Potential Changes to Donor Advised Funds in the Future – How will this impact your organization?

Over the past few years, there has been increasing interest in modifying charitable giving laws.  The charitable giving that has seen the most scrutiny is donor advised funds.  A donor advised fund works by allowing donors to make a charitable contribution to the fund and receive an immediate tax deduction. While the donor can recommend which charity or charities the fund should make the donation to, the investments in the donor advised fund can appreciate, increasing the funds that can be made available to support charitable organizations.  However, unlike a private foundation, a donor has no obligation to distribute minimum annual amounts from the donor advised fund to charitable organizations.  As of 2022, there is more than $200 billion invested in these funds, and this amount is growing.

In November 2022, the IRS and US Department of Treasury issued its most recent Priority Guidance Plan.  The Plan includes three new priorities that are focused on donor advised funds.  These new priorities closely resemble a bipartisan House bill that passed in early 2022, which would encourage donor advised funds to distribute charitable funds more rapidly.

Those within the nonprofit community are split in regards to instituting requirements to distribute amounts from donor advised funds more quickly. Some are in favor of regulation to encourage distributions from these funds, while some oppose it, saying it will negatively impact the philanthropic sector.  Regardless of the stance, nonprofits should closely monitor the situation and understand how future changes may affect their organization.

Have questions or want to learn more? Feel free to contact a member of our Nonprofit team here.

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