ICYMI: Ray Madoff on the Need for DAF Reform at AEI Panel

Last week, Professor Ray Madoff participated in the American Enterprise Institute’s panel discussion about the role of donor-advised funds in philanthropy. Madoff underscored how the failure to adopt guardrails around donor-advised funds hurts working charities and highlighted how the Initiative to Accelerate Charitable Giving’s proposals would put charities back into the equation. 

Check out the below quotes from Ray Madoff and event recording here.

“If you look at what’s happened, charitable giving has gone up about 5% a year since 2014 … The growth [of contributions to commercial donor-advised funds] has been over 20% a year … The growth to working charities, the outright gifts, [is in the range of] 3.3%. So it’s not the problem with charitable giving, it’s the problem with charitable getting.”

“Right now, there’s over a trillion dollars in private foundations, and the obligation that is imposed on them for their tax benefits is to spend 5% a year. Unfortunately, the rise of DAFs and the failure to impose guardrails on DAFs means that private foundations can fully meet their payout requirement by giving to a donor-advised fund. What this essentially does is it makes the payout requirement meaningless because there’s no certainty of these funds going to charities in the near future and the whole purpose of the 5% payout rule was to address the delay in benefit to charity problem.”

“Congress did not create charitable savings vehicles where the funds never have to be spent on charity. [Donor-advised funds] are doing an end run around the rules and the purpose of charitable tax benefits is to get money to charities. It’s not about nefarious people, but there’s a lot of reasons why very good people put money aside but don’t actually get around to doing the charitable giving. I think we owe our charities more than that.”

“We should absolutely expand charitable tax benefits to apply to all taxpayers. If the value of our system is to promote pluralism, then the system really loses its legitimacy when we only incentivize giving for the wealthiest 10% of Americans.”