Donor Advised Funds

FAQ: Donor-Advised Fund

council-webteam — Mon, 02 Jun 2014 19:43:49 +0000

FAQ: Donor-Advised Fund council-webteam Mon, 06/02/2014 - 15:43

FAQ: Donor-Advised Fund

The Pension Protection Act of 2006 includes the first comprehensive regulation of donor-advised funds. These requirements generally took effect at the beginning of the tax year following enactment of the Act, for charities that hold assets in such funds. However, a provision barring the payment from donor-advised funds of grants, compensation, and similar payments to donors, advisors, and persons related to them took effect immediately on August 17, 2006. Understanding the definition of a donor-advised fund also is important to the implementation of the Act’s charitable IRA rollover provision because rollovers are not permitted into donor-advised funds.

What is a donor-advised fund?
A fund must possess three characteristics to be a donor-advised fund:

It must be separately identified with reference to the contribution of a donor or donors
It must be owned and controlled by a sponsoring organization
The donor or a person appointed by the donor must have, or must reasonably expect to have, the privilege of providing advice with respect to the fund’s investments or distributions

If any one of these characteristics is absent, the fund is not a donor-advised fund.

What does it mean for a fund to be separately identified with reference to the contribution of a donor or donors?
Examples of separate identification include naming the fund after a donor or persons related to the donor or tracking contributions to the fund with respect to the specific donor or donors on the organization’s books.

Are funds for a single designated organization or a single governmental entity donor-advised?
No. These funds are exempted by the legislation even if a donor provides advice with respect to investments or distributions. This exemption covers both designated funds and agency endowments.

Are field-of-interest funds donor-advised?
Funds that attract contributions from several donors are not donor-advised as long as the fund is not tracked with reference to the gift of any particular donor. This remains the case even if the fund is advised by an advisory committee that includes some donors to the fund.

Is any fund with a specific charitable purpose a field-of-interest fund?
No. A fund that is tracked by the gift of a particular donor is a donor-advised fund if the donor reasonably expects to provide advice about the fund’s investments or distributions, even if the fund agreement restricts grants to a particular purpose, such as supporting the arts or improving the environment.

I have a donor who would like to create a restricted fund to protect the environment. Apart from specifying the fund’s purpose in the gift agreement, the donor will not provide advice about the fund’s investments or distributions nor will she appoint anyone else to do so. Does specifying the fund’s purpose make it a donor-advised fund?
No. Even though the fund will be tracked by reference to the donor’s gift, the legislative history clearly differentiates between advisory privileges and legal obligations. Legal restrictions, such as a designated purpose, are not advice and will not make the fund a donor-advised fund.

A donor would like to create a fund, to be named for the donor, to benefit arts organizations. The donor would like to recommend three individuals with expertise in the arts to serve as an advisory committee to the fund. Is this a donor-advised fund?
No. As long as the donor only recommends the individuals, and they are persons with expertise that can be documented, the donor will not be considered to have designated or appointed them. Therefore, the fund is not donor-advised.

Are funds, such as those for giving circles or Social Venture Partners, which are established by groups of unrelated donors, donor-advised funds?
No. As in the case of field-of-interest funds, these funds pool the contributions of several unrelated donors, the funds are not tracked by reference to the gift of any individual member of the group, and grant recommendations are a group decision. These funds are not donor-advised.

Memorial funds usually have many donors. Are they donor-advised?
A memorial fund generally is a separate fund tracked by reference to the decedent. Although the decedent is not a donor, the legislative history makes clear that contributions by related persons, such as the decedent’s spouse or a child, can constitute a fund that is separately identified by the contribution or a donor or donors. If the fund is one for which family members of the decedent will provide advice, the fund should be treated as a donor-advised fund even though it has multiple contributors unless it is otherwise exempt because it is, for example, an exempt scholarship fund or a fund designated for a single charitable organization.

Are scholarship funds donor-advised if a donor is a member of the selection committee?
A scholarship fund is not a donor-advised fund, even if a donor or fund advisor is a member of the selection committee, if it meets the following tests:

The sponsoring organization appoints all of the members of the committee and the donor’s advice is given solely as a member of the committee;
The donor, and parties related to the donor, do not control the committee directly or indirectly; and
All grants are awarded on an objective and nondiscriminatory bases using a procedure that has been approved in advance by the board of directors of the sponsoring organization and the procedure is designed to ensure that all such grants meet the requirements of paragraphs (1), (2), or (3) of section 4945.

What are the requirements of paragraphs (1), (2), or (3) of section 4945?
Grants to individuals for travel, study, or similar purposes must fit into one of three categories:

Paragraph (1) allows grants that are qualified scholarships and fellowships. These are scholarships that pay for tuition, books, room, and board, and so forth.
Paragraph (2) sanctions grants that are prizes or awards. The recipient must be chosen from the general public, without any action to enter a contest or proceeding, and must not be required to provide services as a consequence of receiving the award.
Paragraph (3) permits grants to achieve a specific objective, produce a report or other similar product, or improve or enhance a literary, artistic, musical, scientific, testing or other similar capacity, skill, or talent of the grantee. This is the broadest category and covers, for example, awards to artists to create works of art and scholarships that do not fit under paragraph (1).

Can the donor recommend the other members of a scholarship selection committee?
Yes, as long as it is clear that the recommendation is based on objective criteria related to the expertise of the person recommended. As an example, the legislative history states that if a donor recommends the heads of the science departments at local secondary schools to be on a committee to award grants for the advancement of science at those schools, the persons so recommended will not be considered to be designated or appointed by the donor.

Learn more about Scholarship Funds and PPA Compliance.

The donor’s attorney is among those she has recommended for the selection committee. May the community foundation appoint the attorney?
Yes, the attorney can be a member of the selection committee, but the attorney must be considered to be appointed or designated by the donor in determining whether the donor and parties related to her control the committee.

Are funds that provide disaster relief or emergency hardship grants to individuals donor advised?
They are not donor-advised if the donor does not sit on or designate the members of the advisory committee. We believe funds that provide assistance to employees of a particular employer and that are advised by employee committees should be exempt from the donor-advised rules, but the Treasury Department has not issued any guidance and the Secretary of the Treasury has not yet exempted such funds.

Disclaimer: The information provided here is based on our continuing analysis of the law. Every effort has been made to ensure accuracy of this information. Please understand, however, that due to the complexity of the law and the fact that many of these provisions introduce issues that are new to the Internal Revenue Code, this information is subject to change. This information is not a substitute for expert legal, tax, or other professional advice and we strongly encourage grantmakers and donors to work with their counsel to determine the impact of this legislation on their particular situations. This information may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.

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Donor Advised Funds

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Engaging Donor Advised Funds in Impact Investing

council-webteam — Sat, 16 Nov 2013 22:45:23 +0000

Engaging Donor Advised Funds in Impact Investing council-webteam Sat, 11/16/2013 - 17:45

Engaging Donor Advised Funds in Impact Investing

A Toolkit for Community Foundations

“Impact investing” is the practice of investing for social and environmental impact while generating financial return. For community foundations, impact investing represents a new, complementary tool for achieving community change. Community foundations are poised to take advantage of this practice being increasingly embraced by a variety of investors leveraging their unique role in community.

We are pleased to share a practical toolkit for community foundations looking to engage their donors in an impact investment program. Developed by Imprint Capital in partnership with The Greater Cincinnati Foundation, the toolkit outlines the entire process—from feasibility through implementation—to help a community foundation incorporate donor-advised funds (DAF) into their programs. Thanks to a generous grant from The Rockefeller Foundation, Imprint was able to test the concept with four community foundations fom 2010 to 2012 and identify multiple approaches to operating a DAF impact investment program.

"Engaging Donor Advised Funds in Impact Investing: A Toolkit for Community Foundations" includes an overview of a DAF program, frequently asked questions, an impact investment policy statement, a donor engagement kit that includes marketing and presentation materials, webinar presentations, and general resources on impact investing.

Toolkit

Webinar Presentation: Models and How to Get Started (.pdf)
Webinar Presentation: Assessing Feasibility (.pdf)
Webinar Presentation: Including Donor-Advised Funds in Impact Investing
- Slide Deck (.pdf)
- Recording
Sample Community Foundation Impact Investment Policy (.doc)
Sample Impact Sector Tear Sheet (.doc)
Sample Impact Investment Opportunity Description (.doc)
Sample Impact Investment Descriptions (.doc)
Sample Impact Investing Team Qualifications (.doc)

Resources

Websites

Reports

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Donor Advised Funds

Endowments & Investing

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Donor-Advised Fund Flowchart

council-webteam — Mon, 11 Nov 2013 21:13:17 +0000

Donor-Advised Fund Flowchart council-webteam Mon, 11/11/2013 - 16:13

Donor-Advised Fund Flowchart

This handy flowchart can help you determine which funds should be classified as donor-advised under the Pension Protection Act of 2006. Remember, a fund is only a donor-advised fund if:

A donor or person appointed or designated by the donor has, or reasonably expects to have, advisory privileges with respect to distributions or investments;
The fund is separately identified by reference to contributions of donor(s); and
The fund does not fall within an exception established by the Act.

Download Document

Donor Advised Fund Flowchart

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Virtual Meet-Up: Community Foundation Donor Services - October 2024

melissa.nolan@cof.org — Tue, 16 Jan 2024 20:48:03 +0000

Virtual Meet-Up: Community Foundation Donor Services - October 2024 melissa.nolan@… Tue, 01/16/2024 - 15:48

Peer Event

Virtual Meet-Up: Community Foundation Donor Services - October 2024

Join this interactive and informal virtual meet-up for all community foundation staff who are philanthropic advisors or involved in donor stewardship.

Join this discussion for peer-led insights to gain knowledge and inspiration from your peers in the field. Topic will be announced!

Don't miss this opportunity to connect, collaborate, and learn from fellow professionals in the philanthropic advising and donor stewardship space. Register today to secure your spot and take away valuable insights to enhance your donor relationships.

To learn more about how you can connect with peers in the field, we encourage you to join the Philanthropy Exchange, as a space to ask questions, provide feedback, and share resources with community foundation donor service professionals.

Peer Discussion Leads

Cathy Cooney

Director, Donor Services

Montana Community Foundation

Lauren Hough

Manager, Donor Services

The San Diego Foundation

Karen Nichols

Vice President of Philanthropic Services

Spartanburg County Foundation

Questions?

Connect with Council Staff

Related Resources

Virtual Meet-Up: Community Foundation Donor Services - August 2024

melissa.nolan@cof.org — Tue, 16 Jan 2024 20:25:49 +0000

Virtual Meet-Up: Community Foundation Donor Services - August 2024 melissa.nolan@… Tue, 01/16/2024 - 15:25

Peer Event

Virtual Meet-Up: Community Foundation Donor Services - August 2024

Join this interactive and informal virtual meet-up for all community foundation staff who are philanthropic advisors or involved in donor stewardship.

Working with Professional Advisors (CPAs and Estate Planning Attorneys)

Donor service professionals at community foundations often work closely with donors to facilitate their charitable giving and help them achieve their philanthropic goals effectively. Join this peer virtual meet-up to learn strategies and valuable knowledge from peers in navigating the intricacies of collaborating with Certified Public Accountants (CPAs) and estate planning attorneys. Engage in small group peer discussions on critical topics such as tax planning, wealth preservation, charitable giving strategies, and the latest industry trends.

This discussion will focus on:

What are effective strategies and best practices for fostering productive partnerships with CPAs and estate planning attorneys to maximize the impact of charitable giving?
What are strategies to recognize and appreciate the contributions of professional advisors in stewarding donor relationships?
How can community foundations serve as a resource to CPAs and estate planning attorneys?

Peer Discussion Leads

Monika Collins

Vice President for Advancement and Philanthropic Services

The Foundation for Delaware County

Cathy Cooney

Director, Donor Services

Montana Community Foundation

Lauren Hough

Manager, Donor Services

The San Diego Foundation

Karen Nichols

Vice President of Philanthropic Services

Spartanburg County Foundation

Questions?

Connect with Council Staff

Related Resources

Virtual Meet-Up: Community Foundation Donor Services - June 2024

melissa.nolan@cof.org — Tue, 16 Jan 2024 20:12:01 +0000

Virtual Meet-Up: Community Foundation Donor Services - June 2024 melissa.nolan@… Tue, 01/16/2024 - 15:12

Peer Event

Virtual Meet-Up: Community Foundation Donor Services - June 2024

Join this interactive and informal virtual meet-up for all community foundation staff who are philanthropic advisors or involved in donor stewardship.

Strategies for Planned Giving: Annuities and Trusts

This informal peer discussion will explore the complexities of planned giving, providing an in-depth look at the benefits and mechanisms of charitable gift annuities and trusts. Peers from community foundations across the nation will share valuable strategies to help you guide donors in optimizing their philanthropic impact while ensuring financial security and tax advantages. Attendees will gain practical knowledge on structuring these giving vehicles, understanding donor motivations, and effectively communicating the long-term benefits of planned giving. Don't miss this opportunity to enhance your knowledge and network with fellow professionals dedicated to fostering a culture of generosity and thoughtful giving.

This discussion will focus on:

What are the most common planned giving vehicles utilized by community foundation donors and how do they differ in terms of flexibility and impact?
How can we understand and address donor motivations for choosing annuities or trusts are part of their planned giving strategy?
What are examples of gift acceptance policies and other logistics of planned gifts?

Peer Discussion Leads

Cathy Cooney

Director, Donor Services

Montana Community Foundation

Pauline Martinson

Director, Philanthropy Advisor

The San Diego Foundation

Karen Nichols

Vice President of Philanthropic Services

Spartanburg County Foundation

Questions?

Connect with Council Staff

Related Resources

Virtual Meet-Up: Community Foundation Donor Services - April 2024

melissa.nolan@cof.org — Tue, 16 Jan 2024 18:32:59 +0000

Virtual Meet-Up: Community Foundation Donor Services - April 2024 melissa.nolan@… Tue, 01/16/2024 - 13:32

Peer Event

Virtual Meet-Up: Community Foundation Donor Services - April 2024

Join this interactive and informal virtual meet-up for all community foundation staff who are philanthropic advisors or involved in donor stewardship.

Stewardship Events: Creating Memorable Donor Experiences

Join us for a dynamic virtual meet-up focused on stewardship events in donor services. This engaging session will address the challenges of events, including gauging interest, attendance, technology for hybrid events, accommodating audiences, as well as covering geographical barriers for in-person events. We’ll delve into the types of events that donors are most interested, and explore strategies for maximizing engagement.

Participants will gain insights into effective stewardship event strategies tailored to donor interests and preferences. Through interactive discussions and breakout groups, attendees will leave with actionable ideas to enhance their donor services initiatives.

Don't miss this opportunity to connect with fellow professionals in donor services and gain valuable insights into optimizing stewardship events!

Peer Discussion Leads

Cathy Cooney

Director, Donor Services

Montana Community Foundation

Monika Collins

Vice President for Advancement and Philanthropic Services

The Foundation for Delaware County

Karen Nichols

Vice President of Philanthropic Services

Spartanburg County Foundation

Questions?

Connect with Council Staff

Related Resources

Virtual Meet-Up: Community Foundation Donor Services - February 2024

melissa.nolan@cof.org — Mon, 08 Jan 2024 18:33:05 +0000

Virtual Meet-Up: Community Foundation Donor Services - February 2024 melissa.nolan@… Mon, 01/08/2024 - 13:33

Peer Event

Virtual Meet-Up: Community Foundation Donor Services - February 2024

Join this interactive and informal virtual meet-up for all community foundation staff who are philanthropic advisors or involved in donor stewardship.

Strategies for Onboarding and Educating Donors

Join us for an insightful virtual meet-up focused on the strategies and best practices of onboarding and educating donors. Discover how your peers across the nation provide essential educational resources and engaging programs designed to empower donors in making informed and impactful philanthropic decisions. Engage in discussions, gain insights, and discover tools to enhance your donor relationships.

Peer Discussion Leads

Cathy Cooney

Director of Donor Services
Montana Community Foundation

Lauren Hough

Manager, Donor Services
The San Diego Foundation

Questions?

Connect with Council Staff

Related Resources

Legal Matters for Community Foundations - September 2024

jill.gordon@cof.org — Mon, 13 Nov 2023 19:44:59 +0000

Legal Matters for Community Foundations - September 2024 jill.gordon@cof.org Mon, 11/13/2023 - 14:44

Training

Legal Matters for Community Foundations - September 2024

Led by the Council's legal team this workshop is designed to answer your broad legal and practical questions on administering funds, grants, and community foundation activities.

Date & Time

Wednesday, September 11 - 1:00-4:30 p.m. ET
Thursday, September 12 - 1:00-4:30 p.m. ET

Location

Virtual Zoom Meeting

Cost

Council Members = $320
Nonmembers = $420
Group Rate (5-7) for Council members only = $290
Email educate@cof.org to register a group.

Led by the Council on Foundations Legal Team, this workshop is flexibly organized to ensure that your broad legal questions for administering funds, grants, and community foundation activities are addressed. The legal team will provide technical and practical understanding of complex rules and regulations.

Workshop Hours

Wednesday, September 11: 1:00-4:30 p.m. ET
Thursday, September 12: 1:00-4:30 p.m. ET

Throughout the workshop, sessions will be curated by

Insight from Council's top-notch legal team that interacts with nearly 2,000 foundation leaders each year
Trends spotted by our broader team, including National Standards for U.S. Community Foundations
Timely, relevant take on the basics that informs day-to-day business decisions and operations
Expertise to advance your knowledge of the organization's inner workings--from admin to governance, donor stewardship to grantmaking.

With each session, there will be time for questions and a deep exploration of the answers. This workshop is open to any board or staff member from any community foundation that is eager to dive into the legalities of our business model and unlock the truth to effective management and leadership of a community foundation.

Sample Agenda

Specific topics will be defined in advance of the workshop as attendees begin to submit ideas, pressing issues, and assist with the defining of sessions. This event is designed to be time sensitive and relevant to current issues. The format will be discussion-oriented, question and answer-based learning alongside peer sharing.

DAY 1: Wednesday, September 11— 1:00 - 4:30 p.m. ET

General Overview of new rules, regulations, and developments for CFs – Discuss latest new rules and regulations affecting community foundations.
- Topics will vary based on current events and attendee requests, but often cover topics such H.R. 3988 (universal deductions), CARES Act, Updated Charity Act, Tax Deductibility, UPMIFA and related public policy trends.
Small Group Discussions & Deep Dives with Attorneys: Most common legal complexities facing community foundations – Assessing the most common inquiries from the field nationally, Council attorneys will delve into pressing subjects and issues such as DAFs and permissible grantees, current laws and basic rules regulating DAFs, Notice 2017-73 regarding DAFs, variance power, expenditure responsibility, agency funds, and geographic affiliates.

DAY 2: Thursday, September 12 — 1:00-4:30 p.m. ET

Trends and Challenges from the Field – Council experts will share the trending narratives shaping conversations in board rooms as well as the most common challenges shared among community foundations.
Small Group & Deep Dive with Attorneys: Most common legal complexities facing community foundations – Assessing the most common inquiries from the field nationally, Council attorney Ben McDearmon will delve into pressing subjects and issues such as scholarships, hardship and disaster relief funds, and new rules, regulations and developments in the sector.

Questions?

Connect with Council Staff

Related Resources

Digesting Proposed DAF Regulations

melissa.nolan@cof.org — Mon, 13 Nov 2023 17:49:50 +0000

Digesting Proposed DAF Regulations melissa.nolan@… Mon, 11/13/2023 - 12:49

Webinar

Digesting Proposed DAF Regulations

This webinar provided updated information and valuable insights on the IRS's proposed donor-advised fund regulations.

The Council's Government Affairs and Legal Resources team provided an overview of the IRS's proposed donor-advised fund (DAF) regulations. The proposed regulations clarify the definitions around DAFs, address excise taxes on taxable distributions made by a sponsoring organization from a DAF, and discuss rules around scholarships. Participants had the opportunity to ask questions during this webinar and shared insights that could help inform the Council's comments in response.

Our Government Affairs and Legal Resources team continues to analyze this proposal and plans to submit comments to the IRS. Comments are due by January 16, 2024, so let us know how these changes could impact your foundation. To help inform our comments, please email govt@cof.org to let us know how these changes might impact your work.

Donor Advised Funds

FAQ: Donor-Advised Fund

FAQ: Donor-Advised Fund

Questions?

Related Events

Related Resources

Engaging Donor Advised Funds in Impact Investing

Engaging Donor Advised Funds in Impact Investing

A Toolkit for Community Foundations

Toolkit

Resources

Questions?

Related Events

Related Resources

Donor-Advised Fund Flowchart

Donor-Advised Fund Flowchart

Download Document

Questions?

Related Resources

Related Events

Virtual Meet-Up: Community Foundation Donor Services - October 2024

Virtual Meet-Up: Community Foundation Donor Services - October 2024

Speakers

Peer Discussion Leads

Director, Donor Services

Montana Community Foundation

Manager, Donor Services

The San Diego Foundation

Vice President of Philanthropic Services

Spartanburg County Foundation

Questions?

Related Events

Related Resources

Virtual Meet-Up: Community Foundation Donor Services - August 2024

Virtual Meet-Up: Community Foundation Donor Services - August 2024

Working with Professional Advisors (CPAs and Estate Planning Attorneys)

Speakers

Peer Discussion Leads

Vice President for Advancement and Philanthropic Services

The Foundation for Delaware County

Director, Donor Services

Montana Community Foundation

Manager, Donor Services

The San Diego Foundation

Vice President of Philanthropic Services

Spartanburg County Foundation

Questions?

Related Events

Related Resources

Virtual Meet-Up: Community Foundation Donor Services - June 2024

Virtual Meet-Up: Community Foundation Donor Services - June 2024

Strategies for Planned Giving: Annuities and Trusts

Speakers

Peer Discussion Leads

Director, Donor Services

Montana Community Foundation

Director, Philanthropy Advisor

The San Diego Foundation

Vice President of Philanthropic Services

Spartanburg County Foundation

Questions?

Related Events

Related Resources

Virtual Meet-Up: Community Foundation Donor Services - April 2024

Virtual Meet-Up: Community Foundation Donor Services - April 2024

Stewardship Events: Creating Memorable Donor Experiences

Speakers

Peer Discussion Leads

Director, Donor Services

Montana Community Foundation

Vice President for Advancement and Philanthropic Services

The Foundation for Delaware County

Vice President of Philanthropic Services

Spartanburg County Foundation

Questions?

Related Events

Related Resources

Virtual Meet-Up: Community Foundation Donor Services - February 2024

Virtual Meet-Up: Community Foundation Donor Services - February 2024

Strategies for Onboarding and Educating Donors