Donor-advised funds (DAFs) are accounts owned and controlled by a sponsoring charitable organization, into which a particular donor deposits cash or non-cash assets with the expectation of having advisory privileges on their eventual distribution or investment.
DAFs are a growing vehicle for philanthropy, and may offer a more flexible, prudent and cost-effective alternative to creating a private foundation.
In 2014, Independent Sector convened a cross-sector working group to consider whether to require a five percent payout for DAFs. The working group considered available DAF data and issued a report to the Independent Sector Board of Directors. Based on the working group’s recommendations, the IS Board concluded that efforts to establish a payout rate would not necessarily increase the overall amount of funding DAFs allocate to nonprofit organizations. The Board also recommended that DAF managers ensure their aggregate payout rates are transparent by making them publicly accessible on an annual basis.
IS supported the CHARITY Act in the 115th Congress, which would make distributions to DAFs eligible for IRA rollover contributions while also increasing transparency by requiring DAF sponsoring organizations to disclose more information about their policies and payout rates.