Philanthropy
Ten of America’s 20 Top Public Charities Are Donor-Advised Funds
The three highest-earning DAF sponsors each take in more than double the donations of the highest-earning operating charity.
At a time of staggering inequality, wealthy donors are donating billions to donor-advised funds, charitable giving intermediaries often abbreviated as DAFs.
Donors can claim substantial charitable tax benefits for their contributions to DAFs while still maintaining de facto control over the funds, which is why DAFs now reign supreme at the top of the charity heap. (Another reason DAFs are winning the charity derby? They facilitate anonymous giving, since donations from them need only be credited to their sponsors, not the original donor directing the gifts.)
In fact, for the past several years, the largest commercial DAF sponsors — commercial wealth management firms that offer donor-advised fund services as their nonprofit arms — have taken in more money each year than the country’s largest working charities. In 2022, half of the top twenty recipients of charitable revenue in the country were DAF sponsors — including the top three.
Unfortunately, though, because DAFs have no payout requirement, the money in these funds often fails to move quickly enough to working charities directly addressing urgent needs in a timely way.
Public charities are nonprofits that rely on a broad base of donors for their revenue. Private foundations, on the other hand, are usually created and supported by just one or two major donors. DAF sponsors qualify as public charities, and so receive the same preferential tax treatment as working charities.
This is a big part of the reason why DAFs are growing explosively. The assets held in U.S. DAFs have grown by 411 percent over the past 10 years — rocketing from $45 billion in 2012 to $229 billion in 2022. And DAFs now rake in one quarter of all U.S. individual charitable giving.
Of particular concern are DAF sponsors that are affiliated with for-profit Wall Street financial corporations. As we have documented, these commercial DAFs provide enormous publicly-subsidized tax benefits to their high-rolling contributors while actively encouraging the warehousing of charitable wealth.
Commercial sponsors have particularly benefited from DAFs’ rising popularity. The Fidelity Charitable Gift Fund, for example, has been the most successful charitable fundraiser in the country for the past seven years.
In 2022, Fidelity extended its lead by pulling in $15.2 billion — more than three times more than the top working nonprofit, Feeding America. Fidelity’s two closest competitors, the National Philanthropic Trust and Schwab Charitable, are coming up fast on its heels, bringing in $13.2 and $9.8 billion, respectively. All three are leaving the rest of the field far behind.
We counted the Silicon Valley Community Foundation and the Chicago Community Trust as DAF sponsors because contributions to DAFs made up 93 percent and 97 percent, respectively, of their total incoming contributions in 2022.
Some of the operating nonprofits on this list — such as the United Way and Stanford University — sponsor DAF programs as well, but we did not categorize them as sponsors because their DAF programs are tiny compared to their other fundraising.
Also worth noting: When you look only at cash donations, DAFs have actually done even better relative to working charities than our ranking shows.
We compiled our rankings by pulling contribution information from the tax returns of the largest DAF sponsors and universities in the U.S., and then combining that with Forbes‘ list of the top-fundraising non-DAF, non-university charities in 2022.
Both our list and Forbes‘ list include non-cash donations, however, which can inflate revenue numbers, particularly for relief and healthcare organizations. If this ranking only included cash donations to Feeding America, for example, it would have slipped out of the top 20.
Through the charitable tax deduction, taxpayers subsidize contributions to DAFs by up to 74 cents on the dollar. This gives us all an interest in making sure that the money stored in DAFs is actually used for the greater good. There’s no reason we need to enable DAFs to function as tax avoidance vehicles for the wealthy or a personal enrichment opportunity for commercial money managers.
It’s time to move the money out of DAFs. We’ve outlined a number of reforms that would make this happen, including:
- Requiring DAFs to pay out funds within 5 years of receipt
- Excluding DAF grants to other DAFs from counting towards payout
- Requiring sponsors to report on DAFs on an account-by-account basis
- Changing the tax benefits for DAFs to match those of private foundations
- Limiting the estate tax charitable deduction to a percentage of the estate’s value, with a lower percentage for gifts to private foundations and DAFs
- Providing a charitable tax credit for non-itemizers to increase everyday donors’ participation in philanthropy
Join us to advocate for these critical changes, whether you have a DAF or, like the vast majority of Americans, you don’t. We all have a stake in transforming our philanthropic sector to truly benefit our world.