Indiana Philanthropy Alliance Submits Formal Reply to Proposed Rules for Donor-Advised Funds  

Undoubtedly, Donor-Advised Funds (DAFs) have surged in popularity as a channel for charitable giving. According to The National Philanthropic Trust, in 2018 alone, there were 728,563 individual DAF accounts collectively holding assets exceeding $121.4 billion, with donors distributing $23.4 billion in grants to qualified charities. DAFs have become integral to the philanthropic landscape, embodying the generosity of donors and facilitating impactful contributions. 

At the state level, DAFs are a critical component to the philanthropic infrastructure of Indiana. With over 3,000 DAFs holding assets worth $852 million in 2022, these funds outnumber and outvalue other types of philanthropic funds in the state.   

Indiana's community foundations distributed $109 million from DAFs in 2022, with an average spending rate of 12.84%, which is double the national average. DAFs also received the highest number of gifts, nearly doubling those to designated funds. 

The Problem 

Recently, the Treasury Department unveiled proposed regulations, signaling potential repercussions for the philanthropic sector. While aiming to bring clarity to existing statutes, these proposals introduce new definitions and concepts that could significantly alter how foundations manage their DAFs. Notably: 

• The redefined "donor-advisor" category may notably affect organizations allowing donors to suggest investment advisors for DAF assets, particularly if those advisors also offer counsel on donors' personal assets. 
• Funds established to support a single public charity could be reclassified as DAFs if a donor linked to the fund serves on the charity's board. 
• Previously excluded funds, such as certain giving circles and field-of-interest funds where donors pool contributions and have volunteer advisory committees for grant recommendations, may now fall under the DAF definition. 

As an organization committed to enhancing the regulatory landscape for foundations, IPA finds the Treasury's proposals concerning. These additional rules could impose significant constraints on DAFs, potentially complicating charities' ability to meet public support criteria. IPA’s official response outlines why these proposals are vague, excessively broad, and could disrupt the operational norms of IPA’s member organizations. 

While the Treasury's proposed regulations pose challenges to the DAF landscape, IPA remains steadfast in its commitment to advocating for its members and philanthropy as a whole. IPA will continue to engage with policymakers, raise concerns, and work towards ensuring that regulatory frameworks encourage and facilitate charitable giving, fostering a culture of generosity and impact in American society.

For more background on these proposed regulations, IPA created this resource.