The Philanthropy Project is not anti-DAF… and here’s why
When people hear about the Philanthropy Project, sometimes we hear back, “But I think donor-advised funds (DAFs) can be useful.”
We agree! We are not anti-DAF. We do not favor getting rid of DAFs.
We aren’t anti-car, but we think there should be speed limits. We aren’t anti-beer or anti-cocktail, but we support drunk-driving laws. Morphine is a crucial drug for severe pain, but we’re glad it’s regulated.
To be perfectly clear: we are not anti-DAF. DAF accounts can serve as efficient and generous tools to manage charitable contributions, which the world needs more of. We are, however, against the ways DAFs get used for private benefit, to support illegal activities, or when Wall Street firms manipulate tax deductions and their fees through DAFs.
“But I use my DAF responsibly and so do my friends who have DAFs!”
That’s wonderful to hear. You and your friends probably also don’t drive drunk. But we still need laws against drunk driving.
“If I want to put $10 million into a DAF and let my children decide after my death whether and how to give it out, I should be able to.”
Yes, you should! But you shouldn’t get an immediate charitable tax deduction just for socking it away now. Instead, you or your children should get a tax deduction when it is converted into an actual public benefit. That result does deserve a tax deduction.
So what do we think? The speed limits and impaired driving laws should be for donor-advised funds, private foundations and endowments. Promoting effective policies on this question is just what the Philanthropy Project is about.
I agree with giving a tax deduction when the funds are actually given away. Otherwise, it is like putting your funds in a bank account and getting a tax deduction at that time.
That would create a bookkeeping nightmare!
The logic is that the donor codes control of the gift to the recipient organization which the accepts advice from donor as a courtesy (while the donors’ funds increase the investment portfolio of the recipient organization.)
Supposedly if the recipient organization decides to grant the funds to fulfill its own philanthropic goals, it can.
Is that when the bookkeeping department issues the acknowledgement to the donor and then the donor takes the deduction?
Who keeps track of all that?
Maybe a time limit? All DAF to be disbursed within ## days, or returned with a.nice 1099 to the donor?
Excellent. It’s so clear. But in addition to the example of the $10 million deferred gift I would add more exsmples and the changes you recommend. Thank you!
Excellent article(s) here. It’s just plain wrong that the benefit to the donor, the deduction, is an immediate cost to the public treasury and current generations, while the benefit to society and philanthropic causes may not be realized for years and only flow to future generations.