New Donor Advised Fund Legislation Introduced in Congress

Late last year, the Federal Government made the IRA Charitable Rollover permanent. Now, just months later, Congress is considering a bill that would expand the IRA Rollover provision. If passed, the measure would allow donors to contribute IRA dollars to a Donor Advised Fund in addition to 501(c)3 nonprofit organizations.

Arc of Washington by Eric B Walker via Flickr In the US Senate, Sen. John Thune (R-SD) introduced S-2750, Charities Helping Americans Regularly Throughout the Year Act. In the US House of Representatives, Rep. George Holding (R-NC) introduced a companion bill: HR-4907, The Grow Philanthropy Act of 2016.

(Just as an aside, I have to ask: Who came up with these bill names? I’m not sure if they suffered from too much creativity or not enough. In any case…)

The Senate bill has been assigned to the Finance Committee while the House bill has been sent to the Ways and Means Committee. At this point, it’s unclear whether either bill will receive a floor vote. And, if a vote is held, it’s uncertain whether the measure would pass. You can track the progress of the bills at GovTrack.us.

Even if the bills do not pass this year, it’s doubtful the matter will be dropped. Remember, it took many years before the existing IRA Charitable Rollover became permanent. So, unless the new measure passes this year, I think we can expect the matter to come up again.

Some fundraising professionals believe that DAFs are good for the nonprofit sector because they encourage more giving. Others believe that DAFs are harmful because they divert funds away from operating nonprofit organizations. Still others believe that it doesn’t matter what we think about DAFs because they’re here to stay.

So, what do you think about the idea of allowing donors to contribute to a DAF from their IRA? Share your thoughts in the comments below and take the poll:

That’s what Michael Rosen says… What do you say?

Posted on May 18, 2016 at 1:31 am in Current Events, Fundraising | RSS feed | Reply | Trackback URL

Tags: Charitable IRA Rollover, charitable tax deduction, charities, charity, Congress, DAF, Donor Advised Fund, Donor Advised Funds, fundraising, IRA Charitable Rollover, IRA Rollover, nonprofit, philanthropy, poll, Rep. George Holding, Sen. John Thune, tax deduction

12 Responses to “New Donor Advised Fund Legislation Introduced in Congress”

Gregory Warner
May 18, 2016 at 9:36 am

This could be HUGE!

Reply
- Michael J. Rosen, CFRE
  May 18, 2016 at 6:44 pm
  
  Greg, thanks for commenting. I agree that the proposed rule, if it becomes law, could have a significant result. While it would initially funnel more money into DAFs, those dollars would eventually flow to nonprofit organizations. Making more money available for philanthropic use is ultimately a good thing.
  
  Reply
Michael J. Rosen, CFRE
May 18, 2016 at 6:50 pm

Over on LinkedIn, two readers shared some interesting thoughts about this post that I thought I would share with you here:

Kevin Peter — I’m generally agnostic on DAFs. If the measure puts more money in the philanthropic pot, that will be a net gain in the long run for organizations that change lives in ways that matter. I’m more interested in seeing employer sponsored retirement plans, such as 403(b) and 401(k) plans, included in the charitable rollover. Figures vary widely, but most seem to settle at somewhere between 25% and 38% of American employees (a.k.a., potential donors) participate in employer sponsored retirement programs. That’s a lot money tied up in plans not included in the IRA charitable rollover.

Connie Harris — I considered DAFs as “competition” that was wayyyyy ahead of most development offices and once donors make this decision, well, too bad, so sad.

As for me, I’m generally in favor of pretty much anything that gives people more control over their money and makes more money available for philanthropic use.

Reply
Richard Alan Lehrman
May 19, 2016 at 5:13 am

The oddly-titled Senate bill is an apparent attempt to create the acronym “CHARITY.” Having squeezed in the tortured “Regularly” to modify “Throughout the Year,” the staff wisely drew the line before inserting another adjective beginning with the letter “I” (“Inspiringly” is the best I could come up with).

Policy wise, it will likely grow the philanthropic sector, which IMHO is a good thing

Reply
- Michael J. Rosen, CFRE
  May 24, 2016 at 3:11 pm
  
  Richard, thank you for your insight. The Senator’s staff was too clever for me; I missed the acronym. I appreciate you pointing it out. I wonder how long it took them to come up with the name v. the bill itself. 🙂
  
  Reply
jsmith141jay
May 23, 2016 at 9:30 am

Call me selfish, but I would rather see the IRA donation come directly to my non-profit rather than to a DAF where it’s likely to sit for a while and then be divided out to a number of non-profits.

Reply
- Michael J. Rosen, CFRE
  May 24, 2016 at 3:06 pm
  
  Jay, thank you for sharing your thoughts. I understand what you are saying; it’s one of the key issues raised by those who don’t particularly like DAFs. While I appreciate the concern, I’m in favor of the measure if it ultimately brings more philanthropic resources to the nonprofit sector. What we need to better understand and deal with is: Why would a donor prefer to give to a DAF rather than directly to an operating charity?
  
  Reply
Rob Mitchell
May 25, 2016 at 8:13 pm

Michael, The Atlas of Giving has definitively measured the huge positive impact that DAFs have made in the charitable economy since the recession. Critics would like to have a floor (like foundations do) of five percent annually. This will do nothing but guarantee that the floor is all that will be distributed annually; we’ve got decades of data on foundations to prove it — it’s always five percent.

DAFs in 2015 gave 22 percent of their assets as grants — it’s a game changer.

The other thing the critics hate is the anonymity of DAF donors… they want to know who the donors are so that they can hound them like they hound foundations and their boards. Giving this up will kill the DAF Tsunami that is taking the charitable giving economy to new heights.

The critics of DAFS have a solution that is still trying to find a problem.

DAFs are not broken, and don’t need to be fixed.

Reply
- Michael J. Rosen, CFRE
  May 25, 2016 at 9:23 pm
  
  Rob, thank you for sharing your insights. I never understood why some folks are pushing for a five-percent distribution rule for DAFs. As you stated, the actual distribution rate is much greater, without the requirement. On the other hand, I do understand why many fundraising professionals do not like DAFs. However, the reasons they give tend to be organization-focused rather than donor centered.
  
  DAFs put money into the nonprofit sector, engage donors, and give donors control and flexibility.
  
  Wise nonprofit pros will try to understand why donors choose to give via DAFs rather than directly to a charities. Then, they will adapt accordingly, as appropriate. Furthermore, fundraisers need to learn to more effectively seek gifts from DAFs and properly steward such gifts in meaningful ways.
  
  Reply

Michael Rosen Says…

Michael J. Rosen

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