Pressure is growing to address a fundamental design flaw in our charity system. Wealthy donors get substantial tax breaks when they place funds into their private foundations, and even more in the case of their donor-advised funds (DAFs). But there is very little requirement that they move those funds to active charities, even in the face of a global pandemic.
Private foundations are sitting on top of over $1 trillion in wealth, with a mandate that they pay out a minimum of 5% of their assets on an annual basis. And an additional $120 billion is parked in donor-advised funds, with no mandated payout requirement ever.
Lawmakers are considering an “emergency charity stimulus” in order to unlock an additional $200 billion in charitable resources over the next three years. The temporary legislation would mandate that foundations double their payout from 5% to 10% and that DAFs have a 10% payout, as well.