The Chronicle of Philanthropy reported on the eye-opening results from one of the first studies to look at donor-advised funds (DAFs) from a micro-level. The study, commissioned by the Council of Michigan Foundations, analyzed DAFs at Michigan community foundations on the account-level and found that in 2020, 35 percent did not distribute any money, while another 22 percent distributed less than 5 percent of their assets.
The article quoted philanthropist John Arnold, who emphasized that the findings clearly demonstrate the problem with our current charitable giving laws: “there are too many DAF accounts that have received a tax benefit and are not distributing resources into the community.”
Excerpts from The Chronicle of Philanthropy article are below:
One of the first studies ever to look at donor-advised funds on a micro level has found that every year, 37 percent on average don’t distribute any money and over half give less than 5 percent of their assets. The findings are fueling demands for passage of a Senate bill that would spur donors to do more to channel their money out of the funds faster.
“If society is going to subsidize through the tax code the creation of donor-advised funds and private foundations, then there is a responsibility that those vehicles transmit resources into the community in a timely manner,” John Arnold, a prominent philanthropist pushing for Congress to change regulations for donor-advised funds, told the Chronicle.
“Opponents have said the bill is a solution in search of a problem, and this report explicitly describes the problem,” said Arnold. “There are too many DAF accounts that have received a tax benefit and are not distributing resources into the community.”
“If you look at the year 2020, in which the need for charitable giving was arguably the greatest ever, that there’s 35 percent of DAF accounts in Michigan that made no distribution, I think is a real problem,” said Arnold. “And this statistic that 90 percent made a distribution of at least $1 in aggregate is an incredibly low bar, and one I don’t think defines success.”