As millions of Americans filed their taxes this week, many took stock of their charitable giving during the past year. A growing segment, including the two of us, do that giving through a donor-advised fund.
A DAF is essentially a charitable checking account. Donors contribute to the account and receive an immediate tax deduction in return. They can then tap the DAF for quick and easy charitable donations whenever it’s convenient.
As with many good ideas, though, what started out as a helpful tool has created unintended and not entirely welcome consequences. With so many would-be donors using these funds, overall DAF holdings have swelled to more than $234 billion. That’s greater than the annual GDP of Nevada.
Here’s another way to think about the situation: The money currently sitting in DAFs could easily double the budgets of hundreds of thousands of charitable organizations in the United States, 92 percent of which have operating budgets of less than $1 million. That level of investment would be transformative for these groups, accelerating efforts to curb climate change, pursue lifesaving research, and address a host of societal inequities.
But large numbers of donors aren’t deploying the funds. As advocates for speedier DAF distribution through our #HalfMyDAF campaign, we have witnessed a range of reasons for donors sitting on their DAF dollars. Many say they’re busy and will get to their philanthropy later. Others say they feel overwhelmed by the vast array of worthy causes and aren’t sure where to give.
No system is in place to nudge donors or remind them about the money in their DAFs. This lack of incentive for DAF holders to make charitable grants has drawn scrutiny from policy makers. Last month, President Biden renewed a call for tighter regulations designed to spur DAF giving as part of his latest budget. The proposal would impose time limits on some DAFs, requiring donors to either grant out the funds or forgo the tax deduction.
While we support policy changes to help mobilize DAF funds to the charitable causes they’re intended to support, we also believe in the power of donors themselves.
A Matching Campaign That Works
In 2020, in response to Covid and cognizant of the untapped wealth sitting in DAFs as the pandemic surged and needs grew, we launched the #HalfMyDAF challenge to inspire more people to give through the funds. Together with a small set of like-minded donors, we offered nonprofits receiving DAF money a chance for millions of dollars in matching funds. The only requirement was that donors commit to granting at least 50 percent of the money in their DAF.
The results have far exceeded our expectations and suggest enormous untapped potential for increased charitable giving. Since 2020, #HalfMyDAF has mobilized $33 million in giving from DAFs. For the nonprofits at the receiving end, this is serious money; it has made a meaningful difference to these organizations.
We are now expanding this campaign. In 2023, #HalfMyDAF is offering two new rounds of matching grants totaling $1 million — on June 30 and September 30 — for organizations funded by donors participating in the #HalfMyDAF challenge. We will randomly select eligible nonprofits for dollar-for-dollar matching grants — most up to $5,000 with one match at $50,000.
As part of this effort, #HalfMyDAF is partnering with Amalgamated Foundation — one of the only major DAF sponsors that explicitly prioritizes giving. We have also moved our personal DAF to Amalgamated. Unlike most of the major financial institutions that offer DAFs, Amalgamated measures success based on grants made, not assets under its management. It was also the first provider to enact a 10 percent payout pledge as part of its mission to move more money, more quickly to nonprofit groups.
Importantly, Amalgamated ensures no #HalfMyDAF matching grants go to known hate groups, and it has taken a public stand against the “twisted use of charitable funds to support organizations that foment hatred.” This is particularly important since a common criticism of DAFs is that they can be used to hide giving to extremist organizations.
Donors don’t need to wait for the government to enact needed policy change. They should join us in putting their DAF dollars to work now.
DAF holders, make the commitment to spend down half of your DAF, knowing that every donation will be eligible for a dollar-for-dollar match from #HalfMyDAF. Nonprofit leaders, tell donors about #HalfMyDAF and the opportunity to receive matching grants. Together, we can tap into the immense potential of DAF giving to help nonprofits achieve their goals and change society for the good.