Legislation aimed at requiring more disclosure from donor advised funds (DAFs), which has been in the works in California for nearly a year, died in committee at the end of January.

In its original form, Assembly Bill (AB) 1712 was aimed at DAF “sponsors disclosing information about individual funds or accounts.”

Southern California Grantmakers (SCG) shared in a recent policy update that AB 1712 would “impose significant burdens on community foundations and reveal donor identity of DAF accounts – including the trustees of many SCG members who use DAFs as a form of their philanthropy.”

SCG along with other regional grantmaker associations in California opposed the bill since such legislation could lead to concerns about privacy and could disincentive this rapidly growing giving vehicle.

While the bill isn’t moving forward, the conversation in California is drawing attention throughout the sector, recognizing what happens in California could have implications across the country.

According to the latest data from the National Philanthropic Trust (NPT), “grantmaking from donor advised funds to qualified charities has nearly doubled in the past five years. In 2018, philanthropists recommended grants to charities from their donor advised funds totaling $23.42 billion.”

In 2018, the annual payout rate for DAFs was nearly 21%.

NPT shows that Michigan is among nine states in the country, including California, that have more than 40 DAF charitable sponsors.

“DAFs are a tool, a charitable incentive and not just for high net worth donors. The thresholds are varied but generally modest to help create an opportunity for many to give,” Kyle Caldwell, president and CEO of CMF said. “It is for all those interested in philanthropy but who do not necessarily feel they need to establish a formal foundation. It is an on-ramp to a potentially deeper level of engagement in community problem solving. When facilitated through a community foundation, their grants can be stewarded with the deep experience and knowledge of a trusted source.” 

In Michigan, we have seen continued DAF growth through our member community foundations, which are accredited through national standards.

Kalamazoo Community Foundation and Grand Rapids Community Foundation are among the CMF member community foundations with the largest number of DAFs.

“Establishing a donor advised fund at a community foundation offers donors the rare opportunity to gain insight from a professional grantmaking staff,” Joanna Donnelly Dales, vice president of donor relations at the Kalamazoo Community Foundation (KZCF) said. “Community foundations are uniquely positioned to understand their community’s needs and the organizations addressing those issues most effectively. Donor advisors can leverage this expertise to make their giving more personally meaningful and impactful in the community.”

According to our most recent Community Foundation Databook survey, 62% of the 50 community foundation respondents say they have an articulated policy in place for inactive donor advised funds. Of those, nearly all require the DAF holder to make distributions within 1, 2 or 3 years.

“To maintain focus on the most pressing needs for our community we engage DAF holders regularly, introducing them to organizations and networks working in their areas of interest,” Diana Sieger, president of Grand Rapids Community Foundation said. “This builds trust in the community foundation and strengthens our relationships with donors, which we believe will ensure continued support and investment in our community.”

SCG shares that the lawmaker behind AB 1712 is expected to introduce new legislation in the coming weeks.

The conversation in California is an issue CMF will continue to monitor.