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This article is fundamentally misleading here: > When it comes to D.A.F.s, the United States tax code rewards the promise of good intentions. Wealthy donors —

This article is fundamentally misleading here: > When it comes to D.A.F.s, the United States tax code rewards the promise of good intentions. Wealthy donors — including many of the Silicon Valley billionaires who have asked the public to trust them with their digital lives — pledge to distribute their funds to charity once they get their tax break. A contribution to a donor advised fund is irreversible. Once the donor has given that contribution, it is no longer "their funds." The NYTimes makes it sound like the donor could make a gift and then later spend that money on themselves. That's not how it works. They have the ability to advise the DAF where the grants go, but the grants must go to charities recognized by the IRS. Giving money to a donor advised fund is giving money to charity. You don't get it back. It's not a promise to give later. It's a charitable donation. I'm bewildered by the tone of this article. If the author wants to take a donor to task for giving to charity X instead of charity Y, that seems fair even if I disagree. But asserting that someone who gives hundreds of millions of dollars to a DAF -- an irreversible charitable gift -- is "Hacking Their Taxes" and somehow cheating is just disingenuous.

adventured 8y ago
> I'm bewildered by the tone of this article. It's a propaganda article that intentionally lies about what's occuring. It's very unlikely that the NY Times writer simply didn't understand anything about what they were writing on. The most plausible argument is that they're pushing an agenda and are willing to lie to do it. It's at least semi-widely believed that large foundation giving by eg Gates or Buffett (or any other billionaires), is a tax dodging scheme for their own benefit (as though they can freely spend billions in foundation money on themselves). You'll see those comments by the droves across forums when this topic comes up, despite the anti-logic, anti-factual nature of the claims. It's a sort of 'the rich are evil, even in charity' dog whistle for people that buy into that ideology (the Times writer is pitching to their base here).
Woberto 8y ago
I thought the tone was reasonable - I don't think NYT said anything about donors spending the money on themselves later. Here are the issues it points out (I had posted this somewhere lower): One issue mentioned by NYT is using DAFs to "obscure their political activity" since donations don't have to be made public and non-profits don't have to disclose donors. Another issue is that the tax savings felt by the donors is tied to the original contribution's valuation and not the valuation at the time the money is used. So in the case of GoPro's Nicholas Woodman, he got a tax break based on $500 mil, but the shares have dropped around 93% so if they're used for charity now it's like he only donated a fraction of that amount. NYT also reports that the fees for some of these DAFs can be significant and so a portion of these donations are going to e.g. Goldman Sachs, Fidelity, and similar firms.
- chimeracoder 8y ago
  > Another issue is that the tax savings felt by the donors is tied to the original contribution's valuation and not the valuation at the time the money is used. So in the case of GoPro's Nicholas Woodman, he got a tax break based on $500 mil, but the shares have dropped around 93% so if they're used for charity now it's like he only donated a fraction of that amount. Sure, but the reverse is true as well - the contribution could increase in value, which benefits the charity. And if that happens, he doesn't get to claim the difference as a deduction. Furthermore, he gets the tax deduction based on $500 million because that's the amount he's giving up at the moment he makes the (irrevocable) decision to divert the funds to charity. (The alternative is for him to liquidate and hold onto the $500 million himself; he's getting a tax deduction for not doing that).
  - Woberto 8y ago
    In this case investors saw his donation as a sign of lack of confidence in the company, which indicates that he chose to make the donation when he thought he could get the biggest tax break from it. I think it'd be fair for donors to get a tax break according to how much the stock is worth when it's given to charity.
    - chimeracoder 8y ago
      > I think it'd be fair for donors to get a tax break according to how much the stock is worth when it's given to charity. In the most common scenario, that would mean people could receive deductions on a larger tax basis than the value they actually donated. If they waited long enough, they could even receive a tax break that was greater than 100% of the amount they donated.
    - downandout 8y ago
      In this case investors saw his donation as a sign of lack of confidence in the company An admittedly brief review of the news articles about this event seem to contradict that. The author of this article interpreted the drop that way in order to better make their case, because...well...they have no case. Below I have listed a few articles from the front page of Google results for this subject. Not a single article that I could find mentions investor worries that the donation was driven by the CEO's lack of confidence in the company. Rather, investors were upset because JP Morgan allowed these shares to be released from a lockup agreement with virtually no advance notice to shareholders. They were worried that the shares could potentially be sold by the charity almost immediately, which would have flooded the market with insider shares far earlier than investors expected. https://www.inc.com/associated-press/gopro-shares-fall-as-ceo-donates-shares-to-charity.html https://www.inc.com/associated-press/gopro-shares-fall-as-ce... https://money.cnn.com/2014/10/02/investing/gopro-charity-shares/index.html https://money.cnn.com/2014/10/02/investing/gopro-charity-sha... http://fortune.com/2014/10/02/gopro-shares-woodman-charity-lock-up-period/ http://fortune.com/2014/10/02/gopro-shares-woodman-charity-l... https://www.wsj.com/articles/gopro-ceos-foundation-doesnt-intend-to-sell-shares-1412281879 https://www.wsj.com/articles/gopro-ceos-foundation-doesnt-in...
throw2016 8y ago
There are a number of issues raised in the article. The lobbying for secrecy that has just been passed. The misaligned incentives and subsequently even more lobbying by the banking sector that gets huge management fees from DAFs. And the deceptive movement of funds from one DAF to another to give a misleading impression of disbursements per year. These are all games and have nothing to do with charity. There are also other issues like the dollar tax benefits aligned to the high stock prices even though the stock today may be worth a fraction of its initial value, and the lack of transparency in disbursements which means funds can just be moved around with little accountability.
petilon 8y ago
>> You don't get it back. Yes, you can get it back. All the donor has to do is find a recipient who agrees to buy goods or services from his/her company for above-market prices, in exchange for receiving the donation. It's called a quid-pro-quo arrangement.
- TomMarius 8y ago
  Is that common with IRS-approved charities?
  - Pica_soO 8y ago
    How about the donor opening one - the St.Facebook Orphan school for ants who must justify the means.
  - petilon 8y ago
    The charity in this case is Silicon Valley Community Foundation. They may not be aware of any secret deals made between the donor and the recipient. The charity just gives money to whoever the donor directs them to give to. The fact that the donor directed the donation is hidden from public, which allows this kind of abuse to occur.
- NelsonMinar 8y ago
  That is explicitly illegal. Not saying it doesn't happen (particularly with education) but it's illegal. FWIW, the Schwab DAF has a checkbox I'm required to check every single grant promising there is no quid pro quo. I suppose people lie on that.
cheriot 8y ago
> Once the donor has given that contribution, it is no longer "their funds." There's power in controlling money even when you can't spend it on yourself. The donor can use it to own securities and control corporations. > Unlike family foundations, which are required to distribute 5 percent of their assets each year and have historically been the way wealthy donors disbursed their philanthropic firepower, D.A.F.s have no distribution requirements, meaning that billions of dollars earmarked for charity can sit idle for decades. That 5% per annum distribution requirement is the check on transferring this power from one generation to the next and is completely absent from D.A.F.s. There are better arguments for raising that minimum % than for removing it.
sametmax 8y ago
Except the charities can invest said money, and they do. And you control that. So you keep your influence in the market, which is what money is about at this scale. Indeed, when you have that much money, buying yet another luxury brings nothing. What's really important is power. And with this system you still have it. E.g: the gates foundation invest the majority of its money (https://mobile.agoravox.fr/tribune-libre/article/bill-gates-philanthrope-oui-mais-19525 https://mobile.agoravox.fr/tribune-libre/article/bill-gates-...) and the gates family has the control of it.

adventured 8y ago

> I'm bewildered by the tone of this article. It's a propaganda article that intentionally lies about what's occuring. It's very unlikely that the NY Times writer simply didn't understand anything about what they were writing on. The most plausible argument is that they're pushing an agenda and are willing to lie to do it. It's at least semi-widely believed that large foundation giving by eg Gates or Buffett (or any other billionaires), is a tax dodging scheme for their own benefit (as though they can freely spend billions in foundation money on themselves). You'll see those comments by the droves across forums when this topic comes up, despite the anti-logic, anti-factual nature of the claims. It's a sort of 'the rich are evil, even in charity' dog whistle for people that buy into that ideology (the Times writer is pitching to their base here).

Woberto 8y ago

I thought the tone was reasonable - I don't think NYT said anything about donors spending the money on themselves later. Here are the issues it points out (I had posted this somewhere lower): One issue mentioned by NYT is using DAFs to "obscure their political activity" since donations don't have to be made public and non-profits don't have to disclose donors. Another issue is that the tax savings felt by the donors is tied to the original contribution's valuation and not the valuation at the time the money is used. So in the case of GoPro's Nicholas Woodman, he got a tax break based on $500 mil, but the shares have dropped around 93% so if they're used for charity now it's like he only donated a fraction of that amount. NYT also reports that the fees for some of these DAFs can be significant and so a portion of these donations are going to e.g. Goldman Sachs, Fidelity, and similar firms.

chimeracoder 8y ago
> Another issue is that the tax savings felt by the donors is tied to the original contribution's valuation and not the valuation at the time the money is used. So in the case of GoPro's Nicholas Woodman, he got a tax break based on $500 mil, but the shares have dropped around 93% so if they're used for charity now it's like he only donated a fraction of that amount. Sure, but the reverse is true as well - the contribution could increase in value, which benefits the charity. And if that happens, he doesn't get to claim the difference as a deduction. Furthermore, he gets the tax deduction based on $500 million because that's the amount he's giving up at the moment he makes the (irrevocable) decision to divert the funds to charity. (The alternative is for him to liquidate and hold onto the $500 million himself; he's getting a tax deduction for not doing that).
- Woberto 8y ago
  In this case investors saw his donation as a sign of lack of confidence in the company, which indicates that he chose to make the donation when he thought he could get the biggest tax break from it. I think it'd be fair for donors to get a tax break according to how much the stock is worth when it's given to charity.
  - chimeracoder 8y ago
    > I think it'd be fair for donors to get a tax break according to how much the stock is worth when it's given to charity. In the most common scenario, that would mean people could receive deductions on a larger tax basis than the value they actually donated. If they waited long enough, they could even receive a tax break that was greater than 100% of the amount they donated.
  - downandout 8y ago
    In this case investors saw his donation as a sign of lack of confidence in the company An admittedly brief review of the news articles about this event seem to contradict that. The author of this article interpreted the drop that way in order to better make their case, because...well...they have no case. Below I have listed a few articles from the front page of Google results for this subject. Not a single article that I could find mentions investor worries that the donation was driven by the CEO's lack of confidence in the company. Rather, investors were upset because JP Morgan allowed these shares to be released from a lockup agreement with virtually no advance notice to shareholders. They were worried that the shares could potentially be sold by the charity almost immediately, which would have flooded the market with insider shares far earlier than investors expected. https://www.inc.com/associated-press/gopro-shares-fall-as-ceo-donates-shares-to-charity.html https://www.inc.com/associated-press/gopro-shares-fall-as-ce... https://money.cnn.com/2014/10/02/investing/gopro-charity-shares/index.html https://money.cnn.com/2014/10/02/investing/gopro-charity-sha... http://fortune.com/2014/10/02/gopro-shares-woodman-charity-lock-up-period/ http://fortune.com/2014/10/02/gopro-shares-woodman-charity-l... https://www.wsj.com/articles/gopro-ceos-foundation-doesnt-intend-to-sell-shares-1412281879 https://www.wsj.com/articles/gopro-ceos-foundation-doesnt-in...

throw2016 8y ago

There are a number of issues raised in the article. The lobbying for secrecy that has just been passed. The misaligned incentives and subsequently even more lobbying by the banking sector that gets huge management fees from DAFs. And the deceptive movement of funds from one DAF to another to give a misleading impression of disbursements per year. These are all games and have nothing to do with charity. There are also other issues like the dollar tax benefits aligned to the high stock prices even though the stock today may be worth a fraction of its initial value, and the lack of transparency in disbursements which means funds can just be moved around with little accountability.

petilon 8y ago

>> You don't get it back. Yes, you can get it back. All the donor has to do is find a recipient who agrees to buy goods or services from his/her company for above-market prices, in exchange for receiving the donation. It's called a quid-pro-quo arrangement.

TomMarius 8y ago
Is that common with IRS-approved charities?
- Pica_soO 8y ago
  How about the donor opening one - the St.Facebook Orphan school for ants who must justify the means.
- petilon 8y ago
  The charity in this case is Silicon Valley Community Foundation. They may not be aware of any secret deals made between the donor and the recipient. The charity just gives money to whoever the donor directs them to give to. The fact that the donor directed the donation is hidden from public, which allows this kind of abuse to occur.
NelsonMinar 8y ago
That is explicitly illegal. Not saying it doesn't happen (particularly with education) but it's illegal. FWIW, the Schwab DAF has a checkbox I'm required to check every single grant promising there is no quid pro quo. I suppose people lie on that.

cheriot 8y ago

> Once the donor has given that contribution, it is no longer "their funds." There's power in controlling money even when you can't spend it on yourself. The donor can use it to own securities and control corporations. > Unlike family foundations, which are required to distribute 5 percent of their assets each year and have historically been the way wealthy donors disbursed their philanthropic firepower, D.A.F.s have no distribution requirements, meaning that billions of dollars earmarked for charity can sit idle for decades. That 5% per annum distribution requirement is the check on transferring this power from one generation to the next and is completely absent from D.A.F.s. There are better arguments for raising that minimum % than for removing it.

sametmax 8y ago

Except the charities can invest said money, and they do. And you control that. So you keep your influence in the market, which is what money is about at this scale. Indeed, when you have that much money, buying yet another luxury brings nothing. What's really important is power. And with this system you still have it. E.g: the gates foundation invest the majority of its money (https://mobile.agoravox.fr/tribune-libre/article/bill-gates-philanthrope-oui-mais-19525 https://mobile.agoravox.fr/tribune-libre/article/bill-gates-...) and the gates family has the control of it.