Ways to use (and not use!) your DAF
Stonewall's donor advised funds (DAFs) are central to our grantmaking as an organization. But that doesn't mean it's always easy to understand how they work, when to use them, or what their legal restrictions are. We get a lot of questions from our Fund Partners about how and when DAFs can be used, so we put together a list of answers to some of the most common queries.
Donor Advised Funds (as well as their siblings, the Designated Fund and the Field of Interest Fund), are flexible vehicles to manage your philanthropic interests and giving over an extended period of time. In practical use for over 100 years, they were codified in 2006’s Pension Protection Act, and have been variously clarified since then. In 2017, the IRS published Notice 2017-73 requesting comments on several issues that had come up over the years. Many philanthropic organizations, including Stonewall, took this as a confirmation that policies we’d been implementing were in line with IRS positions and practices. With a list of penalties for improper giving impacting the donor, the organization, and even individual staff members, we have set our policies in line with a strict interpretation of IRS intent.
The following language appears on the FAQ section of our website:
For the most part, your fund can be used to make grants to any 501(c)(3) non-profit organization you choose for general operating or program-specific gifts, depending on the type of fund and the parameters outlined in the initial Fund Agreement.
Donor-advised funds (DAFs) cannot be used to fulfill pledges, to support political candidates or parties, or to cover the costs of anything for which you’d receive a valued benefit*. For example, you could not use your DAF to purchase tickets to an organization’s gala, or a silent auction item, though you could use it at a gala to make an additional donation, for which you receive no benefit.
A grant from your DAF cannot be directly made for a specific individual’s benefit (salary line, scholarship or tuition payments). Fund partners wishing to make scholarships must set up a specialized scholarship fund.
We know these rules can be confusing, so we wanted to compile these bits of advice and put them in this newsletter as a reminder.
Additionally, though you are certainly free to tell an organization that you are recommending a grant, we advise not providing them with a specific dollar amount until you’ve had a conversation with us about the grant. Every grant goes through a due diligence process, and in extremely rare occurrences, there may be a reason that we cannot grant the amount you’ve recommended, or at the time you make a recommendation.
Stonewall staff are happy to discuss any potential opportunity with you, or even work with you to come up with a list of potential grantee partners to help you achieve the outcomes you desire.
Check out our full list of Fund Partner FAQs here.
*Stonewall Community Foundation will not make bifurcated grants, i.e., we are not able to pay for the “tax deductible” part of a ticket or sponsorship if the donor is paying the fair-market value. The IRS believes that inherent and valued benefits are still received in those cases.