Article Inside Philanthropy

Inside Philanthropy Examines the Growth of DAFs and the Need for Reforms

Inside Philanthropy recently examined charitable giving reports and trends, including the decade-long growth of donor-advised funds (DAFs) and its implications for philanthropy.

The article explored how “DAFs are certainly a mighty reserve, though their ‘readiness’ is a matter of contention” and noted the “modest shifts” in charitable giving during the pandemic. It also highlighted several voices – including IACG Members Ray Madoff, Professor of Law, and John Arnold, Co-Founder of Arnold Ventures – who have echoed the need and appetite for DAF reforms.  

“Tax laws in the United States ‘do not sufficiently incentivize DAFs and private foundations to distribute their funds to charities in a timely fashion, even though donors receive tax benefits upfront,’ said prominent DAF critic and Boston College Law Professor Ray Madoff in our coverage of the Initiative to Accelerate Charitable Giving this past December.”

“Madoff and James Andreoni, an economics professor at University of California, San Diego, wrote a working paper in October criticizing the formula that large DAF managers use to chart payout, proposing a better approach that shows a rate of 14.7%, versus the industry’s 22.4% figure.”

“[A]s John Arnold put it in a recent tweet, ‘Curiously, the tax code rewards the commitment to give rather than the act of giving.’”

Read the full story here.