{"id":1520,"date":"2025-10-14T13:00:00","date_gmt":"2025-10-14T13:00:00","guid":{"rendered":"https:\/\/www.artsjournal.com\/scenechange\/?p=1520"},"modified":"2025-09-20T07:31:13","modified_gmt":"2025-09-20T07:31:13","slug":"born-in-the-dsa-its-time-to-outlaw-donor-advised-funds-dafs","status":"publish","type":"post","link":"https:\/\/www.artsjournal.com\/scenechange\/2025\/10\/14\/born-in-the-dsa-its-time-to-outlaw-donor-advised-funds-dafs\/","title":{"rendered":"Born in the DSA*: It\u2019s Time To Outlaw Donor Advised Funds (DAFs)"},"content":{"rendered":"\n

If you understand \u201cTime Value of Money,\u201d then you\u2019ll understand just how uncharitable these schemes are \u2014 and the users know it.<\/strong><\/p>\n\n\n\n

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With still more apologies to Bruce Springsteen. (Image produced with AI)<\/figcaption><\/figure>\n\n\n\n
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In the second article in the Born in the DSA <\/em>series, I\u2019d like to introduce you to a business school Econ 101 unit called \u201cTime Value of Money.\u201d In a nutshell, it works like this:<\/p>\n\n\n\n

\"\"<\/a>
Assume inflation is 3% per year.<\/figcaption><\/figure>\n\n\n\n

<\/p>\n\n\n\n

In 2025, I have $100. For that $100, I can buy $100 worth of stuff.<\/p>\n\n\n\n

In 2034, that same stuff will cost me $134.39.<\/p>\n\n\n\n

Alternately, in 2025, I have $100. I hold on to it.<\/p>\n\n\n\n

In 2034, I will only be able to buy $78.30 worth of stuff with it.<\/p>\n\n\n\n

So, in this example, which accounts for no runaway inflation, recessions, depressions, or naked materialistic money-grubbing, my buying power shrank considerably.<\/p>\n\n\n\n

Now, in a slightly different scenario,<\/strong> using the same 3% rate and the same chart above, I invest in a Donor Advised Fund (DAF) in 2025 with my local community foundation. I donate $100. The donation tax deduction I get is immediate.<\/p>\n\n\n\n

In 2034, when that money is finally given by the foundation to a nonprofit arts organization upon my advice to do so, it can only purchase $78.30 worth of stuff in 2025 dollars. However, the tax deduction is still based on the original $100 \u201cdonation,\u201d a donation that didn\u2019t actually get donated for ten years. In fact, in 2034 dollars, that donation is worth $134.39. It\u2019s a bonanza for me; not so much for the charity I supposedly like.<\/p>\n\n\n\n

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*DSA stands for the Divided States of America (aka \u201cOne Nation, Divisible\u201d). Periodically, I\u2019ll be writing more specific takes on issues that are clearly wrong for this country, using the arts as context. If there are issues you\u2019d like to take up (or that you\u2019d like me to take up), let me know.<\/p>\n<\/blockquote>\n\n\n\n

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But wait, there\u2019s more.<\/strong> As money invested in a foundation, with all its advisors and money managers ostensibly involved in community betterment, I cannot use DAF money to lobby. However, if my entire intention was to find a way to lobby for a happier life for me regardless of the community, I can direct the money be donated to a nonprofit organization\u2019s lobbying fund, because a nonprofit can spend up to $1,000,000 on lobbying. In fact, I can even ask the foundation folks for suggestions on which nonprofits I can use for that purpose. And I\u2019ll still get the tax deduction. Yay me.<\/p>\n\n\n\n

Go with me on this. I only chose ten years as an example. <\/strong>Relatively speaking, this can go on indefinitely, even if the intent is pure and the nonprofit arts organization of choice is in dire need of the funds that have already been promised<\/em>. In essence, and to borrow a well-worn point of advice, if a DAF walks like a pledge receivable and it talks like a pledge receivable, then it\u2019s\u2026<\/p>\n\n\n\n

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It counts its money like a pledged receivable, too. Note who still has the money in his eerily human hands.<\/figcaption><\/figure>\n\n\n\n

<\/p>\n\n\n\n

Okay, I\u2019ll admit<\/strong>: DAFs are not as simple as that. And pledge receivables are a different and continuing (if not expanding) problem, or so I keep reading. As Lisa Z. Greer<\/a> (author of the wonderful trade book, Philanthropy Revolution) <\/em>wrote way back in 2022, Amber Heard\u2019s $7 million pledge remained just a pledge because that\u2019s all she thought she was required to do. \u201cI use pledge and donation synonymously with one another\u2026.They are the same thing\u2026.That\u2019s how donations are paid.\u201d If pledges were horses, beggars might ride, except that the pledges would all be unicorns that don\u2019t really exist.<\/p>\n\n\n\n

And DAF donations disappear into the mist.<\/p>\n\n\n\n

The reason that DAFs exist is wholly because they are<\/em> complex<\/strong>. Wealthy people can hold onto their own money and reap the benefits at the expense of the poor and underserved. Even the IRS<\/a> concedes that DAFs might have seemed to be a good idea, but in practice, they\u2019ve been an abusive ruse.<\/p>\n\n\n\n

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\u201cThe IRS is aware of a number of organizations that appeared to have abused the basic concepts underlying donor-advised funds. These organizations, promoted as donor-advised funds, appear to be established for the purpose of generating questionable charitable deductions, and providing impermissible economic benefits to donors and their families (including tax-sheltered investment income for the donors) and management fees for promoters.<\/em><\/p>\n\n\n\n