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DAF Is Not a Four-letter Word:

DAF Is Not a Four-letter Word: understanding the relationship between donor advised funds and the nonprofits they serve Presented by: Nancy M. Brown, MS, CFRE October 5, 2019. DAF Is Not a Four-letter Word. Overview of donor advised funds (DAFs) Rules and regulations

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DAF Is Not a Four-letter Word:

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  1. DAF Is Not a Four-letter Word: understanding the relationship between donor advised funds and the nonprofits they serve Presented by: Nancy M. Brown, MS, CFRE October 5, 2019

  2. DAF Is Not a Four-letter Word • Overview of donor advised funds (DAFs) • Rules and regulations • Working with fund sponsors (sponsor) • Working with fund advisors (advisor) • Making it work

  3. DAF Is Not a Four-letter Word • Charitable Organization Both the charitable sponsor of a DAF or the recipient of a DAF grant • Charitable (Fund) SponsorManages DAFs • DonorIndividual/organization establishing a DAF • ContributionAmount a donor gifts when establishing or adding money to a DAF • AdvisorIndividual assigned the rights to recommend grant distributions • GrantThe transfer of assets from a DAF to a qualified charitable recipient

  4. DAF Is Not a Four-letter Word 2017 Data No. DAFs: 284.965 Contributions: $23.27B Ave. DAF Size: $298,809 Grant Distributions: $15.75B Annual Payout Rate: 20.3% National Philanthropic Trust 2017

  5. DAF Is Not a Four-letter Word Donor Advised Fund • Donor makes an irrevocable contribution to a sponsoring organization • Donor receives the maximum tax deduction that the IRS allows • Donor has the right to name the fund, assign advisor(s) and successor advisor or charitable beneficiary • Donor retains the right to recommend grants from the fund • Fund assets are co-mingled in a larger investment pool

  6. DAF Is Not a Four-letter Word Prohibited Payments • Non-charities and private non-operating foundations • Distribution to any organization if not for a charitable purpose • Distributions to individuals • including scholarship grants • reimbursing donor fundraising expenses • Type III supporting organizations that is not “functionally integrated” • Type III supporting organization (functionally integrated) if the supported organization is controlled by either the donor or an advisor appointed by donor

  7. DAF Is Not a Four-letter Word Limits on Benefits • Advisor cannot receive a substantial benefit from the grant • Auction items • Memberships • Galas • Golf Outings • Raffle tickets • BUT WHAT ABOUT PAYING A PLEDGE?

  8. DAF Is Not a Four-letter Word Section 4 IRS Notice 2017-73 If finalized, proposed regulations would provide that distributions from a DAF to a charity will not be considered to result in a more than incidental benefit to a Donor/Advisor under section 4967 merely because the Donor/Advisor has made a charitable pledge to the same charity provided the Sponsor makes no reference to the existence of any individual’s pledge when making the DAF distribution

  9. DAF Is Not a Four-letter Word Ethics Sidebar

  10. DAF Is Not a Four-letter Word Working with Fund Sponsors • Gift processing • Hard credit goes to the fund sponsor • Keep the paperwork and check together • Honor the fund sponsor’s instructions • Call if you have questions

  11. DAF Is Not a Four-letter Word Working with Fund Advisors • Soft-credit • Acknowledge don’t receipt • Recognize as per policy • Develop a strategy for future gifts

  12. DAF Is Not a Four-letter Word Why do DAFs get a bad rap? Does something need to change?

  13. Can I Use My DAF for That?, Gil Nusbaum, National Philanthropic Trust, March 27, 2019 Everything You Ever Wanted to Know About Type 3 Supporting Organizations, Marty McKeever, Foundations, June 26, 2000 (found on Planned Giving Design Center) Legal Compendium for Community Foundations: Component Funds: The absence of Material Restrictions,, Christopher R. Hoyt, Council on Foundations Taxable Distributions for Donor-Advised Funds, Council on Foundations Three Simple Steps to Protect Charities and American Taxpayers from the Rise of Donor-Advised Funds, Ray Madoff, Nonprofit Quarterly, July 25, 2018 Working With Donor-Advised Funds: The Basics, The Chronicle of Philanthropy “Advice”, May 01, 2018 IRS Publication 1771 IRS Publication 526 Divider Here

  14. THANK YOU! Nancy M. Brown, CFRE nbrown@winonacf.org

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