Donor advised funds
Encyclopedia : D : DO : DON : Donor advised funds
A Donor-Advised Fund is a charitable giving vehicle set up under the tax umbrella of a public charity, which acts as sponsor to many Funds. A Donor-Advised Fund offers the opportunity to create an easy-to-establish, low cost, flexible vehicle for charitable giving as an alternative to direct giving or creating a private foundation. Donors enjoy administrative convenience, cost savings and tax advantages by conducting their grantmaking through a Donor-Advised Fund.
Community foundations pioneered the development of Donor Advised Funds and a number of commercial sponsors, educational institutions, and independent charities now offer this service. The largest donor advised program in the United States is the Fidelity Charitable Gift Fund, founded by Fidelity Investments.[link]
Because the Fund is housed in a public charity, donors receive the maximum tax deduction available, while avoiding excise taxes and other restrictions imposed on private foundations. Further, donors do not incur the cost of establishing and administering a private foundation, including staffing and legal fees. Since the maximum tax deduction is received by the donor at the time of the gift, the foundation administering the fund gains full control over the contribution, granting the donor advisory status. As such, they are not legally bound to the donor, but make grants to other public charities upon the donor's recommendation. Most foundations that offer donor advised funds will only make grants from these funds to other public charities, and will usually perform due diligence to verify the grantee's tax-exempt status.
While private foundations in the United States are heavily regulated by the Internal Revenue Service, including rules on oversight and minimum annual payouts, donor advised funds housed in public charities are not subject to the same tax restrictions. Congress is currently considering revising the tax code to further regulate these types of funds, including extending tax law to include an official definition of a donor advised fund.
See also
- Charitable organisation
- Foundation (charity)
Further reading
- Elfreena Foord, [Philanthropy 101: Donor-Advised Funds]
- Eileen R. Heisman, [Guide to Donor Advised Funds]
- [Analysis of S. 2020 The Tax Relief Act of 2005]
External links
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