05 March 2018

Roundtable Submits Comments to Treasury on Foundation Use Of Donor-Advised Funds

The Philanthropy Roundtable has submitted public comment to the U.S. Department of Treasury detailing how donor-advised funds (DAFs) are a valuable tool for foundations in fulfilling their charitable purpose. The submission comes as Treasury has solicited public feedback on 1) how private foundations use DAFs to support their charitable purposes, and 2) how transfers of funds from foundations to DAFs should be treated as counting toward the foundation’s “qualifying distribution” requirement.

“Donor-advised funds are an essential tool for private foundations, allowing them to make grants to dangerous parts of the world, access local expertise, participate in collaborative funding efforts with other foundations, instill a culture of giving for the next generation of philanthropists, and be more efficient, among other reasons,” said Sean Parnell, vice president of public policy at The Philanthropy Roundtable. “The U.S. Treasury should ensure that any regulatory changes do not diminish the effectiveness of donor-advised funds for private foundations in pursuing their philanthropic missions.”

The Roundtable submitted 23 examples of how DAFs help foundations fulfill their philanthropic missions. The examples were provided by private foundations, community foundations and DAF sponsoring organizations from across the county.

“Any potential statutory or regulatory changes should be considered with [these examples] in mind, and adopted only if they are narrowly targeted at known and serious abuses and do not diminish the ability of foundations to use donor-advised funds in furtherance of their legitimate philanthropic purposes,” wrote the Roundtable in its submission.

Among the reasons cited in the Roundtable’s comments was DAFs allowing foundations to provide funds to organizations located in violent or unsafe areas of the world. One example was provided by a foundation in the East that makes grants to a donor-advised fund to support organizations that oppose terrorism, some of which have had fatwas against them. Giving to a donor-advised fund protects the foundation’s trustees from the threat of violence.

Donor-advised funds also allow for increased collaboration among multiple organizations. A foundation in the Southwest makes grants to donor advised funds at community foundations in order to participate in multi-foundation collaborative funding efforts, which it finds more efficient than simply coordinating direct grants by the participating foundations. It also allows grantees to have a single entity to report to rather than deal with conflicting reporting formats and timelines.

A copy of the submitted comments can be found here and accompanies this release.