The Impact of DAFs on Charitable Giving
Even as they build assets for future charitable giving, do DAFs inhibit near-term giving? This issue can be scrutinized through the prism of Giving USA 2020, the Indiana University Lilly School of Philanthropy annual compendium of the extent and types of charitable giving in the US, based on tax return data.15
Giving USA 2020 (which examines the year 2019) gives reason to believe that the impact of DAFs is either positive or neutral. In 2019, charitable giving, both individual and corporate, notably, reached its highest historic figure, $449.64 billion. Charitable giving by individuals, specifically, rose 4.7 percent, to $309.66 billion.16
These increases in giving could mask some assets in DAFs because Giving USA 2020 includes contributions to DAFs—even if they are not then redirected to operating charities—in its total charitable giving. Such contributions are included in a broader category that includes other types of organizations, such as advocacy groups, under the rubric “public society benefit organizations.” Giving to such organizations rose 13.1 percent between 2018 and 2019, increasing to $37.16 billion.17
Giving USA 2020, however, is careful to track grants made from DAFs. Thus, grants made from appreciated DAF assets are also reflected in its accounting. In this context, note that every category of charitable giving that the Lilly School tracks increased from 2018 to 2019. For instance, giving to human organizations rose by 5 percent to $55.9 billion, while giving to health organizations rose 6.8 percent to $41.46 billion.18
Broadly, then, overall annual direct charitable giving to operating nonprofits—whether food pantries, biomedical research, or museums—has risen, while DAF assets, DAF appreciation, and the number of DAF account holders have also increased. Thus, there is little reason to see DAFs as a “tax loophole” undermining or inhibiting direct charitable grant making. DAFs’ asset appreciation appears to have contributed to grants received by the full range of charitable organizations.