US regulators scrambling to catch up with boom in charitable giving accounts

[Pelican Press 0]

US regulators scrambling to catch up with ***** in charitable giving accounts

Credit: Pixabay/CC0 Public Domain

A

This is the hidden content, please

• Sign In
• or
• Sign Up

is underway due to the growth of donor-advised funds in the ******* States.

Known widely as DAFs, these

This is the hidden content, please

• Sign In
• or
• Sign Up

. Donors can get an immediate tax deduction by putting money or other assets into the accounts, and advise the accounts’ managers to give away the money at a later date.

After years of concerns about how quickly the money reserved for charity gets distributed and whether donor-advised funds need to operate more transparently,

This is the hidden content, please

• Sign In
• or
• Sign Up

are now pending. Though the regulations would not create new requirements for how rapidly these funds distribute money, they do provide some new guidelines for what

This is the hidden content, please

• Sign In
• or
• Sign Up

by law.

As

This is the hidden content, please

• Sign In
• or
• Sign Up

who studies DAFs, I believe these new changes may mark the start of what could become a series of reforms.

Nearly $230 billion

DAFs have been

This is the hidden content, please

• Sign In
• or
• Sign Up

but got off to a slow start. After decades of being concentrated in community foundations, DAFs became more widely accessible with the introduction of

This is the hidden content, please

• Sign In
• or
• Sign Up

—a DAF-sponsoring organization tied to Fidelity Investments—in 1991.

Many more DAF sponsors

This is the hidden content, please

• Sign In
• or
• Sign Up

have since emerged.

Because donors

This is the hidden content, please

• Sign In
• or
• Sign Up

and can then wait a long time before distributing it to nonprofits, DAFs essentially operate as

This is the hidden content, please

• Sign In
• or
• Sign Up

.

DAFs are not, however, subject to the same restrictions.

Foundations have to disclose their donors to the public and also have to distribute minimum amounts for charitable use each year.

This is the hidden content, please

• Sign In
• or
• Sign Up

This is the hidden content, please

• Sign In
• or
• Sign Up

.

This is the hidden content, please

• Sign In
• or
• Sign Up

and distributed some $52 billion to charities that year. Those are significant sums as giving of all kinds totaled about $500 billion that year.

As of 2023 there were about

This is the hidden content, please

• Sign In
• or
• Sign Up

, according to the National Philanthropic Trust.

40% don’t distribute a dime

Critics of DAFs say that the government should require them to

This is the hidden content, please

• Sign In
• or
• Sign Up

.

Foundations have faced that kind of obligation for more than five decades. They must pay out at least

This is the hidden content, please

• Sign In
• or
• Sign Up

each year—although some of that money can be used to pay for their operations or even be set aside in a donor-advised fund.

Supporters of DAFs counter that the payout rate for those accounts is already much higher than the foundation floor of 5%. It

This is the hidden content, please

• Sign In
• or
• Sign Up

.

However, that statistic applies to all the money held in DAFs, not what happens with each one of them.

This is the hidden content, please

• Sign In
• or
• Sign Up

in a given year.

Calling for change

Other changes have been proposed over the years, including:

IRS regulations

The IRS released

This is the hidden content, please

• Sign In
• or
• Sign Up

at the end of 2023, and gave the

This is the hidden content, please

• Sign In
• or
• Sign Up

on them.

The

This is the hidden content, please

• Sign In
• or
• Sign Up

This is the hidden content, please

• Sign In
• or
• Sign Up

, who is considered a fund’s adviser, and restrictions on DAF disbursements.

Though largely focused on definitions, these proposed regulations are not without teeth. Nor

This is the hidden content, please

• Sign In
• or
• Sign Up

.

The proposed regulations would identify certain distributions as taxable and declare that donors are not the only parties considered DAF advisers—the

This is the hidden content, please

• Sign In
• or
• Sign Up

are, too. This means the financial advisers, like donors, cannot receive any benefits from a DAF.

In identifying taxable distributions, the regulations include the possibility that funds used to support

This is the hidden content, please

• Sign In
• or
• Sign Up

could lead to penalties for both the donor and the fund’s manager. And

This is the hidden content, please

• Sign In
• or
• Sign Up

DAFs are commonly used to support lobbying.

A

This is the hidden content, please

• Sign In
• or
• Sign Up

charged to a participating fund manager.

By including

This is the hidden content, please

• Sign In
• or
• Sign Up

in the group considered advisers to the DAF, investment fees paid to such financial advisers for their services would become

This is the hidden content, please

• Sign In
• or
• Sign Up

. As such, the proposed new rules would require the

This is the hidden content, please

• Sign In
• or
• Sign Up

.

This is the hidden content, please

• Sign In
• or
• Sign Up

have objected to the proposed regulations. A key concern they’ve expressed has to do with what the regulations could mean for

This is the hidden content, please

• Sign In
• or
• Sign Up

.

Since financial advisers often oversee investments of both the donor and the donor’s charitable funds, such dual advisory roles may be eliminated by the threat of penalties.

Changes possible in Congress

Additional, *******, changes could occur in the near future through legislation.

Possibilities include requiring DAFs to disclose donors and connect them with distributions so

This is the hidden content, please

• Sign In
• or
• Sign Up

or

This is the hidden content, please

• Sign In
• or
• Sign Up

when donations to DAFs are not immediately distributed to charities to encourage donors with DAFs to dispatch their gifts quickly.

Although legislation aimed at requiring faster payouts was

This is the hidden content, please

• Sign In
• or
• Sign Up

, few lawmakers have made it a priority.

The most recent bill, the

This is the hidden content, please

• Sign In
• or
• Sign Up

, was first proposed by

This is the hidden content, please

• Sign In
• or
• Sign Up

in 2021. It did not

This is the hidden content, please

• Sign In
• or
• Sign Up

to garner a vote. At this point, it is

This is the hidden content, please

• Sign In
• or
• Sign Up

that measure.

But

This is the hidden content, please

• Sign In
• or
• Sign Up

role in charitable giving, I believe that Congress will eventually have to take action if it wants to meaningfully regulate this new charitable environment.

Provided by
The Conversation

This article is republished from

This is the hidden content, please

• Sign In
• or
• Sign Up

under a Creative Commons license. Read the

This is the hidden content, please

• Sign In
• or
• Sign Up

.

Citation:
Donor-advised funds: US regulators scrambling to catch up with ***** in charitable giving accounts (2024, March 19)
retrieved 19 March 2024
from

This document is subject to copyright. Apart from any fair dealing for the purpose of private study or research, no
part may be reproduced without the written permission. The content is provided for information purposes only.

This is the hidden content, please

• Sign In
• or
• Sign Up

Science, Physics News, Science news, Technology News, Physics, Materials, Nanotech, Technology, Science
#regulators #scrambling #catch #***** #charitable #giving #accounts

This is the hidden content, please

• Sign In
• or
• Sign Up