Proposal to Change Donor-Advised Funds: "Fixing" What Isn’t Broken


By J.B. Horton and Jeffrey Trimbath


“A solution in search of a problem.” That’s the best summary we’ve heard of the recent proposed legislation to increase mandates and regulations for charitable giving through donor-advised funds.


We are both fundraisers, with a combined 25 years in major and legacy giving for national and state-based nonprofit organizations. We also have consulted with several diverse nonprofit groups. We are privileged to work with some of the most generous, discerning, and passionate philanthropists in the country, counseling those givers to make an impact that exceeds their expectations.


It is with this background in working with donors that we think the mandates on donor-advised funds of the ACE Act, currently under consideration by lawmakers, are a bad idea. The legislation imposes distribution timeframes on charitable dollars, envisions different tax schemes for these timeframes, and in some cases mandates a 5% minimum payout.


Their adoption will increase the cost and administrative burden on philanthropists and their advisors, ultimately reducing the total amount that goes to charity.


Americans have long been the most generous givers in the world. Giving to charity is inherently an individual decision. Unlike paying your taxes, or satisfying a bill, giving your money to charity is your decision. Nobody shows up at your house, points a gun to your head, and says “give me your money to help kids in need.” No—the entire decision begins and ends with the individual.


Yes, the tax code can incentivize folks to make a gift. But those incentives have always been marginal.


Limiting the options for those who support charity, therefore, doesn’t make any sense. And this is particularly true for those in the middle to upper middle class, who don’t have access to the legal and accounting resources to set up their own foundations. That’s one of the main appeals of donor-advised funds. They are exceedingly simple to set up – easily done online in a matter of minutes.


Many of the donor-advised funds sponsored by large organizations don’t even have minimum amounts to open accounts. Instead of a tool for the “super-wealthy,” as has been reported, these accounts have popularized philanthropy to increasing numbers of givers.


And yes, they give donors the option to distribute funds either immediately or in the future. But this flexibility is good for donors and society. Donors’ interests change, and charitable causes and needs change all the time. Giving donors this kind of flexibility allows them to respond either now or in the future, depending on the current needs. (Who could have predicted the unique charitable need from COVID-19 just two years ago?)


But here’s what proponents of increased regulation curiously omit—at no point in the life of a donor-advised fund can the funds be used to support anything except charity. Unlike other tax-deferred accounts, which can support anything after a certain period of time (like IRA’s), or directly benefit other relatives (529 accounts), or pay for abortions (via health savings accounts), every dollar in a donor-advised fund must only go to support public charities. No boats, no jets, no tuition for Cousin Buffy at the Ivy League.


And what about the charge that too little of donor-advised funds go to support charities each year? The data we have paint a very interesting picture. The National Philanthropic Trust’s most recent report on donor-advised funds noted that for 2019, the payout rate for all donor-advised funds was 22.4%.


Now, one might charge that the National Philanthropic Trust is a “pro-donor-advised funds” group, and thus its results reflect its biases. But, even a recent NBER working paper, authored by a proponent of this legislation, showed that donor-advised funds distribute 14-23% of their assets, depending on the calculation. We’re no mathematicians, but 14% is greater than the 5% minimum payout from foundations.


Only in Washington would it make sense to make the legal floor for one entity a new ceiling for another.


Giving to charity is inspired primarily by mission, not tax breaks. We know that the most important reason that donors give is because they agree with the mission of the nonprofit. The greats of our field (like our mentors, John Von Kannon, Jerry Panas, and Bill Sturdevant) have taught us this. Donors choose to give to those charities whose mission they want to support at that particular time. Many factors may go into giving, but agreement with the mission is always at the top, and tax benefit is always at the bottom.


We believe that giving donors—regardless of political ideology, religious conviction, or economic status—more choices and more control over their own giving has resulted in greater financial benefit for charity. We would hate for that to change.


J.B. Horton is the chief development officer of the Texas Public Policy Foundation. Jeffrey Trimbath is the senior advisor for the Conservative Partnership Institute. They both served as the John Von Kannon Fellow in Philanthropy at The Heritage Foundation.

More Resources


03/28/2024
The Democrats' Abundance Problem Revisited
So, Um, Where Is It?

more info


03/28/2024
Are Democrats Still Stuck With Biden?


more info


03/28/2024
RFK Jr. Now Hurting Biden, Helping Trump


more info


03/28/2024
The Twilight of the Republican 'McLeadership'
The Trump team is steadily purging the Republican leadership of holdovers from past decades. The departure of McCarthy, McDaniel, and McConnell is part of exorcising the legacy of a more important Mc whose influence is still felt in the U.S. Senate: John McCain.

more info


03/28/2024
The Funniest Media Story of the Year?
Surely this is the funniest media story of the year?

more info


03/28/2024
Abridging, Not Coercing, Is First Amendment's Yardstick
Under the First Amendment, the government may not abridge the freedom of speech, whether that abridging is done by coercing internet platforms or by getting them to cooperate in government efforts to censor the public.

more info


03/28/2024
Trade Cheaters Are Killing Aluminum Industry Jobs
Aluminum industry workers stand ready to do their part to move the nation forward. They just need the federal government to enforce trade laws.

more info


03/28/2024
It's Time for an Immigration Moratorium
An effective freeze on immigration could revitalize our national culture, politics, and economy before it's too late.

more info


03/28/2024
U.N. Gaza Resolution Could Lead to Lasting Cease-Fire


more info


03/28/2024
Biden's War Against the Jews


more info


03/28/2024
'Fairness Initiative' Tackles Too-High Government Pay
Governments at every level ought to cap public-sector wages and benefits at private-sector comparables.

more info


03/28/2024
My Friend Joe
I write now, in the worst pain and shock, with news of my friend Joe Lieberman's death just moments ago. I write because I know what his critics will be quick to write, what news reports have already re-circulated.

more info


03/28/2024
Why I'm Resigning From the Biden State Department
Since Hamas' attack on October 7, Israel has used American bombs in its war in Gaza, which has killed more than 32,000 people - 13,000 of them children - with countless others buried under the rubble, according to the Gaza Ministry of Health. Israel is credibly accused of starving the 2 million people who remain, according to the UN special rapporteur on the right to food; a group of charity leaders warns that without adequate aid, hundreds of thousands more will soon likely join the dead.

more info


03/28/2024
Gaza: Truths Behind All the Lies
From civilian casualties, the use of disproportionate force, and international biases, the mainstream narrative of the Gaza conflict often obfuscates the truth behind lies.

more info


03/28/2024
Obama, Fearing Biden Loss to Trump, Is On Phone To Strategize
As the election approaches, President Joe Biden is making regular calls to former President Barack Obama to catch up on the race or to talk about family. But Obama is making calls of his own to Jeffrey Zients, the White House chief of staff, and to top aides at the Biden campaign to strategize and relay advice.

more info



Custom Search

More Politics Articles:

Related Articles

Senate Drug Plan Helps Government, Hurts Patients


Nancy Pelosi has a plan to lower drug prices. The Speaker of the House just released a new bill that would impose a slew of new taxes and allow the government to meddle with private businesses.

So-Called Methane Regulation "Rollbacks" Actually Reduce Emissions


President Trump just proposed a small update to methane-emission regulations. But judging by the Democratic candidates' hyperbolic reactions, you'd think he personally assaulted Mother Earth.

A Time of Civility Needed Again


Tonight, President Donald Trump will visit Minneapolis. Minneapolis Mayor Jacob Frey stated, "While there is no legal mechanism to prevent the president from visiting, his message of hatred will never be welcome in Minneapolis." For those too young to remember, the United States in 1963 was divided deeply over the growing civil rights movement—a division that later widened with the war in Vietnam.

Betsy Ross Recall is a Cheap Moral Stand


Nike courted controversy when it cancelled a new line of Betsy Ross flag-stitched sneakers just before the Fourth of July. The American shoemaker, valued at over $130 billion, pulled the shoes after former NFL quarterback and company spokesperson Colin Kaepernick worried on Twitter that the flag was a racist symbol.

Jordan B. Peterson: A Sign of the End Times?


It is not often that a clinical psychologist becomes the cultural equivalent of a rock star, but Canadian academic Jordan B. Peterson has done just that. Cometh the hour, cometh the man, as the old saying goes, and Dr. Peterson is surely a man who has found his time. And all indications are that, behind his characteristically serious (if not slightly puzzled) expression, he quite enjoys the irritation and annoyance that his forthright statements on our current cultural climate cause the self-appointed members of contemporary Committees of Public Safety. Like Camille Paglia (who provided a jacket commendation for his latest book) he preaches that most unpopular of gospels in this age of victimhood: personal responsibility.

Direct-to-Consumer Drug Advertising Benefits Companies, but Patients Even More


Analysts at the nonpartisan Congressional Budget Office recently scored Speaker Nancy Pelosi's drug pricing bill, H.R. 3.

Sharp Cuts to Research Funding Would Deprive Patients of Hope


Congress is poised to pass two separate bills designed to bring down drug prices.

America Shows How to Fight Climate Change Without Regulation


Speaking at the United Nations in December, House Speaker Nancy Pelosi drew cheers by saying the United States was "still in" the Paris Climate Agreement.

Trump's New Drug Pricing Plan Isn't "The Best Deal" For Patients


President Trump will soon unveil a new plan to reduce drug prices.

The Smart and Practical Way to Address Climate Change


Lawmakers want to fight climate change, but many of them are taking the wrong approach. Proposals to abandon fossil fuels entirely, like the Green New Deal, are both impractical and expensive.

Expansion of "Buy America" Rules Would Slow Development of Coronavirus Vaccine


Federal policymakers are considering laws that would force federal agencies to rely solely on medicines made in the United States.

Costs At the PHarmacy are Spiraling, But Price Controls Are the Wrong Solution


Congress is considering two plans to reduce high drug prices. Senators Ron Wyden (D-Ore.) and Chuck Grassley (R-Iowa) have spent the past several months promoting their Prescription Drug Pricing Reduction Act. Meanwhile, Sen. Mike Crapo (R-Idaho) is pushing his alternative, the Lower Costs, More Cures Act.

U.S.-Canada Trade Must Prevail Amid Pandemic


The United States-Canada border has been closed to cross-border tourism and other non-essential travel for more than three months.

Summer 2020 COVID-19 Data in Pennsylvania: What We Don't Know


The COVID-19 coronavirus is a novel virus, and everybody who claims they have it figured out is living under an illusion. Our knowledge is growing, but it is still very fragmented. Our local politicians have been cautious because of the vast unknown; we have never been here before.

The World Can Thank President Trump for the Oil Deal


In the midst of a pandemic, President Trump was able to convince the second and third largest crude oil producing countries to voluntarily cut production. In so doing he may have saved global financial markets, the U.S. energy industry -- and the U.S. economy.