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The biggest are mentioned in the article: 1. No required distribution per year. A DAF has no obligation to actually give its money away in any timely manner. T

The biggest are mentioned in the article: 1. No required distribution per year. A DAF has no obligation to actually give its money away in any timely manner. The Bloomberg article actually undersells how close this was to being regulated. Everybody likes this rule though because it allows people to siphon fees off money which should be in a charity. 2. Upfront tax benefit for later charitable benefit. Charitable tax deductions should be linked to actual charitable giving, not promises to do so. DAFs should only give a tax benefit on the disbursements they make to charities, not on a donors disbursement to the DAF. I think this is the least likely fix to happen but also the one that would most directly fix the problem. 3. Capital gains dodging. The article mentions this but this discrepancy with private foundations should be fixed and donations should be deductible at the cost basis level. Think of this as double-dipping.

bilbo0s 8y ago
1. Would be a good reform, but the financial industry would never allow this kind of thing. 2. There are a lot of reasons that the tax benefit to the DONOR, is given on disbursement to the DAF. I won't go over all of them, but without getting too technical, imagine that the donor has passed on, or soon will. Should his/her heirs be allowed to take that tax benefit as they donate money in the DAF? I think most people would answer "No" to that question. (Believe it or not, oftentimes more money is left to the DAF or Foundation, than is left to the heirs. You could end up in a situation where heirs pay no tax on the money they're earning from their own portion of the estate). So again, we can argue the propriety of the general idea of the charitable deduction, but there are a lot of very good reasons that if the deduction exists, it should be given to the donor, or his/her estate, on donation to the DAF. 3. I wouldn't have too much of a problem with a cost basis deduction, and neither would any of the donors. But again, two things, the financial services industry and the charity would have a problem with that. And second, yet again, what we're really talking about is the existence of the deduction at all, because +/-5 to 10% is not going to make much of a difference to a donor. (Many of whom have passed on in any case.) So these DAF's would exist with or without cost basis level deductions. The only difference is, charities would end up with a bit less money or a bit more money. (Depending on what you're looking at with the capital gains.)
- frgtpsswrdlame 8y ago
  >Should his/her heirs be allowed to take that tax benefit as they donate money in the DAF? Easy fix, just make a DAF non-inheritable. I feel the same way about private foundations. It shouldn't be tax deductible to give to an entity which gives to charities. It should only be deductible to give to charities directly. If I need a big tax deduction this year, I shouldn't be able to get that by moving this money over here where I still exercise some degree of control over it. I should have to give that directly to a charity. >neither would any of the donors Absolutely they would, because it will dramatically reduce the tax benefit a DAF provides to many donors. >because +/-5 to 10% is not going to make much of a difference to a donor. Yes it does. >(Many of whom have passed on in any case.) Yes many have passed on, many are quite alive as well. >The only difference is, charities would end up with a bit less money or a bit more money. Here's the difference. If you change the cap gains thing, DAFs become less beneficial to donors. That will probably decrease contributions to DAFs overall. To offset that, you do the suggestion in two which makes DAFs much less attractive compared to giving directly. The size of the effects is arguable but I believe that would actually increase the amount of money given to charities since many DAFs sit around and people are very reluctant to spend them down.

bilbo0s 8y ago

1. Would be a good reform, but the financial industry would never allow this kind of thing. 2. There are a lot of reasons that the tax benefit to the DONOR, is given on disbursement to the DAF. I won't go over all of them, but without getting too technical, imagine that the donor has passed on, or soon will. Should his/her heirs be allowed to take that tax benefit as they donate money in the DAF? I think most people would answer "No" to that question. (Believe it or not, oftentimes more money is left to the DAF or Foundation, than is left to the heirs. You could end up in a situation where heirs pay no tax on the money they're earning from their own portion of the estate). So again, we can argue the propriety of the general idea of the charitable deduction, but there are a lot of very good reasons that if the deduction exists, it should be given to the donor, or his/her estate, on donation to the DAF. 3. I wouldn't have too much of a problem with a cost basis deduction, and neither would any of the donors. But again, two things, the financial services industry and the charity would have a problem with that. And second, yet again, what we're really talking about is the existence of the deduction at all, because +/-5 to 10% is not going to make much of a difference to a donor. (Many of whom have passed on in any case.) So these DAF's would exist with or without cost basis level deductions. The only difference is, charities would end up with a bit less money or a bit more money. (Depending on what you're looking at with the capital gains.)

frgtpsswrdlame 8y ago
>Should his/her heirs be allowed to take that tax benefit as they donate money in the DAF? Easy fix, just make a DAF non-inheritable. I feel the same way about private foundations. It shouldn't be tax deductible to give to an entity which gives to charities. It should only be deductible to give to charities directly. If I need a big tax deduction this year, I shouldn't be able to get that by moving this money over here where I still exercise some degree of control over it. I should have to give that directly to a charity. >neither would any of the donors Absolutely they would, because it will dramatically reduce the tax benefit a DAF provides to many donors. >because +/-5 to 10% is not going to make much of a difference to a donor. Yes it does. >(Many of whom have passed on in any case.) Yes many have passed on, many are quite alive as well. >The only difference is, charities would end up with a bit less money or a bit more money. Here's the difference. If you change the cap gains thing, DAFs become less beneficial to donors. That will probably decrease contributions to DAFs overall. To offset that, you do the suggestion in two which makes DAFs much less attractive compared to giving directly. The size of the effects is arguable but I believe that would actually increase the amount of money given to charities since many DAFs sit around and people are very reluctant to spend them down.