The IRS and the U.S. Department of the Treasury shared proposed regulations in November that focus mostly on important definitions surrounding donor advised funds (DAFs).

As CMF reported, the proposed regulations would provide guidance regarding DAFs and taxable distributions. Generally, they would apply to certain organizations, including community foundations and other charitable organizations that maintain one or more DAFs and other individuals involved with the DAFs, including donors, donor-advisors, related individuals and certain fund managers.

In February, Treasury held an extended comment period for organizations and individuals to submit comments. Treasury received more than 150 public comments, most raising concerns over the effect that the proposed changes could have on DAFs as a giving vehicle.

CMF submitted comments to Treasury on the proposed regulations and provided a template for CMF members to utilize as they crafted their own.

Several CMF members submitted comments or signed on to comments submitted by one of our national partners, including the Philanthropy Roundtable, Council on Foundations, United Philanthropy Forum or Finance, Administration and Operations Group.

Recently, Treasury released the “Green Book,” which provides further details about the revenue measures included in the Biden Administration’s Fiscal Year 2025 budget. The Green Book included provisions for foundations and DAFs, which were repeated in last year’s budget proposal.

The provisions include:

• Disallowing private foundations from counting distributions to DAFs toward their 5% minimum payout requirement unless funds are distributed from the DAF by the end of the following year.
• Excluding payments to family members at family foundations from counting toward the mandatory 5% payout. Under current law, reasonable and necessary administrative expenses to further the charitable purpose of a foundation are considered a qualified distribution and count toward the distribution requirement. Still, the Green Book contends that paying family members does not further the charitable purpose.

Once the Treasury finalizes its work on the proposed DAF regulations, it could begin work on these rules impacting DAFs and family foundations.

The IRS and the Treasury Department recently announced a public hearing on proposed DAF regulations. The public hearing is scheduled for May 6 in D.C., with an option to testify and attend virtually. Those planning to provide comments are required to submit written outlines of their comments by April 5.

As a part of Foundations on the Hill in February, CMF moderated a panel discussion on the Donor Advised Fund Research Collaborative’s (DAFRC) 2024 National Study on Donor Advised Funds. The report covers nine years of activity from more than 50,000 DAFs and analyzes donor behavior, payout rates, inactive funds, and more.

CMF continues to collect DAF community stories that we can share with policymakers to show the value and flexibility of DAFs as a giving vehicle. We encourage you to connect with our team if you’d like to share more about the value of DAFs at your organization.

Treasury has also invited public comment for items to be included in the 2024-2025 Priority Guidance Plan, which identifies tax items that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. CMF will submit comments by May 31.

Want more?

We invite you to read CMF’s submitted comments.

Read the full Department of Treasury Green Book.

Learn more about the public hearing on May 6.