Donor‐advised funds post strong growth in 2017

• Published date: 01 April 2018
• DOI: http://doi.org/10.1002/nba.30439
• Date: 01 April 2018

APRIL 2018 NONPROFIT BUSINESS ADVISOR

7

© 2018 Wiley Periodicals, Inc., A Wiley Company • All rights reserved

DOI: 10.1002/nba

Industry News

Donor-advised funds post strong growth in 2017

The new tax law and strong economic performance

led to a major uptick in charitable donations made

via donor-advised funds, according to new data

from Schwab Charitable, one of the nation’s largest

providers of DAF services� Schwab Charitable clients

recommended some 368,000 grants through their

DAFs, a 35 percent increase over the prior year� All

told, the rm facilitated more than $1�6 billion in

grants to 71,000 charities for the year�

The giving increase was attributed to many factors,

including the new federal tax legislation, a surging

stock market and rising real estate values� According

to the company, over 70 percent of contributions into

Schwab Charitable accounts were highly appreciated,

noncash assets such as publicly traded securities, re-

stricted stock and real estate� By giving these assets to

charity, donors were able to maximize their charitable

impact by avoiding capital gains tax, which means

potentially even more funds going to the causes they

support, Schwab said�

In fact, giving via DAFs correlated strongly with

market indicators, as donations, equity and real

estate prices all peaked over the second half of the

year� Interest in DAFs, too, surged at the same time�

According to Schwab, the number of new accounts

opened between July and December jumped 91 per-

cent compared to the same period in 2016�

These factors, and others, impacted how donors

directed grants from their DAFs as well, Schwab said�

In 2017, its donors expanded their giving priorities

in response to the numerous natural disasters that

struck the United States, as well as a changing politi-

cal environment and a shifting focus on the needs of

Giving outlook for 2018–19 dependent on economic growth, experts say

An in-depth analysis of the newly passed tax re-

form law by experts at the Indiana University Lilly

Family School of Philanthropy presents a mixed

bag for nonprots, as charitable donations over the

next couple years may decline or go up modestly,

depending on a handful of economic variables�

As laid out in The Philanthropy Outlook 2018 &

2019, the school’s estimate of the impacts of the Tax

Cuts and Jobs Act depends largely on the law’s im-

pact on the broader economic picture� The starting

assumption is that the new tax law, in itself, will act

as a deterrent for charitable giving by individuals,

due to the change in the standard deduction� How-

ever, if the lower tax rates “trickle down” in the right

ways, donations could be bolstered, the report said�

To get an understanding of how it could all play

out, the report’s authors described three specic

economic scenarios:

• Under the “High Growth” scenario, the Tax

Cuts and Jobs Act would build on the momentum

generated from the healthy economy at the end

of 2017� The loss of tax incentives would have a

dampening effect on giving by some households,

but the performance of the economy overall would

help offset this, and corporate and foundation giving

would remain strong, the researchers said�

• In the “Uneven Growth” scenario, tax policy

changes would primarily benet corporations and

wealthy business owners, with minimal trickle-down

effects� While the impact of this scenario would vary

across different types of charities, estimates for total

giving would hold steady, the report said�

• In the “Flat Growth” scenario, tax policy chang-

es would have little impact on economic growth, and

donors may adapt to tax policies with fewer gains to

the charitable sector, preventing the economy from re-

alizing the full benets of tax law adjustments� Under

these circumstances, broad implications for charitable

giving are difcult to ascertain, the report said�

Another complicating factor: Economic growth

and changes in tax policy will impact some donor

segments more than others� Most notably, the pre-

dicted decline in donations due to the increased stan-

dard deduction will likely impact middle-income

households the most, as wealthy donors are expected

to continue itemizing their deductions� As a result,

the report noted, charities that receive the bulk of

their support from these donors will likely be hit the

hardest� This includes local charities, congregations

and basic needs organizations, the researchers said�

For more information, visit http://philanthropy-

outlook.com. ■

(See GROWTH on page 8)