Almost exactly one year ago, I wrote about the hoarding and transparency problem with Donor Advised Funds (DAFs). Today, I’m writing to announce the Crisis Charitable Commitment’s new initiative–which will be launched tomorrow, July 28– to address the most significant aspect of the DAF problem, a problem of, by and for the rich.
Unlike private foundations, DAFs have NO payout requirement whatsoever and NO requirement to disclose any of their grantmaking, which make DAFs rife for hoarding and abuse by the rich. To address this, CCC’s Charitable Standard calls on DAFs to pay out at least 10 percent of assets, and so far 24 wealthy CCC signers have indicated doing so.
Now, in an effort to tackle the problem at scale, CCC is targeting its new initiative on “sponsoring organizations” which house and administer DAFs. The DAF Sponsor Initiative (DSI) focuses on “Big DAFs,” which CCC defines as DAFs with assets of $1 million or more. While we of course encourage reasonable minimum payout and transparency for all DAFs, the DSI is most concerned with DAFs being used by the wealthy to generate generous charitable tax deductions and to simply park their money while it is invested and grows tax-free without any short- or near-term benefit to nonprofits.
DAF sponsoring organizations fall into three categories:
1. Community Foundations whose grantmaking is focused on their local communities
2. National Foundations whose grantmaking is national or international in scope
3. Commercial Foundations which are nonprofit arms associated with financial institutions
The DSI will recognize those sponsoring organizations that report publicly that 50% or more of their Big DAFs meet a 10% payout AND in the aggregate that their Big DAF payout exceeds 10%. DSI also will give “Above and Beyond” recognition to those sponsoring organizations that visibly and robustly promote a 10% distribution by their DAFs.
As part of this launch, CCC is thrilled to recognize the three sponsoring organizations to have met the DSI Standard and become our first signers. Each of these three forward-thinking organizations represent one of the three categories of DAF sponsoring organizations described above.
Community Foundations: The San Francisco Foundation, founded in 1948, “is one of the nation’s largest community foundations” and is “committed to advancing racial equity and economic inclusion to ensure that everyone in the San Francisco Bay Area has a chance to attend a good school, get a good job, live in a safe and affordable home, and have a strong political voice.”
National Foundations: The Tides Foundation was an early national leader in providing a home for DAFs in a foundation that promotes a “world of shared prosperity and social justice.”
Commercial Foundations: The Amalgamated Foundation is the charitable arm of Amalgamated Bank, which “for 100 years has championed worker’s rights, economic justice, racial equity, human rights & the environment.”
In addition to being inaugural DSI signers, both the Tides Foundation and the Amalgamated Foundation are receiving “Above and Beyond” recognition for actively promoting higher DAF distributions by their clients. The Tides Foundation has been promoting a Get Off Your Assets (GOYA) effort, which includes asking its approximately 50 DAFs with $1 million or more in assets to join CCC.
Recognizing that “DAF providers – particularly those connected with major financial institutions – can be more focused on accumulating assets and providing donors tax benefits than charitable giving,” the Amalgamated Foundation launched its own “Giving Pledge,” to “encourage [its] donors to grant out a minimum of 10% of their assets annually.”
As Amalgamated Bank recognized, the large commercial foundations are the biggest source of concern in terms of hoarding and lack of transparency, as well as the home of most of the Big DAFs as an adjunct and service for their for-profit investment arms.
While CCC and its DAF Sponsor Initiative remain focused on voluntary measures to increase pandemic- and related crisis-giving, we complement legislative efforts like the Emergency Charity Stimulus which would require DAFs and private foundations to pay out 10 percent of assets for the next three years. Through its 102 signers, CCC has demonstrated both that such giving is reasonable and responsible AND that it will take legislative action to mandate that the other 149,000 plus wealthy Americans follow suit.
While the importance of the DSI cannot be overestimated, it is also important to consider the broader philanthropic landscape. A few weeks ago I was on a webinar with approximately 40 informed philanthropoids. We were given a survey question: What change would most effectively move more money, in a timely way, to social impact (pick only one), and the choices, followed by responses, were: “Voluntary norm-changing efforts” (19%); “Wealth tax” (29%); “Foundation payout policy changes” (0%), and “DAF policy changes” (52%).
The survey results surprised me because of a simple fact: DAFs have only one-tenth as much money as private foundations (approximately $120 billion versus $1.2 trillion), and foundations have only one-tenth as much money as rich people, the 0.1%, those with assets over $30 million (combined $12 trillion in assets). Nevertheless, the philanthropy insiders felt that DAF changes – just 1% of all money available for charitable giving – would make the biggest impact.
To put this in perspective, increasing foundation payout rates from 5% to 7% would generate as much money for nonprofits as a 20% payout requirement for DAFs. And Jeff Bezos alone made more money during the pandemic than the total amount of assets sitting in DAFs!
Thus, while addressing DAF abuse makes sense and clearly strikes a chord that should be played, we philanthropists must not lose sight of the largest wealth hoarding and inequality solutions. Which raises the question: Where is the donor class in supporting a wealth tax like the one proposed by Senator Warren, which at 2-3 percent would raise more revenue for public investment than all DAF assets combined? The proposed Millionaires Income Surtax (10% additional tax on incomes of couples making over $2 million) would generate tax revenues more than twice what private foundations distribute.
Fellow philanthropists, we must significantly change how the donor class answers the question “are we giving enough” because we know there is today excessive wealth and inequality and insufficient public investment. One important step we can take is to encourage all sponsoring organizations to meet the DSI challenge, posed by us and the San Francisco Community Foundation, the Tides Foundation and the Amalgamated Foundation, to promote transparency and charitable distributions by wealthy donor advised funds. Copyright © 2021 | The Crisis Charitable Commitment | Privacy Policy | Contact