Billionaires are getting a clear message from nonprofits, lawmakers and even other billionaires: Many of you already got tax breaks for giving away your money. Now, amid the pandemic and recession, it’s time to ensure cash actually gets to charities quickly.
For the past several years, wealthy Americans have poured billions of dollars into donor-advised funds, or DAFs, vehicles that have grown popular because they’re so flexible. Givers get an immediate tax break, which can equal 57 cents or more of every donated dollar, but they have unlimited time to decide where the money should go.
Many nonprofits worry the surge of money into DAFs has cost them in recent years as total giving by individuals has stagnated. Some lawmakers seem to agree. Congress barred DAFs from taking advantage of new incentives for charitable giving included in the $2.2 trillion CARES Act approved in March. In California, state legislators proposed pushing major DAF providers to be more transparent.
Now, the pandemic is prompting more money to flow out of DAFs and into charities where it can do some good. Fidelity Charitable, the nonprofit arm of Fidelity Investments, said in late May that giving from its DAFs was 30% higher so far this year. Vanguard Charitable and Schwab Charitable both said giving increased about 50% over similar time frames from February to mid-May. Goldman Sachs Philanthropy Fund, the bank’s DAF provider, said grants rose 26% in the first five months of the year and 68% in April alone.
Major DAF providers said they’re using webinars, podcasts, social media and emails to nudge clients to give.
“It’s really important to send the message that the need is dire and that DAF holders are in a unique position to jump in,” said Vanguard Charitable President Jane Greenfield.
Last Recession
The providers -- which are technically nonprofits themselves, though they’re affiliated with investment firms -- are making specific recommendations of coronavirus-related causes while urging donors to continue supporting their usual charities.
“People are overwhelmed with choices,” said Fidelity Charitable President Pamela Norley. “We’re identifying organizations that are on the ground, helping to address the needs at scale.”
The rise in donations from DAFs is a rare bit of good news for organizations hit hard by the crisis. Countless fundraisers and galas have been canceled even as the demands on charities, from food banks to health clinics, have surged. Nonprofit leaders are haunted by memories of the last recession, when total giving fell almost 12% from 2007 to 2009, according to the Giving USA Foundation.
“We need resources to respond to Covid, and we need resources to continue the ongoing work,” said Michael Nyenhuis, chief executive officer of Unicef USA. He urged DAF holders “to think about releasing as much of those dollars as they can.”