New Bill Could Hasten Donations to Charities in DAFs

A longtime resident of New Jersey, Harvey Bell holds an MBA in finance from Texas A&M University. Known for his involvement in the community, Harvey Bell advocates for charitable giving in many forms, including via donor-advised funds (DAF).

In July 2021, a new bill was introduced in the Senate by Iowa Republican Chuck Grassley and Maine Independent Angus King. The bill was created in response to complaints that DAFs offer no financial incentive to expedite donations to charities, so the money sometimes sits in such accounts indefinitely. Several new categories of DAF accounts, along with other changes, were proposed by the bill to address these issues.

One type of account created by the bill would provide donors with an immediate tax deduction for the money they contribute to a DAF. However, they must agree to give that money to a charity within 15 years. Another type would let donors delay the distribution of their donation for 50 years, but they won’t receive a tax deduction for the donated amount until the money is distributed. If they donate gifts or stocks to the DAF, they would still save on estate tax and enjoy capital gains.

As to be expected, the proposed new bill generated a large rift in the philanthropic community. Some believe that tighter restrictions on DAFs are unnecessary, while others say that the accounts have essentially become warehouses for donations since they lack payout requirements.