Retiree Comments on Guidance for Donor-Advised Funds, Supporting Organizations

From: RipleyLake@aol.com

Thank you for your efforts to investigate Donor Advised Funds. This effort is overdue in my opinion.

I have been involved in various careers in the nonprofit field for the past 40 years, both as a fund raiser in higher education, then as a foundation executive in both a corporate and major independent foundation. My experience goes back to the time of the Pattman Hearings leading up to the Tax Reform Act of 1969. I have since become a student of the history of regulation in the foundation and nonprofit world and have witnessed, firsthand, the continued abuses of charitable tax law. One of the most effective regulations to come out of TRA 69 was the requirement that all private foundations must pay out five percent of their average asset value each year. Prior to that regulation, many foundations were functioning as ways to avoid paying any tax, or making any grants.

That, in my view, is how too many Donor Advised Funds are now operating. I urge that your study and conclusions should recommend that Donor Advised Funds (DAFs) also be required to make minimal annual contributions. This rule might allow a DAF to accumulate assets over, say, a period of up to five years, but after that time, annual grants should be required.

I have watched many Community Foundations become very successful in attracting DAFs. Some of those Community Foundations and Commercial groups now boast DAF assets over $ 1 Billion. But in too many communities where these large Community Foundations operate, the nonprofit community faces difficulty gaining access to these resources because the DAF donors are insulated from community needs by the Community Foundation managers, and the DAFs are not, at present, required to recommend any distributions from their funds.

These large "charity banks" should be mandated to operate in the public benefit, and hopefully, you will propose to Congress that some minimal distribution, say five percent of the DAFs asset value at least, will be mandated going forward.

Thank you for your important work to keep DAFs charitable for the public good.