Key lawmakers from across the political aisle are wary of a “chilling effect” for charitable giving that could result from a pending donor-advised fund (DAF) rulemaking. Led by Reps. Vern Buchanan (R-Fla.) and Jimmy Panetta (D-Calif.), a bipartisan group of 33 House Ways & Means Committee members joined a letter urging Treasury Secretary Janet Yellen to avoid regulatory changes that could “impede the success of this thriving and flexible charitable tool.” 

DAFs are increasingly popular giving vehicles that allow donors to receive an immediate tax deduction for irrevocably donated funds that may be invested, grown, and distributed to charities. Data from the National Philanthropic Trust shows that two million DAF accounts now hold $228.89 billion in assets, and those accounts granted more than $52 billion to charities in 2022–continuing a pattern of annual payouts regularly exceeding 20 percent.  

“DAFs are now a key tool utilized by community foundations, national sponsors, faith-based and single-issue charities, and other nonprofits to help donors maximize the impact of their charitable giving,” wrote the legislators. “Given the rising popularity of DAFs, we are concerned the regulations could limit their appeal and potentially undermine charitable giving for several reasons.” 

The bipartisan group, whose committee posts notably give them oversight powers over the IRS, said the current proposal is “overly broad.” In addition to concerns about new implications for the roles of investment advisors and the scope of what would be considered taxable distributions, the taxwriters worried that the breadth of the new DAF definitions could rope in numerous charitable funds and subject them to new regulatory complications. 

“Subjecting [field of interest funds], designated funds, or funds with advisory committees to the same substantiation requirements and limitations as what have been historically considered DAFs could be confusing for donors, expensive for sponsors, and lead to less money getting to end-use charities,” they declared. 

This letter comes in advance of a two-day public hearing on this matter at the IRS headquarters on May 6-7. In addition, many DAF sponsors and other nonprofit voices have weighed in with public comments on this proceeding–comments the legislators are asking Yellen to give “full and fair consideration… before issuing final regulations that could undermine the charitable giving that so many of our communities depend upon.” 

ECFA continues to closely monitor this and other DAF-related deliberations in the nation’s capital.