The Acadia Squam Group continues to closely follow developments in the donor advised fund (DAF) segment of the philanthropic sector. We are pleased to share a few important stories from the last quarter. Feel free to contact us with any questions or observations.

ACE Act – The Latest

Senators Angus King (I-ME) and Chuck Grassley (R-IA) introduced the Accelerating Charitable Efforts (ACE) Act in June. ACE would make significant changes to the tax treatment of donor-advised funds (DAFs) and private foundations. So far, the Senate has not taken up the potential legislation nor has the House initiated a companion bill. Importantly, the ACE Act was not incorporated in the House version of the Democrats’ $3.5 trillion tax and spending bill.

Supporters of the bill have continued their work both on Capitol Hill and within the charitable sector. At the same time, some nonprofits are worried divisive legislation like the ACE Act could take attention away from more pressing priorities, like improving the universal charitable deduction. The issue is not expected to disappear any time soon.

Meanwhile, the 15-year wait for the Treasury Department’s report with suggested regulations on supporting organizations and donor advised funds continues…

DAF to DAF Granting – Troublesome or Reasonable?

The article below brings forth an initial analysis of DAF sponsor to DAF sponsor granting in recent years. This practice has attracted nay-sayers as they contend that it is just allowing charitable dollars to move from one bucket to another without any actual public good occurring. That said, there are legitimate reasons for the practice such as account advisors’ unhappiness with a DAF sponsor or their searching for lower fees, more investment options or lower grant minimums.

At Least $1 Billion Has Been Shuttled From One Commercial Donor (Chronicle of Philanthropy)

DAF Grant Payout Rates – Good Enough or More Needed?

DAF payout rates have been a topic of much discussion and disagreement for over twenty years. The August analysis below from the National Philanthropic Trust (NPT) suggests that aggregate annual grant payout rates remain robust. That said, the debate is evolving as to how best to measure the payout rate – as a percentage of contributions received in a given year, or as a percentage of assets, etc. And the NPT presentation does not address the issue that while a DAF sponsor may be granting out a reasonable percentage of its assets within a 1-3 year time frame, some very large individual DAF accounts are actually granting relatively small amounts on an annual basis.

DAF Spotlight: DAF Grant Payout Rates (National Philanthropic Trust)

U. S. Supreme Court Decision on Donor Privacy

In July the U. S. Supreme Court overturned a California donor disclosure law that required charities to report the identities of their major donors to the state. The majority in the 6-3 decision on Americans for Prosperity Foundation v. Bonta, rejected the state’s argument that the disclosure requirement did not broadly discourage donations because the forms are kept confidential. He noted that although “assurances of confidentiality may reduce the burden of disclosure to the State, they do not eliminate it.” And in a footnote, he rebuked California, adding that “the State’s assurances of confidentiality are not worth much.” The groups here, Roberts indicated, have “introduced evidence that they and their supporters have been subjected to bomb threats, protests, stalking, and physical violence.”

This ruling could hamper other state-based efforts to enact donor disclosure laws, and it could dismantle laws already in place in states like New York and New Jersey.

Divided court invalidates California donor-disclosure rules (SCOTUSBlog)

Finally, the Acadia Squam Group will soon be bringing some important new insights to the DAF space. Please be on the lookout for an announcement in the coming months that may help you more fully understand this fast-growing segment of philanthropy.