Donor-advised funds are under congressional scrutiny today with pending federal legislation aimed at, among other things, limiting donor privacy. However, a new analysis of over half of the total assets held by DAFs makes two important findings that should inform legislative discussions:
- anonymous grants comprise a tiny proportion of all DAF grants, and
- most anonymous grants support noncontroversial causes–causes that truly support Americans in need.
The effect of legislation that chills anonymous giving through DAFs would be to stem the flow of resources to organizations that help the poor, the vulnerable and the marginalized in our society.
Howard Husock, American Enterprise Institute senior fellow in domestic studies, recently released a report entitled, Anonymous Giving Through Donor-Advised Funds, in which he analyzed the popular, tax-advantaged, individual charitable giving accounts to determine just how often donors are using them to make anonymous grants. Husock examined data from the five largest DAF sponsors which together hold $75 billion under their management (53% of the total assets by all DAFs): Fidelity Charitable, National Philanthropic Trust, Schwab Charitable, Silicon Valley Community Foundation, and Vanguard Charitable. His findings are interesting.
First, these DAFs made 2.3 million grants in 2020, up 32% from the year prior. Of these, about 98,000 were made anonymously–a 69% increase from 2019–but still only 4.3% of all grants made in 2020.
Second, the lion’s share of anonymous grants (88%) was directed to organizations outside of public policy. The sector receiving the largest proportion of all anonymous gifts (about a third) was human services–organizations such as food banks, homeless shelters and substance abuse centers. Human services actually received a higher proportion of total anonymous grants (32%) than it did among total grants (25%).
The top five grant-receiving organizations of anonymous gifts were Doctors Without Borders, Salvation Army, Feeding America, American Red Cross and St. Jude Children’s Research Hospital. Most Americans would hardly find any of these groups–which feed the poor, provide emergency help following natural disasters and heal the sick both here and abroad–particularly partisan or extreme.
Religion was the second largest category of recipients for anonymous grants. These grants trailed those to human services by half (15%). Among overall DAF grants, the top two rankings are reversed; religion comprised 25% of all grants and human services comprised 23%.
The category of grant recipients that most concern critics of DAFs are “public and society benefit.” These organizations advocate for public policy changes, such as think tanks and advocacy groups, and they may be more ideological, though not political. (DAFs are only permitted to direct grants to organizations with a 501(c)3 status.) Public-benefit organizations received 12% of all anonymous grants, and only 9% of total grants made by DAFs. But, as Husock points out “The absolute number of such gifts is dwarfed when compared to the more than 2.2 million overall grants, both anonymous and non-anonymous.”
Ironically, those who claim DAFs are used anonymously to bankroll conservative policy goals would be surprised to learn that three left-leaning groups actually round out the top 10 grant recipients compared to just one right-leaning organization: American Civil Liberties Union Foundation, Planned Parenthood, and Southern Poverty Law Center versus Samaritan’s Purse.
This research is timely. Senators Angus King (I-ME) and Charles Grassley (R-IA) argue that S. 1981 will increase resources for charities by speeding up donation timelines. The bill also proposes disclosure changes that could chill charitable gifts such as requiring that private foundations giving to DAFs report annually the amount contributed to a DAF, the DAF sponsor and the “donation advice.”
Releasing donor names and motivations could open the door to humiliation, retaliation and even safety concerns. In such an environment, donors would stop giving to and through DAFs. This would grind the growth of this fast-growing giving vehicle to a halt and leave the human-service organizations, which overwhelmingly benefit from those gifts, behind.