In 2021 and for a time after that, commercial donor-advised funds such as Fidelity Charitable and Goldman Sachs’s charitable fund began to block and censor giving to conservative causes. These DAF sponsors broke what one DonorsTrust client called the “gentleman’s agreement” to approve grant requests to any valid 501(c)(3) nonprofit, and instead declined to make grants to groups like Turning Point USA and Alliance Defending Freedom.
(That donor rolled his fund to DonorsTrust after tiring of these practices).
Fortunately, we have seen those large commercial DAF sponsors take a step back from these practices. We still caution donors to be wary, but we hear far fewer reports of conservative groups being denied funding from these entities.
The same cannot be said for the community foundations, however.
Even as the commercial DAFs improve, many big-city community foundations have maintained or expanded a commitment to left-wing ideas. Some incorporate these ideas explicitly in their mission and vision (see the charitable visions for the Louisville Community Foundation and Denver Foundation, for example).
Some community foundations have leaned into the guidance of the Southern Poverty Law Center in determining which groups are acceptable to support. The SPLC is well-known—one might even say notorious—for its “hate list,” a compilation of more than 1,400 “hate and antigovernment groups” that is generously peppered with nonprofits that simply have a different worldview, such as Focus on the Family, Moms for America, Parents Defending Education, and Gun Owners of America.
The Broader Attacks on DAFs and Giving
All of this suggests that donors should be conscious of the charitable vehicles they entrust with their dollars. The variety of donor-advised funds operating today allows donors to find a provider aligned with their interests. However, some antagonists would prefer donors avoid donor-advised funds altogether.
The latest iteration of the ongoing attacks on DAFs comes from a group calling itself the Philanthropy Project. Led by nonprofit leaders from California and Minnesota and partnering with DAF critics such as Boston College professor Ray Madoff, the project’s goals are similar to those of the failed Accelerating Charitable Efforts Act legislation. The Philanthropy Project’s proposals would alter the timing rules around tax deductions for donations to DAF accounts, make it more difficult for private foundations to partner with DAFs, and tinker with transparency rules.
A similar effort, Donor Revolt for Charity Reform, was also launched last year led by the left-leaning Institute for Policy Studies. The overall objection behind these initiatives is that too much money goes into donor-advised accounts and doesn’t move out quickly enough for the liking of DAF detractors.
Despite reports such as The National Study on Donor Advised Funds showing that most money moves through donor-advised funds relatively quickly, and that half of DAF accounts hold less than $50,000, leaders behind efforts such as Philanthropy Project paint with a broad brush to suggest that all DAF users are extremely wealthy misanthropes simply looking for a tax break.
We can hope that, like the ACE Act, these efforts will ultimately fade into the background. But they do merit attention, and thankfully groups such as the Philanthropy Roundtable serve as a watchdog to protect the interests of donors and the charitable sector overall.
Stand for Progress
In contrast to efforts like the ACE Act, some proposals would further safeguard donors’ ability to give as they please. Such is the case with the Protecting Charitable Giving Act, co-sponsored in the U.S. Senate by Senators James Lankford (OK) and Todd Young (IN). This bill would give teeth to the right of donor privacy re-enshrined by the 2021 AFPF v. Bonta Supreme Court ruling.
Sen. Lankford is behind additional legislation that would encourage giving through creation of an above-the-line universal charitable deduction. This would allow taxpayers to claim a tax deduction for their charitable giving even if they take the standard deduction. Sen. Lankford has been working closely with Democrat Senator Chris Coons of Delaware on this proposal and introduced the bill last week with a number of co-sponsors from both parties.
While critics might argue that expanding the charitable deduction diverts money from the government coffers (and, thankfully, it does), an alternative way to view it is creating an incentive for local donors with local knowledge to support efforts having a real impact in their communities.
“Everyone looks towards government to be the safety net. But government sends checks,” Sen. Lankford explained in a recent interview for DonorsTrust’s Giving Ventures podcast. “They don’t actually walk with people through life. They don’t actually do job training. They don’t actually sit with the homeless.… Those are nonprofits, those are houses of worship…that are actually doing life with them.”
The instinct toward charitable giving remains one of the great strengths of the American people. The ability to do so privately and in alignment with their values is critical to that success. The envy of others will always create attempts to divert givers from their goals. It’s important to understand these attacks in order to make smart decision to protect your freedom to give.
