Thread by @JohnArnoldFndtn

3 reports on philanthropy this week:
(1) Total giving increased 2%, from $450 to $459 bln. -@blackbaud
(2) DAF accounts increased from $112 to $142 bln over 2 yrs. -@AEI
(3) Fidelity DAF distributed $9.1 bln last year.

Combined, these studies show the best & worst of DAFs. 1/

On the + side, DAFs are very useful vehicles for donors. They allow ease of execution, low costs, & tax efficiency that promotes giving. For donors looking to contribute appreciated assets or bunch donations into a single year to get the tax benefit, these are great vehicles. 2/

However, the data shows growing problem of asset accumulation within philanthropic vehicles without a commensurate increase in giving to working charities. DAF assets should not be growing at a faster absolute dollar pace (15 bln/yr) than total $ giving to nonprofits (9 bln). 3/

I fear that, increasingly, donations to DAFs are coming at the expense of charities. For some, it’s easier to give to a DAF than choose the nonprofit, so their annual “giving” is just a transfer of assets between accounts. The tax code implies these actions are equivalent. 4/

Curiously, the tax code rewards the commitment to give rather than the act of giving. A contribution to a DAF gets a tax deduction even though there is ZERO requirement for this money to ever go to the community. Capital can build up in tax-free investment accounts forever. 5/

The tax code should require that any tax benefit be linked to a distribution of assets to the community in a reasonable time frame. Society should reward money getting to nonprofits, not money put into investment accounts. 6/

Otherwise, we end up with assets in philanthropic vehicles growing quickly while the nonprofit sector is stagnant. The system rewards philanthropic intent (contribution of assets to a DAF) and is silent about philanthropic action (distribution of assets to the community). 7/

There is a growing coalition of philanthropists, academics, and policymakers who believe policy should prioritize charities and that DAFs are a great conduit for philanthropic giving, not an act of philanthropic giving. 8/

For more info on how to strengthen the charitable sector, please see the below. @accelgiving 9/9
acceleratecharitablegiving.org/new-coalition-…