Reforms Should Close Loopholes Without Restricting Giving

Community foundations want to see more resources in the hands of local nonprofits.

But recent calls to impose a 5-percent mandatory payout on individual donor-advised fund accounts would chill — rather than stimulate — the flow of money to charities.

That’s the message delivered by the leaders of three community foundations in a letter to the editor published today in Tax Notes, a publication that provides daily news, analysis, and commentary on a wide range of tax-related issues.

The letter’s authors — Stephen Maislin of the Greater Houston Community Foundation, Isaiah Oliver of the Community Foundation of Greater Flint, and Mary Rutherford of Montana Community Foundation — write that some recent calls to regulate donor-advised funds are well meaning but will carry unintended consequences.

They advocate, instead, for regulations that are guided by data and align with how donor-advised funds are actually used. 

“Donor-advised fund sponsors are ready to support reforms backed by data, and to close loopholes anywhere there is real evidence of abuse,” the community foundation leaders wrote.

But subjecting DAFs to a 5-percent annual payout “simply flies in the face of the evidence and our real-world experience. The inevitable result will be a decline in total giving at a time when people are looking to the nonprofit sector to do more.”

You can read the full published letter here.