Organizations that offer donor-advised funds, along with a handful of other philanthropy groups, spent $11 million from 2018 to 2023 to block legislation to force donor-advised funds to distribute more to charity. That’s according to an examination of congressional lobbying records conducted by the Institute for Policy Studies, which favors stricter rules governing the popular charitable accounts.
Opponents of the 2021 Accelerating Charitable Efforts Act, the last major attempt to speed donor-advised fund payouts, stopped the legislation dead in its tracks. Now, says the Institute for Policy Studies, they are likely building their lobbying war chests to oppose it in the next Congress.
At the top of the spending list was a coalition of community foundations that spent $900,000 on lobbying, followed by two commercially run funds. Vanguard Charitable Endowment and the Charles Schwab Corporation, two large holders of the funds, each spent half a million to lobby.
The study comes just ahead of another likely battle on Capitol Hill over donor-advised funds. Tax provisions passed during the Trump administration expire at the end of 2025, and many nonprofit experts are bracing for a major debate on charitable tax policy.
Donor-advised funds have become a major force in philanthropy over the past decade, accumulating assets of nearly $230 billion. Donors can place money in a fund account, which is typically run by a community foundation or a charity related to an investment firm, and dole cash out to nonprofits in the amount and timeline as they see fit.
Critics of the funds say too much money is left sitting in the accounts for years and would like to see groups that manage funds face a penalty unless they direct more cash to charities that provide services.
The Accelerating Charitable Efforts Act never received a vote, despite polling conducted by Ipsos, a market research firm, that showed widespread support among both conservatives and liberals for rules directing donor-advised funds to steer funds to charities within five years, said Chuck Collins, a program director at the Institute for Policy Studies.
“The charity lobby is organized to defend the status quo,” he said, explaining that legislators were responsive to a well-funded, coordinated effort to bottle up the bill, which he characterized as a “common sense” piece of legislation that would allow donors to take a tax deduction for their gifts only when they send money from their funds to a charity.
Bipartisan Push Back
Organizations that manage donor-advised funds earn management fees for money in their accounts and thus have a financial rationale for keeping money in the accounts as long as possible instead of distributing them to charities.
From 2018 to 2023, donor-advised funds related to financial services giants, including Vanguard and Charles Schwab, and coalitions of charities and foundations, including the Council on Foundations, Independent Sector, and the Community Foundation Awareness Initiative, spent a total of $11 million lobbying members of Congress on donor-advised fund related issues, the study found. A total of more than $3 million was spent specifically trying to influence the outcome of the Accelerating Charitable Efforts Act.
The report identified $35,000 that was spent on lobbying in support of the legislation by Tesseract, a 501(c)(4) social-welfare organization affiliated with Patriotic Millionaires, a group of wealthy donors who support tighter regulations.
The Philanthropy Roundtable, a network of conservative donors and foundation leaders, spent $241,000 on ACE Act-related lobbying, according the report. In a statement, Elizabeth McGuigan, senior vice president of the organization, said the reason donor-advised funds have grown so much is that they allow donors the flexibility to respond in times of great need, such as during the pandemic. That growth, she suggested, will flatline if policymakers bridle donor-advised funds by imposing new restrictions.
“There is nothing common-sense about restricting a popular tool that has been proven to accelerate charitable giving,” she wrote.
The Council on Foundations, which represents more than 900 grant makers, spent $210,000 on lobbying related to the ACE Act, according to the report. The council got involved to ensure that any legislation wouldn’t put a crimp on overall giving, said Kathleen Enright, the organization’s president. The council developed a slate of proposals related to the legislation, she said.
While the ACE Act would have strengthened federal rules on the funds, the council’s approach was for the donor-advised fund industry to police itself.
“What this report fails to acknowledge is that the bulk of the time and money the Council on Foundations spent on the ACE Act was to develop common-sense reforms and improvements to self-regulation in partnership with those most affected, particularly community foundations,” she said in a statement.
Jeff Hamond, who leads the Community Foundation Awareness Initiative, a lobbying and advocacy network of about 160 regional grant makers that spent the most on the work to thwart the ACE Act, said he was frustrated that the report characterized groups that spent money lobbying as “standing in the way” of changes that could spur charitable giving. Donors give through donor-advised funds, he said, because it is easy to do. If restrictions are placed on the funds, he said, it is not a sure thing that donors would still give to charity using another method.
In 2012 when the initiative was started, most lawmakers had scarcely heard of donor-advised funds, Hamond said. Money spent lobbying helped thwart some possibly unintended consequences of the ACE Act. The bill, he said, would have unfairly roped many community foundations into the same category as donor-advised funds affiliated with a commercial sponsor.
Hamond said money in donor-advised funds doesn’t simply sit in accounts and accumulate. About 60 percent of all funds pay out 100 percent of their original contributions within eight years, he said, citing research by the Donor-Advised Fund Research Collaborative.
“Without any public policy change, you’re already seeing a lot of good results,” he said.
A Different Kind of Donor Revolt
The lobbying expenditures reported by the Institute for Policy Studies are estimates. Congressional lobbying reports don’t break down spending by legislation. In cases in which an organization listed several bills that it lobbied for during one reporting period, the Institute for Policy Studies evenly apportioned the spending estimate among all of the bills included.
Looking ahead, Collins, of the Institute for Policy Studies, expects another concerted effort from nonprofit lobbyists. To counter that, the institute’s Inequality.org effort is participating in a campaign along with donor groups that include Patriotic Millionaires, Solidaire Action, the Excessive Wealth Disorder Institute, the #HalfMyDAF campaign, and the Decolonizing Wealth Project.
The effort, called the “Donor Revolt for Charitable Reform” gathered 183 letters from wealthy donors calling for changes in policy related to donor-advised funds, the charitable deduction, and private foundations. They include Abigail Disney, a Walt Disney heiress; Leah Hunt-Hendrix, an activist whose family made a fortune in the oil business; and Scott Wallace, a board member of the Wallace Global Foundation.
Collins said many nonprofits are in favor of changing rules about donor-advised funds but don’t want to be seen as crossing their donors. Right now, they don’t have the same clout or funding as the charities that lobbied against the ACE Act.
“The nonprofit sector is not going to lead the charge,” he said. “If there’s a billionaire out there who thinks this is a really good idea, maybe that could change the physics of it.”
