Pushing to Accelerate Money Out of DAFs
In the last part of this three-part blog series, Tuti B. Scott, a philanthropy and gender equity strategist and former board chair at Tides, focuses on how philanthropic contributions can be enhanced.
Part one: Why Funding 501(c)(4) Organizations is Critical for Systemic Change
Part two: Six Advantages to Giving to 501(c)(4) Organizations
DAFs have become popular in philanthropy due to their tax benefits and flexibility. However, the vast amounts of money accumulated in DAFs often remain inactive, delaying critical support for urgent social issues. With pressing global challenges such as climate change, racial injustice, and threats to democracy, there’s an urgent need for philanthropic dollars to be put to work now. Delaying disbursement of the $240 billion sitting in DAFs means missed opportunities to address these crises effectively.
The Crisis Charitable Commitment (CCC) aims to enhance philanthropic contributions from foundations, donor-advised funds (DAFs), and ultra-high net worth individuals. It seeks to double the charitable dollars flowing to nonprofits without placing an undue burden on donors. Despite potentially modest minimum contribution requirements compared to recent high investment returns, the CCC focuses on urgent and substantial philanthropic efforts. Four key efforts underway are integrated and catalyzed by the CCC:
Emergency Charitable Stimulus (ECS) Bill proposes mandatory 10% asset distribution by private foundations and DAFs over three years. The CCC aligns with this but advocates for immediate action and leadership.
One-for-Democracy encourages donors to allocate 1% of their assets to democracy-related causes. The CCC supports top line consideration to focusing on racial justice and secure elections.
The Giving Pledge involves billionaires committing over half their wealth to charity without a set time limit. The CCC provides a plan for immediate and impactful donations, focusing on current needs like racial justice and democracy protection.
Various proposals suggest a Wealth Tax to tax wealth to address disparities. The CCC is voluntary but reflects a tangible financial commitment to societal wellbeing, complementing tax initiatives.
Community foundations and commercial funds like Vanguard and Charles Schwab that manage DAFs have spent millions lobbying against stricter payout regulations. From 2018 to 2023, these entities invested $11 million to block legislation aimed at increasing DAF distributions. The debate over donor-advised fund regulations is poised to intensify as tax provisions from the Trump era expire in 2025, sparking renewed discussions on charitable tax policies.
Conclusion
Supporting 501(c)(4) organizations is a strategic and impactful way for philanthropists to drive systemic change and address pressing social issues. By leveraging the unique capabilities of these entities, donors can influence policy, engage in electoral activities, and complement the efforts of 501(c)(3) organizations. Moreover, accelerating the distribution of funds from DAFs, with an eye on supporting 501(c)4s from your DAF, ensures that substantial resources are mobilized to tackle today’s most critical challenges, fostering a more just and equitable society.