic concepts underlying donor-advised funds. These organizations, promoted as donor-advised funds, appear to be established for the purpose of generating questionable charitable deductions, and providing impermissible economic benefits to donors and their families (including tax-sheltered investment income for the donors) and management fees for promoters.

impose section 4958 excise taxes on donors or managers of donor advised funds; and/or (d) deny or revoke the charity’s 501(c)(3) exemption.

Examinations of these arrangements may result in the following Service actions in appropriate cases:

disallow deductions for charitable contributions under Internal Revenue Code section 170 for payments to the fund;

impose section 4966 excise taxes on sponsoring organizations and managers of donor-advised funds;

Source

Finance, Fundraising, Government Relations

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Should There Be More Discussion of Mid & Long Range Collective Advocacy Plans?

October 20, 2025

by:

Joe Patti

Oregon Arts Watch (h/t Artsjournal.com) provided some insight into a state advocacy group’s two year plan to propose a redesign of the state’s funding arts model in light of the national political environment.

Cultural Advocacy Coalition of Oregon is soliciting feedback through six in-person and one online forums and a survey of arts and cultural organizations around the state.

What caught my attention was the discussion of their advocacy schedule for 2026 and 20227 based on feedback they had received from the state legislature. I had not really seen a state advocacy group provide as much detail and insight about mid-range plans advocacy plans to its members.

Granted, the states in which I have lived may not have had legislative sessions whose lengths varied so greatly on alternating years as Oregon’s does.

But often communication from advocacy groups is along the lines of needing members to call/write representatives in the next two weeks about a specific bill and to turn out on advocacy day at the legislature. The effort in Oregon outlines what they are doing now and through 2026 in preparation for 2027.

According to Hildick, legislative leaders have said the 2026 session, which is limited to a maximum of 35 days, will not have enough time to consider any comprehensive reforms or programs, no matter how justified. That means the results of The Big/Rethink will be presented in 2027, when the semi-annual “long sessions” can last up to 160 days.

Source

Advocacy, Fundraising, Government Relations

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State Of Independent Venues In Your State

October 15, 2025

by:

Joe Patti

The National Independent Venue Association released the results of their first survey showing the economic impact of independent venues in each of the 50 states and Washington D.C..

The information categories provided aren’t too different from what you might see if you plug your organization’s numbers into an economic impact calculator like Americans for the Arts’

However, the data they collected is only from entities:

….not controlled by a multinational corporation or a publicly traded company, and their primary
mission is to present live performances to the public. This includes venues, promoters, festivals and more.

Source

Each state either has a notation about the contribution to tourism or profitability. Some of the profitability numbers were interesting to read. For example, apparently only 19% of venues in NY reported being profitable. Most of the other states I clicked around on with this category reported were in the 30%-40% range. The only one that was lower was Vermont at 13%. Nationally, they report 64% of stages were not profitable.

The other thing that each state reported was the operational challenges across the nation. Based on the frequency they were reported they were:

Marketing and Bringing in An Audience
Artist costs driving higher artist fees
Staffing costs
Inflation
Monopolies
Rising Insurance Costs
Scalping and Reseller Platforms
Cost of Rent and Mortgage
Uncapped, unlimited performing rights organization fees
Decreasing alcohol sales

The second to last one about performing rights organization fees I am guessing may be groups like ASCAP, BMI, SESAC, etc charging high fees for the rights to perform songs. I didn’t see any specific explanation on the page or press release.

Many of these aren’t surprising since it is pretty clear many of these factors are driving up costs. I didn’t expect decreasing alcohol sales to make the top ten list. But that does have a certain logic to it.

Finance, State of the Arts

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Studio Tours Shouldn’t Replicate The Gallery Experience

October 14, 2025

by:

Joe Patti

For two weekends this month, the local Creative District is operating their annual artist studio tours. There are other associated activities, but the artists’ opening their spaces for people to wander in and look around is the focus of the event. And if people are moved to buy something, so much the better.

One of the features of the tour the president of the Creative District has been pushing artists to do is not sanitize their work spaces. She feels that when artists clear their materials away into closets and throw sheets over bookcases, it removes many of the interesting elements that can lead to a conversation about process.

I tend to agree. I visited a number of studios this weekend with more on my list for next weekend. In some cases I was able to stand right in the studio was people worked. Most of the time I was in a living room with all the furniture cleared out and the work hung on the walls, arrayed on display racks, or shelving.

Because I have some familiarity and knowledge, I was able to ask some questions about process and materials used, but many curious visitors would basically have had the impression they wandered into a home gallery.

Part of my concern is that seeing a person painting in their immaculate living room with a small tarp under the easel essentially reinforces the idea that art is done by a special breed of people who create things immediately without error.

When in fact, their studios are paint and clay splattered, with swaths of material shoved in to nooks and crannies, and metal filings and sawdust swept into piles. All testaments to their efforts. Not to mention photos, sketches, and early iterations that comprised their study and preparation of the final product leaning against the walls.

Galleries are places in which artists can control the context and perspective in which the visitors encounter their work. Studios tours provide an opportunity to let visitors encounter and better understand their process. There is a missed opportunity when studio tours are essentially replicas of the gallery experience.

Art(ist) Education, Arts Facilities, Audience Relations, Building Public Will For Arts And Culture, creativity, Working In The Arts

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