Donor-Advised Funds Will Face More Congressional Scrutiny

Members of congress from both parties are calling for increased scrutiny of Donor-Advised Funds (DAFs) because of the way these funds are used as a tax avoidance technique.  DAFs have been growing dramatically in recent years, there are now at least 217,000 DAFs representing a 34% increase in the last seven years. 

A DAF is an account set up by a donor and placed under the control of an IRS approved charity.  The charity makes payments from the account to legally recognized charitable beneficiaries who were chosen by the donor.  Donors can also receive a charitable tax deduction for assets put into a DAF while postponing the decision on which charity to support.  Another benefit of a DAF is privacy that a donor gets that would not be available if a donation was made directly to a charitable foundation.  There are many lawmakers who would like to change things because DAFs are costing the treasury a lot of money in lost tax revenue. 

See Diana Britton, The New Reality In Donor-Advised Funds, Wealth Management, January 26, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.