Tax Planning and Compliance for Tax-Exempt Organizations, 2024 Cumulative Supplement, 6th Edition

CHAPTER 11Public Charities

• 11.2a Donor Advised Funds

11.2a Donor Advised Funds

p. 259. Add before 11.3 Community Foundations:

Public charities are nonprofits that receive the majority of their support from a broad base of donors that provide for their revenue—as opposed to private foundations, which are usually created and supported by just one or two persons or a family. Donor advised funds (DAFs) instead are accounts identified with a donor or donor advisor, sponsored by a public charity, commonly created by financial institutions listed below and others, such as community foundations. The donor/donor advisory may not exercise control as they would over a private foundation. Instead, the donor/donor advisor merely has a reasonable expectation of advisory privileges as to the distribution or investment of the assets held in the account associated with their name. Due to this contrast to private foundations, DAF sponsors, (including the DAF accounts they sponsor) qualify as public charities and receive the same preferential tax treatment as working charities like schools and hospitals. More than half of America's 20 top public charities are DAF sponsors, according to Helen Flannery, Research Director for the Charity Reform Initiative and Associate Fellow at the Institute for Policy Studies (IPS).¹ The donations received by the highest earning DAF sponsors now equal about $11 billion, more than the highest earning working charity. In a prior year, IPS wrote about how ...