New Report: Most DAFs Do Not Sequester Funds

New Report: Most DAFs Do Not Sequester Funds

A few days ago, Vox PPLI (this blog) noted a new report from one of the largest Donor Advised Funds indicating that DAFs are successfully competing with private foundations, with the ultimate beneficiaries of increased contributions being charities. Now a new academic study reinforces the rising role and positive news about DAFs as a vehicle for charitable funding. As a new Axios article notes:

One of the perennial complaints about donor-advised funds — charitable giving vehicles that allow donors to front-load tax deductions without necessarily giving any money to charity — is that money tends to get tied up in them and never given away. … An important new paper from the DAF Research Collaborative suggests that worry might be overblown.

“The 2024 National Study on Donor Advised Funds” from the DAF Research Collaborative, “a consortium of academic and nonprofit researchers” which seeks to “enhance the public understanding of donor advised funds,” argues that one of common beliefs about DAFs is, at best, overblown. Key findings from the study can be found in its Executive Summary.

The new Study stems from “the collective efforts of 111 DAF programs that voluntarily provided anonymized data to the research team, the dataset covers nine years of activity from more than 50,000 accounts, with over 600,000 inbound contributions to DAFS and more than 2.25 million outbound grants from DAFs.” The dataset indicates that “Just over half of all DAFs (54%) granted out at least half of their original contribution within three years. After eight years, about three-fifths of all DAFs (58%) had granted out 100% of the original contribution.”

State-by-State Forecast for Threats to Privacy in Both Red and Blue States

State-by-State Forecast for Threats to Privacy in Both Red and Blue States

People United for Privacy has issued a new survey report forecasting that at least 31 states will consider legislation in 2024 “that would chill nonprofit advocacy and expose members and supporters of nonprofit groups to threats, harassment, and intimidation. This concern is particularly pronounced in California, Hawaii, Idaho, Michigan, Minnesota, Ohio, Oklahoma, Oregon, Virginia, and Wyoming. … Party control has no bearing on whether an anti-speech or anti-privacy proposal will receive consideration or become law.” The report summarizes the potential legislative focus in each of the 31 states.

Most of the legislation discussed in this memo is very unlikely to emerge as a serious threat or become law. However, as both parties increasingly view donor disclosure mandates as a tool for ruining their opposition and settling political scores, the threat of anti-privacy proposals passing in states across the country is high. All nonprofits must be on guard for harmful proposals in their state.

That so many states would be considering such proposals less than three years after the Supreme Court’s resounding defense of donor privacy in Americans for Prosperity Foundation v. Bonta, 141 S.Ct. 2373 (2021), is troubling.

Are Donor-Advised Funds Really A Problem?

Are Donor-Advised Funds Really A Problem?

When “donor-directed depositories” arose in the 1990’s, these giving-vehicles competed with private foundations and so caused quite a stir in the tax-exempt organization world. Over time, foundations prevailed, but not entirely; the modern version of DDDs – now called “donor-advised funds” or DAFs – are booming. As it has for decades, the Internal Revenue Service dawdled in producing formal guidance over DAFs and other donor-guided funding mechanisms; in this case, the IRS has recently proposed sweeping changes in the regulations governing DAFs, and they, too, are causing a ruckus. The fuss is partly caused by recent congressional attention to alleged mis-use of tax-exempt organizations, but also from the new regulations’ poor drafting decisions; for example, unlike most such new IRS rules which take effect in the tax year following promulgations, the new regulations would take effect in the year they are promulgated — that is, immediately, even if actions already have been taken that might be affected by the new regs.

That makes a new report from Fidelity Charitable, the largest sponsor of DAFs with a record $12 billion in charitable giving in 2023, quite interesting. The Associated Press has a summary of some surprising statistics, including that the FC DAF had a 5% increase in distribution at a time when “generally donations are dropping”, and its “distributions to nonprofits in 2023 were four times what they were 10 years ago.”

One concern about DAFs, for example, was that it would encourage more anonymity in giving, but 96% of FC DAF donors self-identified either themselves or their DAFs. Another concern was that DAFs would only be used by wealthy individuals to sequester funds or support their own interests, but “the average grant in 2023 was $4,625, with the average DAF handing out 11.8 grants in the year.” And the most popular recipients of grants from DAFs were not politically-active or non-mainstream charities, but “Doctors Without Borders USA and St. Jude Children’s Research Hospital”, as they were in 2022.

It appears that DAFs, like their predecessor organizations, are competing with private foundations, and doing so quite well. In fact, millennials and Gen Xers, who might be thought to be more careful in early giving, seem more willing to use DAFs than give to charities directly. It’s not clear why the IRS is choosing to impose substantial new and expansive regulations on a system that seems to be doing what seems to help the charitable sector and those it serves. Perhaps it’s the same impulse that did in the Donor Directed Depositories — competition with private foundations — but if this competition is being resolved by market forces, it’s not clear that private foundations have the moral high ground, despite a legislative and regulatory record that supports vigorous governmental intervention rather than donor choice.

Judge Lamberth: “In resentencing Mr. Little on the count to which he pleaded guilty, the Court is not suppressing his constitutional right to freedom of expression.”

Judge Lamberth: “In resentencing Mr. Little on the count to which he pleaded guilty, the Court is not suppressing his constitutional right to freedom of expression.”

Note: the painting above (from 2017) does not show events from January 6, 2021, at the U.S. Capitol. Instead, it depicts events from 2017, which saw a series of violent “May Day” public protests in Portland, Oregon, Seattle and other Pacific Northwestern cities against President Donald Trump. Oregon Public Broadcasting has described Portland as a “testing ground” for the 2021 “J6” demonstrations. Portland has a broad history of violent demonstrations that attacked public institutions.

An increasing amount of rhetoric seeks to portray those who entered the U.S. Capitol on January 6, 2021, as “patriots” exercising their First Amendment rights. Cong. Elise Stefanik, for example, described those who were imprisoned for “J6” activities as “hostages.” Now, a well-respected senior judge who has presided over dozens of J6 cases, including the “QA shaman,” has called such claims “preposterous,” and explained his view that the First Amendment does not protect the J6 sort of illegal activity. See, e.g., United States v. Hansen, No. 22-179, Supreme Court of the United States, June 23, 2023 (law criminalizing encouragement of illegal immigration does not violate the First Amendment). He also took the unusual step of decrying as “preposterous” many of the First Amendment claims being made about the events of J6.

Senior U.S. District Judge Royce Lamberth was nominated by President Ronald Reagan and confirmed to the District Court for the District of Columbia in 1987. He was a Captain in the U.S. Army, serving in Vietnam, and served in the U.S. Attorney’s office in D.C., including as the chief of the Civil Division. He was the Chief Judge of the District Court from 2008 to 2013. Since taking senior status (working retirement as a judge) in 2013, he now often also sits as a visiting judge on the U.S. District Court for the Western District of Texas in his hometown San Antonio. He is the longest-serving judge on the D.C. District Court, and has presided over dozens of trials and cases arising out of the January 6, 2021, riot at the U.S. Capitol.

His most recent decision was to resentence James Little, who had entered the Capitol on January 6 and pleaded guilty to “parading, demonstrating or picketing in a Capitol building,” in violation of 40 U.S.C. 5104(e)(2)(G). Little was sentenced to both prison and probation, but he failed to abide by the terms of the probation. Lamberth’s recent opinion was to explain his decision not to give Little full credit for serving 18 months of his probation because he failed to fulfill the probation agreement. Judge Lamberth wrote:

The Court is accustomed to defendants who refuse to accept that they did anything wrong. But in my thirty-seven years on the bench, I cannot recall a time when such meritless justifications of criminal activity have gone mainstream. I have been dismayed to see distortions and outright falsehoods seep into the public consciousness. I have been shocked to watch some public figures try to rewrite history, claiming rioters behaved “in an orderly fashion” like ordinary tourists, or martyrizing convicted January 6 defendants as “political prisoners” or even, incredibly, “hostages.” That is all preposterous. But the Court fears that such destructive, misguided rhetoric could presage further danger to our country. The Court cannot condone the shameless attempts by Mr. Little or anyone else to misinterpret or misrepresent what happened. It cannot condone the notion that those who broke the law on January 6 did nothing wrong, or that those duly convicted with all the safeguards of the United States Constitution, including a right to trial by jury in felony cases, are political prisoners or hostages.
So let me set the record straight based on what I’ve learned presiding over many January 6 prosecutions, hearing from dozens of witnesses, watching hundreds of hours of video footage, and reading thousands of pages of evidence. On January 6, 2021, a mob of people invaded and occupied the United States Capitol, using force to interrupt the peaceful transfer of power mandated by the Constitution and our republican heritage.
This was not a protest that got out of hand. It was a riot; in many respects a coordinated riot, as is clear from cases before me including Hostetter (21-cr-392) and Worrell (21-cr-292). “Protestors” would have simply shared their views on the election—as did thousands that day who did not approach the Capitol. But those who breached and occupied the Capitol building and grounds halted the counting of the Electoral College votes required by the Twelfth Amendment. The rioters interfered with a necessary step in the constitutional process, disrupted the lawful transfer of power, and thus jeopardized the American constitutional order. Although the rioters failed in their ultimate goal, their actions nonetheless resulted in the deaths of multiple people, injury to over 140 members of law enforcement, and lasting trauma for our entire nation. This was not patriotism; it was the antithesis of patriotism.
And the rioters achieved this result through force. Not everyone present that day was violent, but violence is what let them into the Capitol. At first, a police line protected the Capitol, but eventually law enforcement was subjected to such force by such a mass of people that the rioters pushed through. Upon entering the Capitol, many rioters vandalized and looted, some hunted for members of Congress. … What the Court already said in reference to Mr. Little at his original sentencing remains true:

January 6, 2021, marked a tragic day in American history. The peaceful transfer of power—one of our most important and sacred democratic processes—came under a full-fledged assault. While the immediate threat may have subsided, the damage from January 6 persists. Rioters interrupted the certification of the 2020 Electoral College vote count, injured more than one hundred law enforcement officers, and caused more than a million dollars of property damage to the U.S. Capitol. Some of the rioters—now defendants in criminal cases—directly contributed to this violence by assaulting members of law enforcement or by planning, preparing, and facilitating this violence. Others, like Little here, did not directly assault officers.
But even Little and those who engaged in this “lesser” criminal conduct were an essential component to the harm. Law-enforcement officers were overwhelmed by the sheer swath of criminality. And those who engaged in violence that day were able to do so because they found safety in numbers. 

United States v. Little, 590 F. Supp. 3d 340, 342 (D.D.C. Mar. 14, 2022), vacated and remanded, 78 F.4th 453 (D.C. Cir. 2023).

Let me add one more thing. According to the defendant, the criminal justice system has denied him his freedom of speech. Of course, Mr. Little has a right under the First Amendment to believe that the 2020 presidential election was stolen. He has a right to express that view today, and he had a right to do so on January 6th as well. He even has a right to argue that this was a politically motivated prosecution. But the First Amendment does not give anyone the right to enter a restricted area or to engage in riotous activity in the Capitol. In resentencing Mr. Little on the count to which he pleaded guilty, the Court is not suppressing his constitutional right to freedom of expression. For Mr. Little to style himself a political prisoner and to accuse the Court of infringing his rights is not only incorrect, it is offensive to the Court. The public should understand that such notions are preposterous.

This is a matter of right and wrong. Little cannot bring himself to admit that he did the wrong thing, although he came close today. So, it is up to the Court to tell the public the truth: Mr. Little’s actions, and the actions of others who broke the law on January 6th, were wrong. The Court does not expect its remarks to fully stem the tide of falsehoods. But I hope a little truth will go a long way.

United States v. Little, No. 1:31-cr-00315-RCL, Jan. 25, 2024, slip op. at 4-7 (emphases in original).

https://storage.courtlistener.com/recap/gov.uscourts.dcd.230440/gov.uscourts.dcd.230440.73.0.pdf