To encourage people to give more freely from their donor-advised funds in response to the coronavirus pandemic, a California couple has offered to give up to $1 million to donors’ favorite nonprofits.
But there is a catch: The contributions will only be made if the donors pledge to empty half of their donor-advised-fund account and direct that money to charity by September 30.
David and Jennifer Risher say they created the #HalfMyDAF challenge because it’s more important than ever to move money out of donor-advised-fund “parking lots” and speed them to charities in need.
The push by the technology-industry veterans comes as lawmakers in California try to jump-start an effort to require greater transparency for donor-advised funds.
The Rishers hope their match will help nonprofits of all types, not just organizations that deal directly with the fallout from the coronavirus pandemic. Some rely on in-person fundraising events that have been canceled or the largess of donors who have seen their wealth decimated by market losses. Other nonprofits have seen revenue hits because donors have gravitated to causes more directly linked to the public health or economic aspects of the crisis.
“Funding is just dropping off for those nonprofits,’ says Jennifer Risher.
On its first day, eight donors accepted the challenge and pledged to disburse a total of $413,000 from their accounts. The donors are invited to list the nonprofits their gifts support on the #HalfMyDAF website. The Rishers will randomly pick 50 nonprofits from the list in July and another 50 in September to receive $10,000 each.
The Rishers say they welcome other major donors to add to their match and that some have expressed interest.
Controversy in California
Donor-advised funds have taken heat from critics who contend that donors take an immediate tax benefit and then can let the money sit idle in their accounts for years rather than directing it to charity. Donor-advised-fund advocates say the payout rate of the funds in aggregate is well higher than the 5 percent minimum of assets that foundations are required to give to charity each year.
Last year California Assemblywoman Buffy Wicks was pushing a bill that would have required donor-advised-fund sponsors, such as community foundations and funds associated with commercial investment companies, to report donation activity at the fund level rather than in the aggregate. The bill set off a frenzy of lobbying by opponents, and Wicks pulled it from consideration in January.
On Monday, the California Assembly’s judiciary committee will take up the matter again. Originally the legislation required disclosure of payout rates at the account level and required donor-advised-fund sponsoring organizations to provide information on their policy for dormant accounts. It also would have required funds managed by commercial investing houses to disclose whether they pay those organizations management or investment fees. The current bill omits those requirements and simply defines donor-advised funds as a type of charity that is under the oversight of the attorney general.
Setting an Example
David Risher. who founded the nonprofit Worldreader after a career at Microsoft and Amazon, says he is not actively involved in pushing for the bill. While he supports more stringent requirements for donor-advised-fund reporting, he says, it is a “distraction” from the real issue, which he sees as money sitting in the accounts too long. The Rishers, he says, generally empty their donor-advised-fund accounts each year. He hopes #HalfMyDAF serves as a lasting example for others.
“This is a way to help shape a new normal where people’s money doesn’t get put in donor-advised funds and kind of sit there but actually flows through to those nonprofits,” he says.
Opposition to the legislation continues even in its weakened form. The Silicon Valley Community Foundation sent the committee a letter Wednesday that called the language of the bill vague and warned that it would cripple giving. The powerhouse foundation and other opponents who wrote separate letters, including the Alliance for Charitable Reform, Fidelity Charitable, and the League of California Community Foundations, expressed a fear that donor-advised funds were being unfairly tarred.
“Singling out donor-advised funds in this new legislation creates the perception that this type of philanthropic tool is inherently bad,” wrote Nicole Taylor, the Silicon Valley Community Foundation’s president. “The sustained messaging that there is something inherently suspicious or negative about donor-advised funds will only serve to hinder community philanthropy when we need it most.”
Through May 5, donors giving through their Fidelity Charitable accounts increased their giving by 18 percent this year over the same period in 2019, Fidelity reported.
Jan Masaoka, chief executive of the California Association of Nonprofits, countered that the state gives up $340 million a year in tax revenue because of contributions to donor-advised funds. Since the state loses tax revenue, the state government has a responsibility to learn how much money flows to charity from individual accounts. Given the crisis caused by the pandemic, “accountability for donor-advised funds has never been more crucial than it is now,” Masaoka wrote.
‘A Lovely Bonus’
Dana Johnson and Mark Nelson are serial software entrepreneurs who run a winery in California’s Napa Valley. The couple joined the pledge and agreed to give about $50,000 from their donor-advised fund.
Johnson, who founded the nonprofit Nimbus Arts, says donors have hesitated to give more during the crisis because of the stock market’s travails. She says the couple was poised to start giving more even before they heard about the #HalfMyDAF campaign, but the possibility of winning a matching grant was an added push.
“We would have done it anyway, but it was a lovely bonus,” she says.
The gifts will be made through the couple’s account at the Napa Valley Community Foundation.
Limiting Gifts
Around the time the #HalfMyDAF campaign was being developed to build momentum and boost payout, one foundation temporarily restricted disbursement from donor-advised-fund accounts.
The Sacramento Regional Community Foundation temporarily prohibited donor-advised-fund account holders from disbursing more than 50 percent of the total assets in their accounts. The announcement was in a letter the community foundation sent to account holders urging them disburse funds to any of the more than 600 participating in the foundation’s “Big Day of Giving,” — but with a limit.
“Given the volatility of the market, however, we are limiting expendable fund grants to 50 percent of the most recent value. This policy is only temporary and is meant to prevent spend-outs that exceed portfolio values.”
Linda Cutler, the foundation’s president, says the market fell so precipitously in February and March that she worried donors would suggest a contribution and then find, within a matter of days, when the transaction was to be finalized, that the value of their funds had plummeted.
“We didn’t want any of those donors going into negative territory,” she says.
She said the limit was more of a “red flag” that allowed the foundation to look into the request and make sure it could be executed. In a matter of weeks, the threshold was raised to 80 percent of an account total and then lifted altogether.
The limits prompted a handful of reviews, but all donation requests were handled according to the donors’ wishes, Cutler says, adding that the value of donations from donor-advised funds at the foundation during March and April increased 40 percent over the same two months last year.
Cutler says she is “frustrated” by the pending donor-advised-fund bill.
“Everyone is trying to do so much good work right now, and we’re having to spend time thinking about this legislation, which is without basis.”
