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DAF Is Not a Four-letter Word:

DAF Is Not a Four-letter Word: understanding the relationship between donor advised funds and the nonprofits they serve Presented by: Nancy M. Brown, MS, CFRE October 5, 2019. DAF Is Not a Four-letter Word. Overview of donor advised funds (DAFs) Rules and regulations

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DAF Is Not a Four-letter Word:

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  1. DAF Is Not a Four-letter Word: understanding the relationship between donor advised funds and the nonprofits they serve Presented by: Nancy M. Brown, MS, CFRE October 5, 2019

  2. DAF Is Not a Four-letter Word • Overview of donor advised funds (DAFs) • Rules and regulations • Working with fund sponsors • Working with fund advisors • Pulling it all together

  3. DAF Is Not a Four-letter Word • Charitable Organization Both the charitable sponsor of a DAF or the recipient of a DAF grant • Charitable (Fund) SponsorManages DAFs • DonorIndividual/organization establishing a DAF • ContributionAmount a donor gifts when establishing or adding money to a DAF • AdvisorIndividual assigned the rights to recommend grant distributions • GrantThe transfer of assets from a DAF to a qualified charitable recipient

  4. DAF Is Not a Four-letter Word 2017 Data No. DAF Sponsors: 1002 No. DAFs: 463,622 Contributions: $29.23B Ave. DAF Size: $237,280 Total DAF Assets $110.01B Grant Distributions: $19.08B Annual Payout Rate: 22.1% The 2018 DAF Report, National Philanthropic Trust 2017

  5. DAF Is Not a Four-letter Word Donor Advised Fund • Donor makes an irrevocable contribution to a sponsoring organization • Donor receives the maximum tax deduction that the IRS allows • Donor has the right to name the fund, assign advisor(s) and successor advisor(s) or charitable beneficiary • Donor retains the right to recommend grants from the fund • Fund assets are co-mingled in a larger investment pool

  6. DAF Is Not a Four-letter Word Prohibited Payments • Non-charities and private non-operating foundations • Distribution to any organization if not for a charitable purpose • Distributions to individuals • including scholarship grants • reimbursing donor fundraising expenses • Type III supporting organizations that is not “functionally integrated” • Type III supporting organization (functionally integrated) if the supported organization is controlled by either the donor or an advisor appointed by donor

  7. DAF Is Not a Four-letter Word Limits on Benefits • Advisor cannot receive a substantial benefit from the grant • Auction items • Memberships • Galas • Golf Outings • Raffle tickets • BUT WHAT ABOUT PAYING A PLEDGE?

  8. DAF Is Not a Four-letter Word Section 4 IRS Notice 2017-73 If finalized, proposed regulations would provide that distributions from a DAF to a charity will not be considered to result in a more than incidental benefit to a Donor/Advisor under section 4967 merely because the Donor/Advisor has made a charitable pledge to the same charity provided the Sponsor makes no reference to the existence of any individual’s pledge when making the DAF distribution

  9. DAF Is Not a Four-letter Word Ethics Sidebar

  10. DAF Is Not a Four-letter Word Working with Fund Sponsors • Gift processing • Hard credit goes to the fund sponsor • Keep the paperwork and check together • Honor the fund sponsor’s instructions • Call if you have questions

  11. DAF Is Not a Four-letter Word Working with Fund Advisors • Soft-credit • Acknowledge don’t receipt • Recognize as per policy • Develop a strategy for future gifts

  12. DAF Is Not a Four-letter Word Why do DAFs get a bad rap? Does something need to change?

  13. The 2018 DAF Report, 12th annual, National Philanthropic Trust Can I Use My DAF for That?, Gil Nusbaum, National Philanthropic Trust, March 27, 2019 Integrated Marketing for Planned Gifts: Understanding Donor Advised Funds, R. Clinton Travis, JD, for Crescendo Everything You Ever Wanted to Know About Type 3 Supporting Organizations, Marty McKeever, Foundations, June 26, 2000 (found on Planned Giving Design Center) Legal Compendium for Community Foundations: Component Funds: The absence of Material Restrictions,, Christopher R. Hoyt, Council on Foundations Taxable Distributions for Donor-Advised Funds, Council on Foundations Three Simple Steps to Protect Charities and American Taxpayers from the Rise of Donor-Advised Funds, Ray Madoff, Nonprofit Quarterly, July 25, 2018 Update on Charitable Tax Planning: Guidance on Donor-Advised Funds and Overview of UBTI Rules, Lisa B. Petkun, Pepper Hamilton, LLP Working With Donor-Advised Funds: The Basics, The Chronicle of Philanthropy “Advice”, May 01, 2018 IRS Publication 1771 IRS Publication 526 Disclaimer: This presentation is meant to provide an overview of donor advised fund opportunities and challenges for nonprofits. It is not meant to provide legal or accounting advice. Divider Here

  14. THANK YOU! Nancy M. Brown, CFRE nbrown@winonacf.org

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