The concept of a DAF is outlined in the Pension Protection Act of 2006 and the Internal Revenue Code (IRC) Section 4966. Generally, DAFs are accounts or funds with the following attributes:
The account or fund is separately identified by reference to contributions made by a donor or donors.
The account or fund is owned and controlled by a sponsoring organization, such as a community foundation or other public charity that holds DAFs.
The donor (or their appointee) has the ability to recommend and/or inform decisions on where grants or investments are made from the funds held in the DAF account.
A DAF is not a separate tax-exempt entity.
The CMF-commissioned study, "Analysis of Donor Advised Funds from a Community Foundation Perspective,” includes common scenarios for the creation of DAFs at community foundations (Page 4), and the Technical Appendix includes additional examples of funds that do and do not meet the legal definition of a DAF.
In short, a DAF is a giving vehicle managed by a public charity on behalf of organizations, families or individuals.
A contribution to a DAF is an irrevocable commitment to charity; the funds cannot be returned to the donor or any other individual or used for any purpose other than grantmaking to charities.