Advocates Worry Donor Fund Proposal Could Chill Legit Use

In a recent article Advocates Worry Donor Fund Proposal Could Chill Legit Use, published in Law360, Tom Blaney, Director of our Private Foundation Practice, sets forth some potentially negative factors surrounding proposed changes to donor-advised funds (DAF) rules.

As the article covers, to maintain their tax status, most private foundations are required by the federal government to distribute annually at least 5% of the total fair market value of their assets not used for charitable purposes. Some private foundations use DAFs to meet the 5% annual bar. Currently, these sponsoring foundations may keep advisory privileges over their DAFs without distribution time limits; however, the 2023 federal budget proposes a time limit in which the DAF would be able to offset the 5% distribution requirement. Only if the funds are used by the end of the following taxable year could they be counted toward the 5% rule.

Read the full article with Tom’s view of the results of such changes to the DAF rules.

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Thomas F. Blaney, CPA, CFE