Impact of Proposed DAF Rules on Community Foundations Deserves More Coverage

To the Editor:

Stephanie Beasley’s recent article “The $230 Billion Donor-Advised Fund Industry Gets an IRS Hearing” (May 8) failed to mention how the Internal Revenue Service’s proposed DAF regulations could dramatically decrease donations by everyday donors to community-based nonprofits.

Donors open DAFs at community foundations because they value the expertise provided by staff in transforming their giving into responsible, local grant making.

DAFs at community foundations gave $11.9 billion in 2022 to nonprofits, according to the National Philanthropic Trust. These funds help local nonprofits address housing shortages, food insecurity, rising poverty rates, climate change, and more.

Moreover, most donors to community foundations are not the ultrawealthy described in the article, such as MacKenzie Scott or Netflix co-founder Reed Hastings. They are small-business owners, community leaders, teachers, and farmers. They donate to DAFs because they are committed to giving carefully to support charities in their hometowns.

Yet that could end for many donors if these regulations move forward. Some donors with the means may decide to open private foundations instead of DAFs to ensure they can work with their personal investment advisers. That practice would be taxed so highly under the proposed rules that most community foundations would no longer be able to operate DAFs using investment advisers. Instead, a new wave of unstaffed foundations would emerge that lack the oversight provided by community foundations.

In addition, many funds would be reclassified as DAFs, including collaborative funds that bring together community foundations, private foundations, and individual donors to address crises and disasters. This would cause administrative headaches and increase costs of managing these funds, which would take money and resources away from community-based nonprofits.

The IRS deserves credit for listening to and considering community foundations’ concerns. As leaders of four community foundations, we hope the agency will go back to the drawing board and create rules that will prevent potential abuses while also ensuring that generous, community-minded donors can continue to give freely and responsibly.

Jennifer Bartenbach
CEO
Central Indiana Community Foundation

Keith Burwell
President and CEO
Greater Toledo Community Foundation

Amy Freitag
President
The New York Community Trust

Debbie Wilkerson
President and CEO
Greater Kansas City Community Foundation