Donor‐Advised Fund Corner

• Published date: 01 May 2018
• Date: 01 May 2018
• DOI: http://doi.org/10.1002/npc.30461

Bruce R. Hopkins’ NONPROFIT COUNSEL

May 20184THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonprofit Counsel DOI:10.1002/npc

DONOR-ADVISED FUND

CORNER

There have been several developments concerning

the law of donor-advised funds, most in response to the

IRS notice concerning prospective regulations (summa-

rized in the February 2018 issue).

Giving USA Foundation Issues Report on

Donor-Advised Funds

The Giving USA Foundation has published a report

titled “The Data on Donor-Advised Funds: New Insights

You Need to Know.” This document was researched and

written by the Indiana University Lilly Family School of

Philanthropy.

This report was stimulated by the fact that donor-

advised funds are “one of the fastest-growing charitable

giving vehicles in the United States.” (These funds are the

fastest-growing of the charitable giving vehicles.) Indeed,

sponsors of national donor-advised funds are five of the

top 10 fundraising charities. The Fidelity Charitable Gift

Fund reported $4.1 billion in contributions in 2016.

Charitable giving in the United States in 2016 totaled

$390.5 billion, reflecting a growth of 2.7 percent over

2015. During that year, contributions to donor-advised

funds amounted to $23.27 billion, an annual growth of

7.6 percent. According to this report, over the period

2008–2014, only 15 sponsoring organizations had been

among the top 10 grantmakers.

Most of the grants from donor-advised funds are

made from a small number of large sponsoring organi-

zations. Of the $22 million in grants from these funds

(2012–2015), about one-half were granted for educa-

tional, religious, and public-society benefit entities. (See

the Quote of the Month.)

Foundations Make Case for Their Use of

Donor-Advised Funds

The private foundation community made its case for

foundations’ use of donor-advised funds in connection

with their charitable undertakings.

The Philanthropy Roundtable, by letter to the Trea-

sury and IRS, dated March 5, submitted comments in

the form of examples that “demonstrate how important

donor advised funds can be for private foundations in

sustaining our nation’s diverse, abundant and vibrant

civil society.” Donor-advised funds are, wrote the Round-

table, a “valuable tool for private foundations, which use

them for a wide variety of purposes consistent with their

purposes and federal law.”

Here are some of the illustrations:

Safety and Security

• A private foundation makes grants to a donor-

advised fund to support charities in foreign countries

where the foundation has staff working, accompa-

nied by their families. Many of these countries are

unstable and dangerous; the lives of the foundation’s

staff and family members would be in jeopardy if this

foundation made the grants directly to the charities.

This use of a donor-advised fund keeps the identity

of the foundation private and protects the safety and

well-being of those connected to it.

• A foundation makes grants to a donor-advised

fund to support organizations that oppose terror-

ism, some of which have fatwas against them. This

grantmaking protects the foundation’s trustees from

the threat of violence.

Collaboration Among Foundations

• A foundation utilizes a donor-advised fund at a com-

munity foundation as part of a collaborative effort

with several other foundations that also make grants

to the fund to jointly fund local economic develop-

ment projects. This donor-advised fund is a vehicle

that can accept and manage grants from multiple

sources without the need for establishing an addi-

tional management structure for the collaboration.

• A foundation makes grants to donor-advised funds

at community foundations in order to participate in

multifoundation collaborative funding efforts, which

it finds more efficient than coordinating direct grants

by the participating foundations. This approach also

allows grantees to have a single entity to which to

report.

Support of Local Projects

• A foundation makes grants to a donor-advised fund

at a community foundation in a geographic region

as to which the foundation lacks significant local

knowledge. This grantmaking allows the foundation

to access the local knowledge and experience of the

community foundation’s staff.

• A foundation supports, in collaboration with other

foundations, a project collecting data about city and

county governments. All of these foundations fund

this project at a community foundation.

Funding Outside Normal Areas

• A foundation uses a donor-advised fund when it sup-

ports organizations and projects outside of its typical

areas of grantmaking.

• A foundation normally does not provide support for

fund raising events. The foundation decided to make

a one-time exception, funding a major fund raising

event for a charity. By granting to a donor-advised

fund and recommending a grant to the charity,

the foundation avoided sending a signal to other

charities that might encourage them to seek a similar

funding exception.

• A foundation allows its board members to make

discretionary grants. By keeping these gifts private