Feature

Donation Detour: Donor-Advised Funds in Higher Education

Victoria Nguyen
Victoria Nguyen

Victoria Nguyen

Victoria Nguyen, J.D. Candidate, 2021, University of Oregon School of Law. I would like to express my deep gratitude to Professor Susan N. Gary for her thoughtful guidance and support. I would also like to thank my first-year Legal Writing and Research professor, Elizabeth Frost, for her mentorship and encouragement. Special thanks to Kirsten Williams and Clint McNutt for sharing their expertise in higher education. Finally, I dedicate this Article to Anthony and Addison Button. Thank you for making every day special.

This Article won first place in the American Bar Association’s 2020 Real Property, Trust and Estate Law Section Student Writing Competition.

Author’s Synopsis: This Article examines the history and rising popularity of donor-advised funds (“DAFs”). It discusses the giving vehicles’ impact on higher education philanthropy, and it explores how DAFs can delay donations from reaching higher education institutions. The Article also recommends changes to the Internal Revenue Code that could motivate DAF account holders to make timely grants from their DAFs to benefit colleges and universities.

I. Introduction

Universities have depended on philanthropy since the birth of higher education in the United States. In 1638, a bequest of 400 books trans-formed the country’s first college into Harvard.1 Less than a century later, the Collegiate School expressed its appreciation for a gift of more than 417 books, a portrait of King George I, and nine “bales of goods” by renaming the school for the donor, Elihu Yale.2

Private support for higher education soon became an “American tradition,”3 and by the twentieth century, Congress recognized the country’s income tax posed a threat to that tradition.4 “Some policymakers were concerned that without the charitable deduction, wealthy taxpayers subjected to these higher tax rates would no longer contribute to charities or institutions of higher education (or would contribute less).”5 Thus, Congress created the charitable deduction for individuals in 1917 to promote private support for educational, charitable, and religious purposes.6

But today, a donor can deduct a charitable donation from the donor’s taxes even if the gift never reaches a worthy charity.7 In fact, the U.S. nonprofit that received the most donations in 2018 is not a traditional charity, but rather a charitable giving vehicle:8 a donor-advised fund (DAF).9 Since 2016, Fidelity Charitable, a public charity that exists solely to fundraise and make grants from its DAFs, has garnered more annual donations than any other U.S. nonprofit.10 By 2018, the Chronicle of Philanthropy decided to exclude DAFs like Fidelity Charitable from its annual “America’s Favorite Charities” rankings11 because the giving vehicles are “financial tools to hold and distribute charitable funds,” not “groups with defined charitable missions.”12

However these charities are categorized, DAFs continue to dominate philanthropy in the U.S. Although United Way Worldwide raised $3 billion and earned the top spot in the Chronicle of Philanthropy’s 2018 rankings, Fidelity Charitable garnered $9 billion that year.13 In fact, Fidelity Charitable’s total receipts exceeded those of the top five “non-profits devoted to a cause” combined:14 United Way Worldwide, the Mayo Clinic, Alsac/St. Jude Children’s Research Hospital, the Salvation Army, and Harvard University.15

DAFs function like checking accounts, and they create an intermediate step between donors and the charitable organizations that will ultimately use the donations.16 Rather than donating directly to a charity such as the Red Cross or a university, a donor can give to a sponsoring organization (a public charity) that runs DAFs; in turn, the sponsoring organization will create a DAF in the donor’s name.17

At any time, the original donor (also known as the “account holder”) can recommend the sponsoring organization make grants (distributions) from the DAF to qualified charitable organizations.18 Although a sponsoring organization is not legally obligated to comply with an account holder’s advice, a sponsoring organization can “almost always abide[] by [a] donor’s wishes,” so long as the account holder has selected a qualified, tax-exempt organization.19 When the account holder files her tax returns, she can choose to take the standard deduction or itemize her deductions.20 Because sponsoring organizations are public charities, a taxpayer’s donation to a DAF constitutes a charitable gift.21 The taxpayer can apply her DAF contributions toward her itemized deductions and obtain a tax benefit from the gift.22

DAFs now are the country’s fastest-growing giving vehicle,23 with a significant boost from the Tax Cuts and Jobs Act of 2017 (“TCJA”).24 In 2018, charitable contributions in the U.S. totaled $427.71 billion, and $31.12 billion of that amount was given to DAFs.25 Critics caution DAFs “threaten[] to undermine the American system for funding charity.”26 Because communities depend on charities to fill important social functions, “anything that disrupts this flow can have critical consequences for charitable organizations and the people they serve.”27

Professor Roger Colinvaux has characterized DAFs as substitutes for private foundations and public charities.28 DAFs allow donors to avoid the regulations imposed on private foundations, while maintaining control over gifts.29 Even though sponsoring organizations legally own donations, “for the DAF to be attractive to donors, there is the strong expectation that sponsoring organizations will follow donor advice as a matter of course.”30 Thus, DAFs also serve as a substitute for public charities because if DAFs did not exist, donors may have given directly to the worthy cause.31

Higher education institutions are not immune from DAFs. The more assets DAFs hold, the longer universities must wait until they can use donations.32 The donations may never arrive. Although donations are invested and grow while held in DAFs, that growth occurs to the detriment of universities and other charities that could have used or invested the gift sooner. In fiscal year 2019, the average one-year endowment investment returns across nearly 800 U.S. colleges, universities, and affiliated foundations was 5.3%; ten-year returns averaged 8.4%.33 In other words, when gifts remain in DAFs, universities lose out on significant investment returns that could promptly support their missions.34

This Article will discuss the foregoing issues. Part I will examine how DAFs came to exist and their current role in philanthropy. Part II will discuss DAFs’ impact on higher education and how colleges and universities are responding to the giving vehicle’s rising popularity. Last, Part III will discuss current recommendations for DAF reform and will make targeted recommendations to benefit higher education institutions.

II. DAFs in the Philanthropic Landscape

A. A Brief DAF History

DAFs help taxpayers deduct charitable donations from their income taxes while bypassing the policy goals that inspired the tax expenditure. Congress has permitted individuals to deduct charitable donations since 1917.35 “The exemption for charitable organizations is clearly a derivative of the concept that they perform functions that, in the organizations’ absence, government would have to perform; therefore, government is willing to forgo the tax revenues it would otherwise receive in return for the public services rendered.”36

Through Section 170 of the Internal Revenue Code (Code), Congress identifies the types of charitable organizations that warrant an income tax deduction.37 DAFs are not listed.38 The Congressional Research Service explained DAFs are “another type of organization that serves to facilitate charitable giving, but are not directly involved in the provision of charitable goods and services.”39

DAFs gained popularity, in large part, to avoid private foundation regulations. According to the Department of Treasury, the New York Community Trust created the first DAF in 1931.40 However, DAFs did not flourish for several decades, until tax attorney Norman Sugarman, “the founding father of the DAF,”41 capitalized on the regulations the Tax Reform Act of 1969 imposed on private foundations.42 Sugarman, a former attorney for the Bureau of Internal Revenue, recognized the Code “gave clear preferential treatment to public charities over private foundations.”43 He advised community foundations to “petition the IRS immediately for designation as a public charity . . . and . . . build[] endowment funds.”44 Sugarman saw the opportunity to transfer funds from private foundations to public charities.45 However, Sugarman wanted donors to maintain control of their donations, as they had at private foundations.46 Ultimately, Sugarman obtained a private letter ruling from the IRS that permitted donors to guide the funds they had contributed to public charities.47 The DAF was born.48

By the 1990s, commercial investment firms “recognized the potential of the [DAF] model.”49 Fidelity Investments created Fidelity Charitable, the first commercial sponsoring organization (CSO).50 CSOs are charities that are affiliated with financial institutions but do not serve a specific charitable cause.51 Despite DAFs’ newfound popularity, Congress did not define the giving vehicles until the Pension Protection Act of 2006.52 Code section 4966(d)(2) now defines a DAF as a fund or account that: “is separately identified by reference to contributions of a donor or donors, . . . is owned and controlled by a sponsoring organization, and . . . has . . . advisory privileges with respect to the distribution or investment of amounts held in such fund or account by reason of the donor’s status as a donor.”53

The Code defines a sponsoring organization as an organization listed under section 170(c).54 Section 170(c) includes corporations, trusts, and foundations “organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes.”55 However, private founda-tions do not qualify as DAF sponsoring organizations.56 Because Fidelity Charitable is a 501(c)(3) public charity, it can serve as a sponsoring organization.57

Congress imposed modest reporting duties on DAFs through the Pension Protection Act of 2006.58 For example, the Act required DAF sponsors to annually report data on the Form 990.59 In addition, the Act instructed the Secretary of the Treasury to study the “organization and operation of donor advised funds . . . and of organizations described in section 509(a)(3).”60 Congress posed four questions to the Treasury, three of which concerned DAFs: “Whether the Existing [Deduction Rules for Contributions to DAFs and [Sponsoring Organizations] are Appropriate,” “Whether DAFs Should be Subject to a Distribution requirement,” and “Whether an Advisory Role in the Investment or Distribution of Donated Funds is Consistent with a Completed Gift.”61 The Treasury Department study, released in 2011, did not recommend Congress impose private foundation restrictions on DAFs.62 Moreover, the Treasury did not recommend changing the timing of the charitable deduction for DAF donations.63

The Pension Protection Act’s impact on DAFs pales in comparison to the TCJA, which boosted the giving vehicle’s popularity64 without directly addressing DAFs.65 By doubling the standard deduction, the TCJA limits the number of taxpayers who can itemize and take advantage of the charitable deduction.66 In 2017, 46.2 million taxpayers took itemized deductions.67 Once the TCJA took effect in 2018, that number shrunk to 16.7 million taxpayers.68 Moreover, “only the top [nine] percent of earners will get a charitable deduction after the [TCJA].”69

Since the TCJA, the Congressional Budget Office has estimated the new standard deduction would only decrease charitable giving by about $13 billion per year.70 By contrast, the Lilly Family School of Philan-thropy at Indiana University estimates the TCJA could decrease charitable giving by $19 billion per year.71 Between 2018 and 2025, the University anticipates 2.6 million fewer households will donate annually.72

Meanwhile, taxpayers rushed to open DAFs in 2017, and DAF account balances skyrocketed.73 Contributions to DAFs increased by 20.1% from 2017 to 2018,74 and the number of individual DAF accounts grew by 55.2% in the same period, from 469,331 to 728,563.75 In other words, one-third of the DAFs that existed in 2018 were created in 2017.76

Today, DAFs dominate the charitable landscape, with no signs of slowing down. Fidelity Charitable has received more donations than any other public charity since 2016, and the CSO garnered more donations in 2017 than its top two DAF competitors combined.77 Schwab Charitable Fund came in second with $3.3 billion, while the National Philanthropic Trust ranked third at $2.7 billion.78

B. Why Donors Choose DAFs

A donor may choose a DAF, rather than a traditional giving method—such as a direct gift to a university—for several reasons, including tax advantages, freedom from private foundation restrictions, and flexibility to disperse a single donation to several charities.

1. Significant Tax Advantages

DAFs provide donors with two important tax advantages: tax burden reduction and capital gains avoidance.79 According to a 2015 Fidelity Charitable survey, 90% of its account holders indicated tax benefits were their primary reason for opening a DAF.80

DAFs often appeal to donors who want to reduce their tax burden by itemizing their deductions. Because the TCJA doubled the standard deduction, the new threshold would require taxpayers who had no other deductions to make twice as many gifts in order to itemize in 2018.81 As a result, “some donors made a big gift in one year intended to cover multiple years of philanthropy, to maximize their tax benefits.”82 Taxpayers employ this strategy, called “bunching,” to accrue deductions—including charitable donations—that exceed the taxpayer’s standard deduction in a single year.83 The strategy allows DAF account holders to deduct the full donation from their taxes in the year the donation is made, while spreading the corresponding grants over years or decades.84 In the years following a DAF contribution, an account holder could take the standard deduction and instruct the sponsoring organization to make grants to the charities.85 Extending grants over several years could also maintain or heighten a donor’s status in university recognition societies.86

CSOs have capitalized on the TCJA and advertise DAFs as an easy way to employ this tax efficient strategy.87 A 2020 Schwab Charitable press release noted, “[a] donor-advised fund account makes it easy to fund more than one year of giving in advance and provide support to charities over time, even during market downturns.”88

DAFs can also help taxpayers avoid capital gains tax.89 Data collected by the Chronicle of Philanthropy from 2009–2014 suggests DAF donors give 15% more capital gains assets than non-DAF donors.90 Most importantly, taxpayers can avoid capital gains tax when they donate appreciated property.91 If a taxpayer sells appreciated property, the transaction is typically subject to capital gains tax.92 By contrast, a taxpayer can avoid capital gains tax if she donates the appreciated property to a charity.93 As Schwab Charitable touted in a press release, using DAFs could increase the donor dollars available for charity by up to 20%.94 Thus, a taxpayer could donate the appreciated property to a CSO, and later make additional gifts with the tax liability she avoided.

However, critics argue DAFs do not encourage new philanthropy, but merely cater to current wealthier, existing donors. University of California, San Diego Professor James Andreoni posits the average DAF account holder’s annual income is approximately $1.3 million.95 Accordingly, he asserts DAFs “are clearly a financial instrument that, when measured by dollars that pass through them, are used primarily by people at the very tops of the wealth and income distributions.”96

2. Freedom from Private Foundation Restrictions

Donors often choose DAFs instead of private foundations because the giving vehicles are easier to establish and impose fewer long-term administrative burdens. Although DAFs are a newer phenomenon, DAFs now outnumber private foundations in the U.S.97 Currently, more than 728,000 DAFs exist, as compared to 80,000 private foundations.98 However, DAFs have not caught up with private foundations in terms of assets.99 Private foundations hold $872 billion in assets, while DAFs boast only $121 billion.100

Donors also can create DAFs without legal assistance, whereas private foundations pose significant legal hurdles.101A donor can open a DAF in thirty minutes, while establishing a private foundation typically requires IRS nonprofit recognition102 and can take several weeks or months.103 In addition, a donor must pay substantial legal fees to create a private foundation,104 while CSOs like Fidelity Charitable only require an online application and a $5,000 donation to open a DAF.105

DAFs also spare account holders the ongoing administrative burdens imposed on private foundations.106 The Tax Reform Act of 1969 drew “bright legal lines . . . to tightly regulate passive, donor-controlled foundations to ensure their operation in the public interest.”107 Sponsoring organizations often point to these burdens to promote DAFs.108 For example, Notre Dame University advertises that private foundations must annually file a Form 990.109 By contrast, DAF account holders do not need to submit public filings and can keep their identities confidential.110

Private foundations are also subject to “payout rules, strict self-dealing restrictions, greater disclosure obligations, and tough anti-lobbying rules”111 that DAFs avoid. Private foundations must distribute at least 5% of their assets each year and must pay a 2% excise tax on investment income.112 In addition, private foundations’ administrative fees range from 2.5% to 4% of the foundation’s assets, while DAF administrative fees are typically less than 0.85%.113 In fact, small private foundations with assets of $100,000 or less often terminate the private foundations and “liquidate” them into a DAF to cut costs.114

If a private foundation does not want to liquidate, DAFs also offer private foundations an opportunity to sidestep the annual payout requirement. A private foundation can create its own DAF, then make a distribution to that DAF.115 That distribution will count toward the private foundation’s mandatory payout, and the foundation can recommend grants from the DAF in the future.116 In 2017, The Economist selected a random sample of 4,000 private foundations and discovered that forty made distributions to DAFs.117 Eleven of those foundations sent more than 90% of their annual distributions to DAFs.118

Professors Colinvaux and Ray Madoff assert that when private foundations transfer funds to DAFs to satisfy their mandatory distributions, the foundations flout the spirit of the Pension Protection Act.119 Colinvaux and Madoff argue Congress intended the distributions to support charities, not “other investment funds.”120 Because “[t]he foundation can then advise distribution of the grant from the DAF to an active charity at a later date,” the distribution does not represent a distribution to a charitable organization.121

However, donors who select DAFs over private foundations forego the opportunity to make grants to individuals.122 The IRS authorizes private foundations to make grants directly to individuals for specific purposes, such as scholarships for tuition, room, and board at educational institutions.123 By contrast, DAFs may only make grants to charitable organizations.124 If a DAF grants funds to “any natural person,” the IRS will consider the distribution taxable.125

Although private foundations can make grants to individuals, DAFs ultimately afford donors more favorable tax treatment. Because DAF sponsoring organizations are public charities,126 a DAF account holder may deduct cash contributions that do not exceed 60% of the donor’s adjusted gross income.127 By contrast, donors to private foundations can only deduct cash donations up to 30% of the donor’s adjusted gross income.128

3. Flexibility to Support Multiple Charities

DAFs also benefit donors who want to disperse donations among several charities. In a university setting, development officers will typically cultivate donors for months or years before making a gift proposal. If the donor decides to make a gift, the donor and the university will usually enter into a gift agreement that sets forth the gift’s purpose and amount.129 Once the donor gives the cash or property to the university, the donor cedes control and the university must use the funds in accordance with the agreement.130

By contrast, DAFs afford donors time to determine the recipients and purposes of a gift, while receiving an immediate tax benefit.131 Instead of working with different development officers at several charities, a donor can make a single donation to a DAF, receive a tax benefit, and determine the gift recipients at the donor’s convenience.132 According to University of Chicago law student Kate Harris and professor Daniel Hemel, “DAFs allow taxpayers to claim charitable-contribution deductions when those deductions are most valuable and then distribute funds to charities when they have time to do so thoughtfully.”133

III. DAFs and Higher Education

DAFs have altered the higher education giving landscape. While DAFs flourished with the rise of CSOs,134 the TCJA recently fueled an influx of DAF accounts.135 Before the standard deduction doubled in 2018, taxpayers rushed to create DAFs in order to itemize their charitable donations.136 Higher education supporters also recognized the value of DAFs and responded accordingly.137 According to Fidelity Charitable, the CSO granted more funds to education-based charities in 2018 than any other charitable cause.138 Between June 30, 2017 and June 30, 2018, colleges and universities reported the number of grants they received from DAFs increased by 19%.139 In total, the institutions’ grant dollars from DAFs increased by 65.8%, and individual grant amounts also increased by 39%.140

A. Introduction to Higher Education Giving

DAFs represent a giving vehicle that diverts donors from traditional giving.141 Typically, donors have two choices when giving to a university: donors can make an expendable (outright) gift or an endowed gift.142 Whether a donor makes an expendable or endowed gift, the donor is eligible to deduct the gift’s value in the year the donation is made, subject to certain limitations.143

Universities can access and use expendable gifts immediately.144 Expendable gifts often appeal to donors who want to make an immediate impact145 by supporting capital projects, purchasing equipment, or funding urgent university needs. Unlike expendable gifts, endowment gifts are invested in perpetuity.146 Only a portion of the gift reaches the intended purpose each year, and the principal remains invested.147 Donors typically designate one or more purposes that warrant long-term funding, such as scholarships or faculty support.148 Donors may contribute to an existing endowment, or establish a new endowment.149 To establish a new endowment, donors must often meet a minimum donation threshold.150

Universities typically distribute about 4% to 5% of endowment fund balances annually, so the original gift will grow and serve the donor’s intent in perpetuity.151 Each year, the university or its institutionally related foundation’s governing body approves a distribution rate that determines the amount each endowment fund will disburse to the institution.152 According to the NACUBO Commonfund Study of Endowments, U.S. college and university endowments distributed an average of 4.5% in fiscal year 2019.153 Between fiscal years 2010 and 2019, their average distribution rates ranged from 4.2% to 4.6%.154

B. Challenges DAFs Pose

DAFs serve as intermediaries between donors and charitable organizations.155 Specifically, DAFs delay the donations universities and colleges depend on to fund essential services.156 In addition, DAFs create barriers that hinder the relationship between institutions and their donors.157

1. DAFs Delay Precious Donations

As public support for higher education declines and tuition increases, universities face growing pressure to fill budget gaps.158 Fundraising is a years-long process, and development officers must build long-term relationships to cultivate major gifts.159 Any delay between a donation and its receipt prevents a university from supporting critical priorities.160

The Great Recession “marked a turning point” in United States philanthropy161 and in higher education. Before the Great Recession, more than 65% of households donated to charity on an annual basis.162 That figure fell from 61.11% in 2010 to 53.09% in 2016.163 Twenty million fewer households donated to charity in 2016 than in 2000.164 Even though higher education philanthropy returned to pre-Recession levels in 2013,165 fundraisers still face mounting pressure to bring in donations.166

For all of public colleges’ recent fund-raising success, potential pitfalls loom. Decades ago, advancement “was expected to provide the margin of excellence at the institution, to complement core operating funds that came from the state or from tuition,” [Jeff Martin, a senior consultant with the Advancement Forum at EAB] says. But now, advancement offices are often expected to contribute to core revenues, which can be tricky.167

The Great Recession also decimated public higher education funding across the country, and funding levels continue to flounder.168 In 2018, state spending on public universities and colleges was “more than $7 billion below its 2008 level, after adjusting for inflation.”169 As public funding declined, universities increased tuition.170 According to the Center on Budget and Policy Priorities, “[n]early every state has shifted costs to students.”171 Tuition has increased by an average of 36% in the same period, and forty states have increased tuition by more than 20%.172

Despite universities’ financial needs, the staggering assets held in sponsoring organizations demonstrate DAFs delay donations from reaching worthy causes. The National Philanthropic Trust reported sponsoring organizations across the U.S. managed $121 billion in assets in 2018.173 National charities, which encompass CSOs such as Fidelity Charitable and Vanguard, as well as independent sponsoring organizations such as the National Philanthropic Trust, managed $72.35 billion of those assets.174 Fidelity Charitable managed more than $31 billion as of June 30, 2019, a $4 billion increase from 2018.175

According to Professors Colinvaux and Madoff, “the growing use of [DAFs] is undermining the basic tenet of the charitable tax system that tax benefits should be based on making funds fully available for charitable use.”176 They worry donors receive tax benefits when making donations to DAFs, even though donors retain effective control of the funds.177 Consequently, “funds held in DAFs are not truly available for charitable use until the donors release their advisory privileges.”178

Because Congress has not imposed a mandatory distribution on DAFs,179 donations never have to leave the sponsoring organization. DAF dollars wait, on average, three to four years before they are granted to charitable organizations.180 Even though decreased government spending has increased organizations’ dependence on charitable giving, donations remain in DAFs.181 This separation between a charitable deduction and its corresponding grant undermines the policy rationale behind the deduction and gives donors a tax savings without benefit to a charity.182

Without a mandatory distribution deadline, DAFs inevitably delay the benefit to the institution, even though the donor has already received a tax benefit. The Congressional Research Service noted this delay in a 2012 report:

Certain organizations that support charitable activities . . . may receive tax deductible charitable contributions today, but may not be required to use those funds for charitable purposes within any specific time frame. Thus, taxpayers may be claiming tax deductions for donated funds that are not immediately serving charitable purposes.183

Consequently, Alan Cantor, a nonprofit consultant, asserts “DAFs are very good for donors and a cash cow for Wall Street. But they’re not so good at actually getting money to charity.”184

CSOs contend DAFs are a more effective giving vehicle than private foundations because their distribution rates exceed private foundations’ mandatory payout.185 According to the National Philanthropic Trust, the annual payout rate for all DAFs fluctuated between 20.3% and 22.8% between 2015 and 2018.186 In response, DAF critics argue sponsoring organizations publish misleading distribution rates.187 Cantor represents that the National Philanthropic Trust, a DAF sponsoring organization, exaggerates its payout rates.188 The Trust’s 2019 report explains its payout rate formula: “Grants in this year divided by [a]ssets from the end of the prior year.”189 Cantor asserts this methodology inflates the payout rate because the asset calculation “doesn’t account for money that’s contributed and distributed within the same calendar year,” while the payout calculation includes all grants.190 As an example, if a donor contributes $100,000 in one year and grants those funds by the end of the same calendar year, the Trust would exclude the $100,000 from the DAF’s total assets.191 However, the Trust would include the $100,000 grant as a part of the payout total.192

DAF critics also argue sponsoring organizations can distort their distribution rates by including grants to other DAFs as a part of their calculations.193 According to The Economist, “in a given year around one-fifth of providers fail to make a single grant, and . . . some outgoings are to other DAFs.”194 Moreover, critics note that individual DAF account data is not available.195 Rather, sponsoring organizations provide distribution rates in aggregate,196 so several large DAF grants could compensate for a significant number of accounts that make no grants.

CSOs argue their policies encourage grantmaking.197 Fidelity Charitable’s policy states it reminds donors to make a grant after one year of inactivity.198 After two years, Fidelity will make a grant to a public charity it has approved.199 After five years, if the minimum annual grant requirements are not met, Fidelity will grant the required amounts under the Fidelity Charitable Trustees’ Initiative.200 Similarly, Vanguard Charitable will allow a DAF to remain inactive for thirty months before contacting the account holder.201 Vanguard will then encourage the account holder to make a $500 grant.202 If the account remains inactive, Vanguard takes a two-pronged approach based on the DAF’s balance.203 If the DAF balance is less than $15,000, Vanguard will execute the account’s succession plan.204 For DAFs with balances greater than $15,000, Vanguard can issue a grant equal to 5% of the account balance.205 If the donor does not respond by the fourth year, Vanguard can issue another 5%.206

Of the largest CSOs, Schwab Charitable requires the most consistent grant activity.207 Schwab requires donors to make annual grants of at least 5% of an account’s average net assets,208 which mirrors the private foundation payout rate. According to Schwab, “roughly 80% of contributions have been fully distributed to charity within 10 years.”209 If a DAF account holder does not recommend a grant for thirty months, Schwab considers the account inactive and contacts the account holder.210 If the account holder does not respond, Schwab will issue a grant.211 If the account holder does not recommend any grants in the next two years, the account is deemed dormant.212 Schwab may then close the account or enact a succession plan.213

Although CSO policies may encourage grants, DAF sponsors ultimately benefit when they accumulate assets under management.214 In particular, CSOs collect sizeable management and investment fees as charitable dollars sit in DAFs.215 Dean Zerbe, a former tax counsel to the U.S. Senate Committee on Finance, points out CSOs have a particular incentive to retain assets.216 He contends “having more funds under management is the golden rule for money managers and financial institutions, and charities running DAFs aren’t immune to this pull.”217

CSOs manage DAFs like brokerage accounts; consequently, “attendant fees [are] coming out of the charitable proceeds.”218 Fidelity Charitable employs a bifurcated fee system.219 For DAFs with balances under $5 million, Fidelity Charitable charges the greater of a .60% fee or $100 fee on the first $500,000.220 The next $500,000 is assessed a .30% administrative fee.221 Balances between $1 million and $2.5 million are assessed a .20% fee.222 Balances between $2.5 and $5 million are charged a .15% fee.223 Finally, for DAFs containing $5 million or more, Fidelity Charitable assesses flat fees, ranging from 11.5 basis points to 19 basis points.224

These fees motivate CSOs to retain donations. Fidelity Charitable’s revenues for the fiscal year 2019 included fees of nearly $100 million: roughly $72 million in administrative fees, more than $22 million in investment fees, and $4 million in “professional fees.”225 Meanwhile, Vanguard Charitable collected $22 million in administrative fees in fiscal year 2019.226 Therefore, a sponsoring organization’s gain—fees as donations pile up in DAFs—is a charity’s loss.

2. DAFs Impede Donor Relations

DAFs impede universities’ access to donors when fundraisers are pressed to cultivate donor relationships. Specifically, “investment firm DAF sponsors have broken the link between donors and charities.”227 CSOs sever this link by promoting account holder anonymity.228 Anonymity prevents universities from cultivating or even contacting the account holder,229 even if the person is an alumnus.

While a university can use alumni contact information and biograph-ical data to identify donor prospects, sponsoring organizations can withhold account holder information from grant recipients.230 Sponsoring organizations may do so because the sponsoring organizations, not the DAF account holders, are the legal donors of grants.231 Thus, sponsoring organizations need not reveal account holders’ identities to grant recipients.232 Even though Fidelity Charitable touts that only about 3% of its grants are completely anonymous,233 any anonymity creates a barrier that would not exist if donors gave directly to universities.234

C. Higher Education Responses to DAFs

DAFs have forced universities and colleges to expand their services and adapt their fundraising strategies. First, many higher education institutions decided to sponsor their own DAFs. Second, these institutions have adapted their fundraising strategies to contend with DAFs’ rising popularity.

1. University-Sponsored DAFs

While CSOs ramped up their DAF offerings in the last thirty years, single-issue charities recognized they could also offer the lucrative giving vehicles.235 Community foundations and other nonprofits began to offer DAFs at their charities,236 and universities and colleges have followed suit.237 As of December 31, 2018, single-issue charities sponsored 57,973 DAF accounts, for a total of $15 billion in assets.238

Higher education institutions or their institutionally-related foundations can serve as DAF sponsoring organizations,239 and the organizations often leverage existing investment staff to manage DAF assets.240 When a donor contributes to a university-sponsored DAF, the investment staff manages the donation—just like an endowed gift—until the account holder recommends the university make a grant.241

Private universities and colleges have taken the lead in the DAF race.242 In a study of the top twenty-five richest private colleges, Bloomberg Businessweek found a dozen of those institutions collectively managed $1.2 billion in their DAFs as of 2017.243 Stanford led the survey with $520 million in its DAF, followed by Harvard with $210 million and Cornell with $180 million.244 Stanford and Harvard require donors to give at least $1 million to establish a DAF.245 Cornell University, which created its DAF in 1986 with a minimum donation of $25,000,246 now requires a minimum of $100,000 to establish a DAF account.247 As of June 30, 2018, the value of Cornell’s DAF was $170 million.248

University-sponsored DAFs remove the anonymity barrier and help higher education institutions cultivate donors. For example, Union College, which enrolls 2,150 students,249 did not appreciate “third-party middlemen . . . coming between Union and its supporters.”250 In response, the New York liberal arts college created its own DAF to ensure it maintained close relationships with donors.251

Universities and colleges that sponsor DAFs set their own policies, including minimum requirements to establish accounts and to make grants.252 Wheaton College, a Christian liberal arts college in Illinois,253 requires a mere $5,000 initial contribution to create a short-term DAF and $25,000 to establish an endowment or testamentary account.254 Ohio Wesleyan University requires a $10,000 opening balance and will make grants of $250 or more.255 By contrast, donors who want to establish a DAF at Reed College, an Oregon liberal arts school with 1,400 students,256 must donate at least $250,000.257

Grant requirements also vary among institutions. While many universities and colleges require donors to eventually grant half of donations to the institution,258 approaches differ across the country. The University of Texas Foundation requires account holders to distribute at least 5% of a DAF’s assets annually.259 Dartmouth College requires a $250,000 minimum donation to establish a DAF and compels account holders to distribute at least 5% of the DAF’s market value every year.260 Wheaton College donors who have DAFs that contain less than $1 million are required to annually grant the greater of $5,000 or 25% to the college; donors with DAFs valued at $1 million or more are only required to designate 10% of grants to the college.261 By contrast, Reed College requires donors who recommend grants to external charities also make equal grants to the college.262

Because the sponsoring organization has legal ownership of the donated funds,263 the organization may approve or deny the account holder’s grant recommendations.264 For example, Wheaton College will not make grants to “organizations whose mission or values are . . . inconsistent with those of the College.”265 Similarly, Notre Dame only grants funds to nonprofit organizations that “align with Notre Dame’s values as a Catholic university.”266 In other words, Notre Dame will not grant funds to organizations such as Planned Parenthood,267 and donors must earmark half of contributions for the university.268

Higher education DAF sponsors also restrict the number of grant recipients. While Hillsdale College, a liberal arts college in Michigan,269 only requires $25,000 to create a DAF, the college also limits the number of external organizations that may receive grants.270 Hillsdale “request[s] that no more than ten organizations be selected with Hillsdale designated as at least a twenty-five percent beneficiary of the projected five percent total distribution.”271

Universities also use DAFs to attract donors who previously made endowed gifts. Like endowed funds, DAFs can outlive their donors.272 Sponsoring organizations often advertise that a DAF account holder need not grant funds;273 rather, the donor’s descendants can make recommen dations after the account holder’s death.274 Some universities even allow “unlimited succession,” so account holders can pass DAFs to their heirs “through generations.”275 Wheaton College advertises “Estate Account[s],” which encourage donors to involve their heirs in philanthropy.276 “In many cases, these donors also want their surviving family members to participate in directing which charities receive those gifts. In that event, a legacy DAF permits the donor’s family to recommend annual distributions to charities.”277 Meanwhile, Stanford University permits its donors to name “children or others” as advisors to their university-sponsored DAFs.278

Public universities with robust endowments boast negligible DAF assets compared to private institutions. On an annual basis, NACUBO analyzes private and public university endowment sizes and investment performance.279 As of June 30, 2019, NACUBO had ranked four public universities or university systems in its top ten: the University of Texas System, The Texas A&M University System, the University of Michigan, and the University of California.280 Despite their significant endowments, many public universities report insignificant DAF balances. The University of Texas Foundation—which represents the state’s fourteen public higher education institutions281—boasts the largest public university endowment, valued at $30.9 billion as of June 30, 2019.282 The Foundation is second to Harvard University in NACUBO’s rankings,283 but only reported $27,973 in contributions to its DAF in 2018.284 Its DAFs made $70,465 in grants that year, and had a year-end value of $798,407,285 less than the minimum donation to establish a DAF at Yale University286 or Stanford University.287

The University of California, Los Angeles (UCLA) Foundation, which ranks thirty-seventh on NACUBO’s endowment report,288 advertises more stringent DAF requirements than the wealthier private universities.289 The Foundation requires a $250,000 initial donation to establish a DAF.290 An account holder must distribute 5% of the fund balance each year and maintain a $50,000 minimum balance.291 Moreover, UCLA must receive half of a DAF’s annual distributions, and the Foundation assesses a 6.5% fee on each grant UCLA receives.292

University-sponsored DAFs are likely to make up ground as donors become more familiar with the giving vehicles. North Carolina State University, which boasts a $1.4 billion endowment,293 launched its DAF in 2019.294 The University requires a $10,000 minimum donation to establish a DAF, and account holders must grant half of donations to the University.295

Meanwhile, some universities prefer to point donors to external sponsoring organizations. The University of Michigan, which boasts the ninth-largest endowment in the country,296 encourages donors to bypass the costs and complexities of a private foundation by opening a DAF with a “community foundation, brokerage house, or other sponsoring organ-ization” and naming the University as a beneficiary.297

The University of Colorado (CU) Foundation tells its DAF donors they can “create a lasting legacy by naming the [CU] the beneficiary of the entire account.”298 Donors will still receive an immediate tax benefit and may recommend grants to specific projects, but all of the funds will benefit CU.299

2. Shifting Fundraising Priorities

Universities that want to compete with CSOs must allocate resources to cultivate young alumni and current DAF account holders, even though fundraisers typically prioritize donors who have capacity for major gifts.300 First, universities are motivated to cultivate new alumni because recent graduates “establish their giving habits early.”301 Young donors have also shown greater interest in giving vehicles, such as DAFs or community foundations, than older donors.302 Further, DAFs provide an additional incentive to pursue recent graduates because “every fund raiser knows, the young alumni of today are the major donors of tomorrow.”303 This means a university that neglects recent graduates could miss key opportunities to cultivate donors before losing them to CSOs.

In addition, fewer alumni are donating to their alma maters,304 so fundraisers are already falling behind as DAF popularity grows. This decline in alumni giving is often attributed a smaller number of major donors who comprise the majority of fundraising totals,305 and strict reporting standards.306 Gifts made through giving vehicles, such as DAFs, do not count toward a university’s alumni giving rate.307

Universities are employing creative strategies to engage younger alumni. For example, Penn State University’s Gift Planning website encourages visitors to “explore [their] giving options” based on the person’s age group.308 Visitors who select “Under 40” are offered six options, including Penn State’s DAF.309 Moreover, the website also showcases a donor who created a DAF with the Penn State Giving Fund, which only requires a $5,000 minimum donation.310

California State University, Los Angeles (“Cal State”) has begun donor cultivation at graduation.311 Cal State asked students from the 2018 graduating class to donate $20.18; accordingly, Cal State encouraged its 2019 graduates to give $20.19.312 While the amount fundraised “is secondary to instilling the habit of supporting the university,” Cal State’s initiative is paying off.313 Although only one hundred students donated in 2016, 1,400 participated in 2018.314

Second, university fundraisers who want to capitalize on DAFs are targeting donors who hold accounts at CSOs.315 When a university sponsors its own DAF, it often undertakes “legal, regulatory, and administrative issues” and costs, ranging from investment managers, legal counsel, to donor services.316 By contrast, a university or college without its own DAFs may lack the resources to receive a complex gift that an experienced sponsoring organization could process handily. According to Eileen Heisman, the National Philanthropic Trust’s President and CEO,

[T]he logistics of accepting such a donation can be an expensive and risky task that may outweigh the eventual monetary value of the gift. If that alumnus uses a DAF at a public charity, that same property can translate to a grant to the university without the administrative burden or risk.317

Therefore, a university that lacks a sophisticated gift receiving department may prefer to receive a DAF grant instead of accepting a gift of property and selling it. Fundraisers whose universities do not sponsor DAFs may seek donors who have already established DAFs at CSOs like Fidelity Charitable or Schwab Charitable out of convenience.

IV. DAF Reform

A. Current Recommendations

As DAFs continue to delay funds from reaching worthy charities, critics have recommended several strategies to “restore the connection between the timing of the charitable deduction and the availability of donated funds for charitable use.”318 Colinvaux and Madoff urge DAF reform to prevent taxpayers from claiming a charitable deduction until the donor cedes complete control of the gift and the charitable organization—not the sponsoring organization—receives the gift.319 The professors explain that DAF dollars are held in a “netherworld.”320 The donor cannot reclaim the donation, nor is the donation available for charitable use until the donor recommends a grant.321

By returning the timing of the deduction to the point at which a charity has effective use of the donated funds, this change would promote the purpose of the charitable deduction—to provide funds for charitable use. Further, a deferred deduction rule also ties the amount of the deduction to the amount of cash ultimately made available for charitable use. This has important additional policy benefits, largely regarding donations of property.322

However, Harris and Hemel argue unintended consequences could occur if Congress delayed the charitable deduction.323 For example, Hemel and Harris assert the proposal prevents donors from making thoughtful donations.324 They argue donors are more likely to give when their income is high, which coincides with periods when taxpayers are busier.325 Consequently, “if taxpayers cannot claim deductions until DAF dollars are distributed, then taxpayers will again face a stark choice between rushing their donation decisions or forgoing maximum federal tax benefits.”326

Another strategy to encourage grantmaking is a mandatory distribution deadline. Specifically, Madoff recommends the IRS implement a “reasonable period” by which DAFs must make grants, such as seven years.327 A mandatory grant deadline has also been floated in Congress.328 In 2014, U.S. House Ways and Means Chairman David Camp introduced the Tax Reform Act, a plan that would modify the corporate tax structure, increase the standard deduction, and address charitable giving.329 Camp’s bill imposed an excise tax on sponsoring organizations that did not distribute DAF contributions to an eligible charity within five years.330 Sponsoring organizations would pay a 20% tax on undistributed contributions.331 In addition, the bill treated distributions “as made from contributions (and any earnings attributable thereto) on a first-in, first-out basis.”332 In other words, if a donor contributed $5,000 to a DAF in year one, then contributed $3,000 in year two, the donor must recommend a grant for the $5,000 and its earnings by year six. The donor would have until the beginning of year seven to recommend a grant for the remaining $3,000. The bill did not reach the House floor.333

B. Recommendations to Bolster Higher Education

DAFs are “unlikely to stimulate more new giving than they cost in foregone tax revenues.”334 Therefore, Congress should reform DAFs to justify the lost revenue when taxpayers take charitable deductions without making timely grants. In addition, universities and colleges should incentivize donors to open DAFs at their institutions and to grant DAF dollars sooner.

First, Congress should impose a mandatory distribution on donations to large DAFs. If a new donation increases a DAF balance above $250,000, that donation must be distributed within two years. Any undistributed donations above the $250,000 threshold would be subject to a flat tax. For example, an individual could make a $50,000 annual donation to her DAF for five consecutive years. Only new gifts that exceed the $250,000 donation threshold would be subject to the distribution deadline. Like the Camp plan, donations would be tracked using a “first in, first out,” basis to ensure new gifts and their investment earnings are distributed within two years. This proposal would allow donors to receive an immediate tax benefit, while encouraging donors who cannot make timely grants to donate directly to universities and avoid penalty.

However, investment earnings would not count toward the $250,000 threshold. For example, if an individual opens a DAF with a $250,000 initial donation, any investment earnings the balance accrues would not be subject to the tax. Only new donations and their respective earnings must be distributed within two years. Sponsoring organizations, as the legal owners of DAF dollars, could pass the excise taxes on to account holders by withdrawing the taxes from DAF balances.

While this recommendation shares some similarities with Camp’s plan, it targets larger DAFs whose donors are more likely to have higher incomes and higher marginal tax rates. According to the National Philanthropic Trust, in 2018 the average DAF held $166,653.335 Even though the proposal would target DAFs that exceed the average account balance by one-third, DAF assets are reported in aggregate, not at the individual level.336 Without more detailed information, DAF assets could likely resemble higher education philanthropy, which is dominated by a small group of major donors.337 Thus, the majority of DAFs may not feel any impact from this proposal, while account holders with large DAF balances will be compelled to grant funds to charities.

Although Camp’s bill did not reach the House floor,338 excise taxes have become more prevalent in higher education.339 Through the TCJA, Congress imposed a 1.4% annual excise tax on certain private colleges and universities’ net investment income.340 The bill’s proponents argued the provision would encourage universities to distribute funds from their large endowments to benefit students and reduce tuition.341 The excise tax applies to private colleges and universities that have at least 500 students in the previous taxable year.342 In addition, the “aggregate fair market value of the assets . . . at the end of the preceding taxable year (other than those assets which are used directly in carrying out the institution’s exempt purpose) is at least $500,000 per student of the institution.”343 Twenty-five to forty colleges and universities are likely subject to the endowment tax, and the Joint Committee on Taxation estimated the tax would create a $200 million budget effect per year.344 Harvard University, which boasts an endowment of $40.9 billion, estimated the excise tax created a $37.7 million tax liability,345 while Stanford University estimated it would pay $43 million in taxes based on its $27.7 billion endowment.346

Like the excise tax on large endowments, this proposal will motivate account holders to recommend grants that could fund scholarships and provide much-needed university support. While a tax on undistributed funds could encourage donors who are sincerely motivated to support universities, this proposal would not deter donors who opened DAFs solely for the tax benefits and without regard for charitable purposes. For those donors, a tax penalty would not alter behavior because donors already achieved their primary goal: an itemized deduction.347

In addition, a two-year deadline would afford DAF account holders time to plan their grants carefully. While Harris and Hemel contend delaying the charitable deduction would force donors to choose between a tax benefit and thoughtful decision-making,348 this proposal would still allow account holders to receive a charitable deduction immediately. As the University of Michigan and other colleges demonstrate, institutions are ready and willing to accept gifts from DAFs.349 Consequently, this proposal will help donors meet their philanthropic goals while urging account holders to grant funds to charities more promptly.

Second, universities and colleges should lower the minimum donation required to establish a DAF at the institution. Universities should follow Wheaton College’s lead with a $5,000 minimum donation to compete with the low donation thresholds at CSOs.350 Even if administrative burdens prevent a university from offering a lower opening balance, the university is more likely to attract younger donors with minimum requirements like North Carolina State University’s ($10,000)351 or the University of Texas Foundation ($25,000),352 than with significantly higher requirements like UCLA’s ($250,000).353

Further, a donor who is given the choice between her alma mater and a CSO could be more inclined to open a university-run DAF when the charities require similar initial donations. By encouraging donors to open DAFs with universities, universities remove the CSO anonymity barrier and empower their fundraisers to cultivate donors who would otherwise use giving vehicles.

Third, universities and their counterpart associations such as the Council for Advancement and Support of Education should set best practices for DAF management that encourage timely grantmaking. These best practices should include imposing mandatory annual distributions, drafting giving policies that require account holders to earmark at least half of donations for the institution, and creating DAF-focused development officers who serve as both investment advisors and advocates for the university.

V. Conclusion

For more than a century, the income tax deduction for charitable contributions has served as a powerful tool to motivate philanthropy and support education. DAFs should serve as the giving vehicle that they are and deliver donations to worthy causes. Instead, billions of dollars that earned charitable deductions remain invested in CSOs. Meanwhile, public funding for higher education plummets and tuition rises.

Congress should amend the Internal Revenue Code to encourage timely grants, align taxpayers’ deductions with the benefit to charities, and motivate the philanthropy Congress intended in 1917. Further, universities and colleges should lower their minimum account requirements to attract alumni to university-sponsored DAFs. By failing to compete with CSOs, universities and colleges are ceding prospective donors to behemoth national charities, and they could lose those donors for good.

Endnotes

1. See Historical Facts, Harv. Univ., https://www.harvard.edu/about-harvard/harvard-glance/history/historical-facts [https://perma.cc/E54D-7UEQ].

2. The History of Elihu, Yale Univ., https://doyouelihu.yale.edu/history-elihu [https://perma.cc/LV39-HATM].

3. Noah D. Drezner, Philanthropy and Fundraising in American Higher Education, 37 ASHE Higher Educ. Rep. 17, 19 (2011).

4. See Margot L. Crandall-Hollick, Cong. Research Serv., R46178, The Charitable Deduction for Individuals: A Brief Legislative History 4–5 (2020).

5. Id. at 5.

6. See Paul Arnsberger, Melissa Ludlum, Margaret Riley & Mark Stanton, A History of the Tax-Exempt Sector: An SOI Perspective, IRS Stat. of Income Bull., (Winter 2008), at 105, 106–07, https://www.irs.gov/pub/irs-soi/tehistory.pdf [https://perma.cc/3QUF-9B9M]. Charitable donations are also excluded from the gift tax and estate tax. However, the focus of this Article is the income tax deduction.

7. See Choosing the Right Vehicle for Your Charitable Giving Goals, Fid. Charitable, https://www.fidelity.com/learning-center/personal-finance/charitable-giving/charitable-giv ing-vehicles [https://perma.cc/G38J-VKS7].

8. See id. Instead of donating directly to a charity, donors can use giving vehicles such as DAFs, private foundations, charitable remainder trusts, and charitable lead trusts. See id.

9. See Eden Stiffman & Emily Haynes, Can the Boom Times Last?, 32 Chron. Philanthropy 8, 9–10 (2019).

10. See Drew Lindsay, Peter Olsen-Phillips & Eden Stiffman, A New No. 1, and a Record Year in Giving, Chron. Philanthropy, Nov. 2016, at 11, 11; Heather Joslyn & Peter Olsen-Phillips, Fidelity Charitable Tops United Way for 2nd Year in a Row in the Philanthropy 400, Chron. Philanthropy (Nov. 1, 2017), https://www.philanthropy.com/article/Fidelity-Chari table-Tops/241612 [https://perma.cc/393G-V3X2]; Stiffman & Haynes, supra note 9, at 10.

11. Stacey Palmer, Behind our Newest Charity Rankings, Chron. Philanthropy, Nov. 2018, at 4, 4.

12. Stiffman & Haynes, supra note 9, at 14.

13. See id. at 9.

14. Id.

15. See Drew Lindsay, Who’s Raising the Most: The 100 Charities That Are America’s Favorite, Chron. Philanthropy (Oct. 30, 2018), https://www.philanthropy.com/article/ whos-raising-the-most-the-100-charities-that-are-americas-favorites/ [https://perma.cc/F2 XR-U9RM].

16. See The American College of Trust and Estate Counsel Trust and Estate Talk, An Introduction to Individual Donor-Advised Funds (DAF) (Oct. 22, 2019), https://actecfound ation.org/podcasts/donor-advised-fund-daf/ [https://perma.cc/TFW2-BZDU] [hereinafter Introduction to Individual DAFs].

17. See id.

18. See Understanding and Tapping Into Donor-Advised Funds, Chron. Philanthr-opy (Jan. 10, 2019), https://www.philanthropy.com/resources/toolkit/understanding-and-tapping-into/138 [https://perma.cc/63RU-URYU] [hereinafter Tapping Into Donor-Advis ed Funds].

19. Working with Donor-Advised Funds: The Basics, Chron. Philanthropy (May 1, 2018), https://www.philanthropy.com/article/Working-With-Donor-Advised/243282 [https://perma.cc/3T9U-K4EP] [hereinafter Working with Donor-Advised Funds].

20. See I.R.S., Tax Topic No. 501: Should I Itemize?, Internal Rev. Serv. (Jun. 26, 2020), https://www.irs.gov/taxtopics/tc501 [https://perma.cc/J7QL-LX32].

21. See I.R.C. §§ 170(a), (c), 4966(d)(1).

22. See Tapping Into Donor-Advised Funds, supra note 18.

23. See Nat’l Philanthropic Tr., The 2019 DAF Report 6 (2019), https://www.np trust.org/reports/daf-report/ [https://perma.cc/9QU2-HSHC].

24. See id. at 38; infra notes 64–72 and accompanying text.

25. See Nat’l Philanthropic Tr., supra note 23, at 7.

26. Lewis B. Cullman & Ray Madoff, The Undermining of American Charity, The N.Y. Rev. of Books (Jul. 14, 2016), https://www.nybooks.com/articles/2016/07/14/the-undermining-of-american-charity/ [https://perma.cc/BKD2-ME4C].

27. Id.

28. See Roger Colinvaux, Donor Advised Funds: Charitable Spending Vehicles for 21st Century Philanthropy, 92 Wash. L. Rev. 39, 51–54 (2017).

29. See Introduction to Individual DAFs, supra note 16.

30. Colinvaux, supra note 28, at 51–52.

31. See id. at 54.

32. See id.

33. See Press Release, NACUBO, U.S. Educational Endowments Report 5.3 Percent Average Return in FY19 (Jan. 30, 2020), https://www.nacubo.org/Press-Releases/2020/US- Educational-Endowments-Report-5-3-Percent-Average-Return-in-FY19 [https://perma.cc /86M7-KZMA] [hereinafter NACUBO Press Release].

34. See id.

35. See Julie R. Sirrs, The Tax Cuts and Jobs Act and Charitable Giving: Impact and Planning Strategies, 33 Prob. & Prop. 30, 30 (2019).

36. Bruce R. Hopkins & Alicia M. Kirkpatrick, The Law of Fundraising 2 (5th ed. 2013).

37. See I.R.C. § 170.

38. See id.

39. Molly F. Sherlock & Jane G. Gravelle, Cong. Rsch. Serv., R42595, An Analysis of Charitable Giving and Donor Advised Funds 1 (2012).

40. See Dep’t of the Treasury, Report to Congress on Supporting Organizations and Donor Advised Funds 21 (2011).

41. Ann Charles Watts, The Wolf in Charity’s Clothing: Behavioral Economics and the Case for Donor-Advised Fund Reform, 43 U. Dayton L. Rev. 417, 421 (2018).

42. See Lila Corwin Berman, Donor Advised Funds in Historical Perspective, B.C.L. F. on Philanthropy & Public Good 5, 19 (2015).

43. Id.

44. Id.

45. See id. at 20.

46. See id.

47. See id. at 20–21 (“In Sugarman’s view, public charities stood to benefit from this arrangement, as they would gain power to convene fund holders, to influence their philanthropic decisions, and to operate and invest their funds.”).

48. See generally Lila Corwin Berman, How Norman Sugarman Became $50B Godfather of Charitable Funds, Forward (Nov. 14, 2015), https://forward.com/news/324259/how-norman-sugarman-became-50b-godfather-of-charitable-funds/ [https://perma.cc/G73M-GSKR].

49. Giving USA, Special Report: The Data on Donor-Advised Funds: New Insights You Need to Know 13 (2018).

50. See About Fidelity, Fid. Charitable, https://www.fidelity.com/about-fidelity/ who-we-are/about-fidelity-charitable [https://perma.cc/D6EU-JJX7].

51. See Working with Donor-Advised Funds, supra note 19.

52. See Introduction to Individual DAFs, supra note 16.

53. I.R.C. § 4966(d)(2).

54. See I.R.C. § 4966(d)(1).

55. I.R.C. § 170(c)(2)(B).

56. See I.R.C. § 4966(d)(1)(B).

57. See About Fidelity, supra note 50.

58. See Pension Protection Act of 2006, Pub. L. No. 109-280, § 1226, 120 Stat. 780, 1094 (2006).

59. See id.

60. Id.

61. Dep’t of the Treasury, supra note 40, at 4.

62. See generally id. at 7.

63. See id. at 80–81.

64. See Jonathan Curry, Gifts to Donor-Advised Funds Continue to Surge in TCJA’s Wake, Tax Notes, Nov. 18, 2019, at 1235.

65. See Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (2017).

66. See Darla Mercado, About 30 Million People Lost These Tax Breaks When They Filed Last Year, CNBC (Apr. 9, 2020, 1:37 PM), https://www.cnbc.com/2020/04/09/about-30-million-people-lost-these-tax-breaks-in-2018.html [https://perma.cc/3MNH-JPLJ].

67. See id.

68. See id.

69. Lee A. Sheppard, Disciplining Donor-Advised Funds, Tax Notes Fed., Aug. 5, 2019, at 795, 797.

70. See Sirrs, supra note 35, at 31.

71. See Ind. Univ. Lilly Family Sch. of Philanthropy, Changes to the Giving Landscape 15 (2019), https://scholarworks.iupui.edu/bitstream/handle/1805/21217/van guard-charitable191022.pdf?sequence=1&isAllowed=y [https://perma.cc/2CKN-2TDH].

72. See id.

73. See Nat’l Philanthropic Tr., supra note 23, at 17.

74. See id.

75. See id. at 19.

76. See Introduction to Individual DAFs, supra note 16.

77. See Stiffman & Haynes, supra note 9, at 9; Lindsay, Olsen-Phillips & Stiffman, supra note 10; Joslyn & Olsen-Phillips, supra note 10.

78. See id. at 14 tbl.

79. See Press Release, Business Wire, Schwab Charitable Celebrates 20 Years of Donor Generosity with Record Grants to Charity, (Jan. 22, 2020), https://www.businesswire.com/ news/home/20200122005159/en/ [https://perma.cc/26UA-KQGM] [hereinafter Schwab Charitable].

80. See A Philanthropic Boom: “Donor-Advised Funds, Economist (Mar. 23, 2017), https://www.economist.com/finance-and-economics/2017/03/23/a-philanthropic-boom-donor-advised-funds [https://perma.cc/4GB7-9H3K] [hereinafter Philanthropic Boom].

81. See Curry, supra note 64, at 1235.

82. Heather Joslyn, Giving to Colleges Rises 5%, With Harvard and Stanford Rising the Most, Chron. Higher Educ. (Feb. 11, 2019), https://www.chronicle.com/article/ Giving-to-Colleges-Rises-5-/245659 [https://perma.cc/9PA8-ZDUE].

83. See Schwab Charitable, supra note 79.

84. See id.

85. See Sirrs, supra note 35, at 32.

86. See, e.g., Giving to Cornell, Cornell Univ., https://giving.cornell.edu/why-give/donor-recognition/ [https://perma.cc/ZT59-DXZQ].

87. See Is Bunching Right for You?, Fid. Charitable, https://www.fidelitycharita ble.org/guidance/charitable-tax-strategies.html [https://perma.cc/HRH3-KA95].

88. Schwab Charitable, supra note 79.

89. See Mary Beth Franklin, Interest in Donor-Advised Funds Surges in Response to Tax Changes, Inv. News (Dec. 2017), https://www.investmentnews.com/interest-in-donor- advised-funds-surges-in-response-to-tax-changes-72997 [https://perma.cc/SQY9-A8QH] (“A [DAF] allows donors to contribute cash, appreciated assets or investments that have been held for a year or more without paying capital gains taxes.”).

90. See James Andreoni, The Benefits and Costs of Donor-Advised Funds, 32 Tax Policy & Economy 1, 21, 38 (2018).

91. See id. at 2–4.

92. See id.

93. See id.

94. See Schwab Charitable, supra note 79.

95. See Andreoni, supra note 90, at 7.

96. Id. at 7–8.

97. See Introduction to Individual DAFs, supra note 16.

98. See Nat’l Philanthropic Tr., supra note 23, at 12.

99. See id.

100. See id.

101. See Introduction to Individual DAFs, supra note 16.

102. See id.

103. See Sherlock & Gravelle, supra note 39, at 4 tbl. 1.

104. See id.

105. See Fidelity Charitable, Fid. Charitable Program Guidelines 2 (2020), https://www.fidelitycharitable.org/content/dam/fc-public/docs/programs/fidelity-charitable-program-guidelines.pdf [https://perma.cc/593S-73KA] [hereinafter Fid. Program Guide-lines].

106. See Sherlock & Gravelle, supra note 39, at 4.

107. Roger Colinvaux & Ray D. Madoff, Charitable Tax Reform for the 21st Century, Tax Notes Fed., Sept. 16, 2016, at 1867, 1867–68 [hereinafter Charitable Tax Reform].

108. See Donor-Advised Fund, Univ. of Notre Dame, https://nd.giftlegacy.com/?page ID=136&eBroID=152 [https://perma.cc/6US6-WK9R].

109. See id.

110. See Sherlock & Gravelle, supra note 39, at 4.

111. Charitable Tax Reform, supra note 107, at 1868.

112. See Jane G. Gravelle, Donald J. Marples, & Molly F. Sherlock, Cong. Research Serv., R45922, Tax Issues Relating to Charitable Contributions and Organizations 10 (2020); I.R.S, Administrative Expenses Treated as Qualifying Distributions for the Purposes of IRC Section 4942 – Taxes on Failure to Distribute Income, Internal Rev. Serv. (Oct. 18, 2019), https://www.irs.gov/charities-non-profits/administrative-expenses-treated-as-qualifying-distributions-for-the-purposes-of-ir c-4942-taxes-on-failure-to-distribute-income [https://perma.cc/PNS6-VY3W] (explaining the IRS treats a private foundation’s “reasonable and necessary” administrative expenses as qualifying distributions).

113. See Sherlock & Gravelle, supra note 39, at 4.

114. See Introduction to Individual DAFs, supra note 16.

115. See Charitable Tax Reform, supra note 107, at 1873–74.

116. See id.

117. See Philanthropic Boom, supra note 80.

118. See id.

119. See Charitable Tax Reform, supra note 107, at 1873–74; Pension Protection Act § 1226, 120 Stat. at 1094.

120. Charitable Tax Reform, supra note 107, at 1874.

121. Id.

122. See Sherlock & Gravelle, supra note 39, at 4.

123. See I.R.S., Grants to Individuals, Internal Rev. Serv. (Jun. 2, 2020), https://www. irs.gov/charities-non-profits/private-foundations/grants-to-individuals [https://perma.cc/ 3.EX6-W2UM].

124. See Sherlock & Gravelle, supra note 39, at 4.

125. I.R.C. § 4966(c)(1)(A).

126. See Sherlock & Gravelle, supra note 39, at 3.

127. See I.R.S., Dep’t of the Treasury, Pub. No. 15050A, Publication 526, Charitable Contributions 15 (2019) [hereinafter Charitable Contributions].

128. See id.

129. See, e.g., The Gift Process, Tex. A&M Found., https://www.txamfoundation.com/ How-to-Give/The-Gift-Process.aspx [https://perma.cc/MM8Q-7CLT].

130. See Sherlock & Gravelle, supra note 39, at 9.

131. See Introduction to Individual DAFs, supra note 16.

132. See Tapping Into Donor-Advised Funds, supra note 18.

133. Kate Harris & Daniel Hemel, Don’t Delay Deductions for Donor Advised Funds, Chron. Philanthropy (Oct. 7, 2019), https://www.philanthropy.com/article/Delay-Tax-Breaks-for/247284 [https://perma.cc/BK4W-VNRA].

134. See Philanthropic Boom, supra note 80.

135. See Curry, supra note 64.

136. See id.

137. See CASE, Voluntary Support of Education Research Brief 5 (2018), https://www.case.org/system/files/media/file/2018%20VSE%20Research%20Brief.pdf [https://perma.cc/3TGG-J8VG].

138. See Fid. Charitable, 2019 Giving Report 10 (2019), https://www.fidelitycharit able.org/content/dam/fc-public/docs/insights/2019-giving-report.pdf [https://perma.cc/ FJG2-LJ38] [hereinafter Fid. 2019 Giving Report].

139. See CASE, supra note 137, at 10.

140. See id.

141. See Fid. 2019 Giving Report, supra note 138, at 2.

142. See Anne Bradley, FAQ: What’s the Difference Between Giving to an “Endowment” and Making an “Expendable” Gift?, Duke Univ. (Oct. 4, 2019), https://giving.duke.edu/blog/faq-whats-the-difference-between-giving-to-an-endowment-and-making-an-expen [https://perma.cc/R4QX-7HUD].

143. See Charitable Contributions, supra note 127, at 6–8, 14–20 (discussing non-deductible contributions and limits on deductions). For example, donations to secure priority for athletic season tickets are not deductible. See id. at 6–7.

144. See, e.g., Account Definitions and Documentation Requirements, Univ. of Or. Found., https://www.uofoundation.org/s/1540/images/editor_documents/gift_forms_for_ university_use/gift_forms_for_university_use_account_definitions_and_documentation_requirements_201607.pdf [https://perma.cc/EHL2-UVBH].

145. See, e.g., id.

146. See, e.g., id.

147. See, e.g., Investment Management, Univ. of Or. Found., https://www.uofounda tion.org/s/1540/foundation16/interior.aspx?sid=1540&gid=1&pgid=6625 [https://perma.cc/6MXH-Z8EX].

148. See, e.g., Financial Overview, Univ. of Or. Found., https://www.uofounda tion.org/s/1540/foundation16/interior.aspx?sid=1540&gid=1&pgid=1037 [https://perma.cc/VV8P-THZP].

149. See, e.g., Standard Practice Guide Policies: University Investments and Endowment Funds, Univ. of Mich., https://spg.umich.edu/policy/501.11 [https://perma.cc/T57A-9WCJ].

150. See, e.g., Endowment Giving, Duke Univ., https://giving.duke.edu/ways-to-give/ endowment/endowment-giving/ [https://perma.cc/KB3A-WQTH]; Creating an Endowment or Scholarship, W. Va. Univ. Found., https://www.wvuf.org/ways-to-give/creating-an-endowment-or-scholarship [https://perma.cc/9WSB-CCLZ].

151. See Am. Council on Educ., Understanding College and University Endow-ments 3, 8 (2014), https://www.acenet.edu/Documents/Understanding-Endowments-White-Paper.pdf [https://perma.cc/AX3S-KWTQ].

152. See id. at 10.

153. NACUBO Press Release, supra note 33.

154. NACUBO & TIAA, Average Annual Effective Spending Rates for U.S. College and University Endowments and Affiliated Foundations, Fiscal Years 2019 to 2010, NACUBO (2020), https://www.nacubo.org/-/media/Nacubo/Documents/EndowmentFiles /2019-NTSE-Public-Tables--Spending-Rates--FINAL.ashx?la=en&hash=5ACBD570891 CDBEC1BA589C05E0F5BB9B8776EEC [https://perma.cc/99N7-R9EC].

155. See Sheppard, supra note 69, at 796.

156. See id.

157. See id. at 797.

158. See Lee Gardner, In the Drive for Donors, Regional Public Colleges Have a Lot of Catching Up to Do, Chron. Higher Educ. (Sept. 16, 2018), https://www.chronicle.com/ article/In-the-Drive-for-Donors/244523 [https://perma.cc/3W9G-7PTB] [hereinafter Drive for Donors]; see also, e.g., Press Release, Univ. of Colo., Despite Recession, CU Posts Solid Fundraising Results (July 23, 2009), https://connections.cu.edu/stories/despite-recession-cu-posts-solid-fundraising-results [https://perma.cc/7XQ8-N98R]. Although Colorado University raised $134.5 million in fiscal year 2009, the university’s second highest total, President Bruce D. Benson stated, “Private support will be increasingly essential in the coming years as we deal with fiscal challenges in other revenue streams, and aim not merely to survive but to excel.” Id.

159. See Gardner, supra note 158; Meredith S. Billings, Examining Young Alumni Giving Behavior, in Expanding the Base in Higher Education: Engaging Non-traditional Donors 102, 102 (Noah D. Drezner ed., 2013).

160. See Lee Gardner, Public Universities Are Getting Better at Bagging Big Gifts, Chron. Higher Educ. (Dec. 15, 2017), https://www.chronicle.com/article/Public-Universities-Are/242072 [https://perma.cc/S2V6-KVL5] [hereinafter Bagging Big Gifts].

161. Ind. Univ. Lilly Family Sch. of Philanthropy, supra note 71, at 6 (“From 2000 to 2008, the share of U.S. households donating to charity held relatively steady, dropping only from 66.22% to 65.41%. However, 2010 marked a turning point, as the share who gave declined to 61.11% following the Great Recession.”).

162. See id.

163. See id.

164. See id. at 2, 6.

165. See Ind. Univ. Lilly Fam. Sch. Of Philanthropy, Giving USA: Americans Gave $335.17 Billion to Charity in 2013; Total Approaches Pre-Recession Peak, Ind. Univ. - Purdue Univ. (June 17, 2014), https://philanthropy.iupui.edu/news-events/news-item/ giving-usa:-americans-gave-$335.17-billion-to-charity-in-2013;-total-approaches-pre-rec ession-peak.html?id=127 [https://perma.cc/63BR-2Y6U].

166. See Bagging Big Gifts, supra note 160.

167. Id.

168. See Michael Mitchell et al., Ctr. on Budget and Pol’y Priorities, Unkept Promises: State Cuts to Higher Education Threaten Access and Equity 1 (2018).

169. Id.

170. See id.

171. Id. at 11.

172. See id. at 6.

173. See Nat’l Philanthropic Tr., supra note 23, at 11.

174. See Jeanne Bell & Steve Dubb, Will Donor-Advised Funds Meet Their “Rainy Day” Promise? NonProfit Q. (Apr. 28, 2020), https://nonprofitquarterly.org/will-donor-advised-funds-meet-their-rainy-day-promise/ [https://perma.cc/5SLU-QXPC].

175. See Fid. Charitable, 2019 Annual Report 13 (2019), https://www.fidelity charitable.org/content/dam/fc-public/docs/annual-reports/2019-annual-report.pdf [https://perma.cc/4WS9-PE5A] [hereinafter Fid. 2019 Annual Report].

176. Charitable Tax Reform, supra note 107, at 1868.

177. See id.

178. Id.

179. Compare I.R.C. § 4966, with I.R.C. § 4942.

180. See Andreoni, supra note 90, at 29.

181. See Ray D. Madoff, Opinion, Tax Write-Off Now, Charity Later, N.Y. Times (Nov. 21, 2011), https://www.nytimes.com/2011/11/22/opinion/tax-write-off-now-charity-later.html [https://perma.cc/24PN-SFVG].

182. See Paul Clolery, Waiting for What? Too Much Donor Intent Is Sitting on the Sidelines, Non-Profit Times, Mar. 1, 2018, at 10.

183. Sherlock & Gravelle, supra note 39, at 1.

184. Alan Cantor, Opinion, Donor-Advised-Fund Payout Numbers Don’t Add Up, Chron. Philanthropy (July 13, 2017), https://www.philanthropy.com/article/Opinion-Donor-Advised-Fund/240631 [https://perma.cc/3JCU-X4MF].

185. See Alfred E. Osborne, Jr., Voices from the Field: Fidelity’s 2019 DAF Grants Spoke – How Donor-Advised Funds Changed Giving for the Better, Nonprofit Q. (July 29, 2019), https://www.philanthropy.com/article/Opinion-Donor-Advised-Fund/240631 [https://perma.cc/VSL3-B52F].

186. See Nat’l Philanthropic Tr., supra note 23, at 20.

187. See Cantor, supra note 184; Philanthropic Boom, supra note 80.

188. See Cantor, supra note 184; Nat’l Philanthropic Tr., supra note 23.

189. Nat’l Philanthropic Tr., supra note 23, at 29.

190. Cantor, supra note 184.

191. See id.

192. See id.

193. See Philanthropic Boom, supra note 80.

194. Id.

195. See id.

196. See id.

197. See Osborne, Jr., supra note 185.

198. See Fid. Program Guidelines, supra note 105, at 16.

199. See id.

200. See id.

201. See Policies and Guidelines, Vanguard Charitable, https://www.vanguard charitable.org/company-policies/policies-and-guidelines [https://perma.cc/P9A2-BBG8].

202. See id.

203. See id.

204. See id. Under Vanguard Charitable’s policies, a succession plan takes effect “when advisors are deceased or unable or unwilling to manage account processes.” Id. A succession plan may pass the DAF account privileges to others, allow the sponsoring organization to create a new account, recommend grants to charity, or transfer the assets to another fund. See id.

205. See id.

206. See id.

207. See Schwab Charitable, Program Policies (2019), https://www.schwabcharit able.org/public/file/P-5252372 [https://perma.cc/4EUW-G656].

208. See id. at 24.

209. Mark Schoeff, Jr., As Donor-Advised Funds Grow in Popularity, They May Draw More Scrutiny, Inv. News (Mar. 1, 2019), https://www.investmentnews.com/as-donor-advised-funds-grow-in-popularity-they-may-draw-more-scrutiny-78403 [https://perma.cc/Q9RX-RNT6].

210. See Schwab Charitable, supra note 207, at 23.

211. See id.

212. See id.

213. See id.

214. See Madoff, supra note 181.

215. See id.

216. See Dean Zerbe, DAF Reform–A Chance to Provide a Real Benefit to Working Charities, Nonprofit Q. (July 25, 2018), https://nonprofitquarterly.org/daf-reform-a-chance-to-provide-a-real-benefit-to-working-charities/ [https://perma.cc/9Z2K-UA98].

217. Id.

218. Sheppard, supra note 69, at 797.

219. See What it Costs, Fid. Charitable, https://www.fidelitycharitable.org/giving-account/what-it-costs.html [https://perma.cc/93VS-UFRA].

220. See id.

221. See id.

222. See id.

223. See id.

224. See Fid. Program Guidelines, supra note 105, at 20.

225. Fid. 2019 Annual Report, supra note 175, at 15.

226. See Vanguard Charitable, Financial Statements 10 (2019), https://www.van guardcharitable.org/sites/default/files/Vanguard_Charitable_Endowment_Program_Financial_Statements_06.30.19.pdf [https://perma.cc/QUG3-8X8V].

227. Sheppard, supra note 69, at 798.

228. See Fid. Program Guidelines, supra note 105, at 15.

229. See Tapping into Donor-Advised Funds, supra note 18.

230. See, e.g., Fid. Program Guidelines, supra note 105, at 15.

231. See Tapping into Donor-Advised Funds, supra note 18 (noting DAFs hinder fundraisers from acknowledging and cultivating account holders); Andreoni, supra note 90, at 4 (noting donations are legally owned by the sponsoring organization); Fid. Program Guidelines, supra note 105, at 4, 15 (discussing sponsoring organizations’ exclusive legal control of donations and anonymous grants).

232. See Eileen Heisman, Deepening the Donor Pool, U. Bus., June 2012, at 82, 82.

233. See Fid. Charitable 2019 Giving Report, supra note 138, at 8.

234. See Charitable Contributions, supra note 127, at 1922 (explaining donors who give directly to universities must provide some identifying information to receive gift acknowledgements or gift receipts for tax purposes).

235. See Giving USA, supra note 49; Alex Daniels & Drew Lindsay, Philanthropy’s New Landscape, Chron. Philanthropy, Nov. 2016, at 26, 26.

236. See Martin Levine, Nonprofits Must Adapt to Continued Growth in Donor-Advised Funds, Nonprofit Q. (Dec. 29, 2017), https://nonprofitquarterly.org/growth-donor-advised-funds/ [https://perma.cc/5JFA-4NP4].

237. See Alex Daniels & Drew Lindsay, supra note 235.

238. See Nat’l Philanthropic Tr., supra note 23, at 10, 34.

239. See What Everyone on Campus Needs to Know about Donor-Advised Funds, HigherEdJobs (Dec. 26, 2018), https://www.higheredjobs.com/HigherEdCareers/inter views.cfm?ID=1792 [https://perma.cc/EB4K-5YTL].

240. See Janet Lorin, Got $5 Million? Yale Will Invest It, Bloomberg Businessweek, Dec. 17, 2018, at 30, 30, https://www.bloomberg.com/news/articles/2018-12-12/got-5-million-yale-will-manage-it-but-you-won-t-get-it-back [https://perma.cc/DHT8-XTTY].

241. See id.; see, e.g., Donor Advised Fund, Yale Univ. Off. of Planned Giving, https://www.yale.planyourlegacy.org/GIFTdaf.php [https://perma.cc/8M25-K8HH].

242. See Lorin, supra note 240, at 30.

243. See id.

244. See id.

245. See id.; Stan. Univ., Donor Advised Funds at Stanford 4 http://giving.stanford. edu/sites/default/files/pdf/wp-pg-donor-advised-funds.pdf [https://perma.cc/YWH4-HFLW].

246. See John L. Pulley, A Newfound Tool for College Fund Raisers, Chron. Higher Educ. (July 26, 2002), https://www.chronicle.com/article/a-newfound-tool-for-college-fund-raisers/ [https://perma.cc/AFW5-CM33].

247. See Lorin, supra note 240, at 30.

248. See Cornell Univ. Found., Return of Organization Exempt from Income Tax (2017 Form 990), Internal Rev. Serv., at 1 https://apps.irs.gov/pub/epostcard/cor/2228 48738._201806_990_2019080716549215.pdf [https://perma.cc/C6GL-YEKX].

249. See Union at a Glance, Union Col., https://www.union.edu/admissions/union [https://perma.cc/WK6D-CUXD].

250. Pulley, supra note 246.

251. See id.

252. See What Everyone on Campus Needs to Know About Donor-Advised Funds, supra note 239.

253. About Wheaton College, Wheaton Coll., https://www.wheaton.edu/about-wheaton/ [https://perma.cc/KK5C-VBGW].

254. See Wheaton Coll., Donor Advised Funds 11, https://www.wheaton.edu/ media/migrated-images-amp-files/media/files/giving/publications/DAF-Brochure.pdf [https://perma.cc/GM88-JN4U] [hereinafter Wheaton College DAF].

255. See Donor Advised Funds, Ohio Wesleyan Univ., https://www.owu.edu/alumni-and-friends/give-to-owu/donor-advised-funds/ [https://perma.cc/KT3G-W3RQ].

256. See About Reed, Reed Coll., https://www.reed.edu/about-reed/ [https://perma.cc/ HM9K-RLWF].

257. See Donor Advised Funds, Reed Coll., https://www.reed.edu/givingtoreed/ways-to-give/donor-advised-funds.html [https://perma.cc/MZR9-3HT7].

258. See Lorin, supra note 240, at 30.

259. See Donor Advised Fund, Univ. of Tex. Found., https://www.utxf.org/donor-advised-fund [https://perma.cc/G5DF-L96P] [hereinafter Univ. of Tex. Found.].

260. See Dartmouth Donor Advised Fund, Dartmouth Univ., https://giftplanning. dartmouth.edu/dartmouth_donor_advised_fund [https://perma.cc/BTH2-TZ2B].

261. See Wheaton College DAF, supra note 254, at 11.

262. See Donor Advised Funds, Reed Coll., supra note 256.

263. See Tapping Into Donor-Advised Funds, supra note 18.

264. See Working with Donor-Advised Funds, supra note 19.

265. Wheaton College DAF, supra note 254, at 11.

266. Univ. of Notre Dame, supra note 108, at 3.

267. See Lorin, supra note 240, at 30.

268. See Univ. of Notre Dame, supra note 108, at 3.

269. See College Profile, Hillsdale Coll., https://www.hillsdale.edu/about/college-profile/ [https://perma.cc/5GS9-5RDA].

270. See Donor Advised Funds, Hillsdale Coll., https://www.hillsdale.edu/support/ ways-to-give/donor-advised-funds/ [https://perma.cc/J6SG-9NHP].

271. Id.

272. See Working with Donor-Advised Funds, supra note 19; Pulley, supra note 246.

273. See Suzanne Woolley, The Super-Rich are Stockpiling Wealth in Black-Box Chari-ties, Bloomberg (Oct. 3, 2018), https://www.bloomberg.com/news/articles/2018-10-03/the-super-rich-are-stockpiling-wealth-in-black-box-charities [https://perma.cc/95E7-L8KC].

274. See id.; Working with Donor-Advised Funds, supra note 19.

275. Working with Donor-Advised Funds, supra note 19.

276. Wheaton College DAF, supra note 254, at 8.

277. Id.

278. Stan. Univ., supra note 245, at 4.

279. See NACUBO Press Release, supra note 33.

280. See NACUBO & TIAA, U.S. and Canadian Institutions Listed by Fiscal Year (FY) 2019 Endowment Market Value and Change in Endowment Market Value from FY18 to FY19 (Revised), NACUBO (2020), https://www.nacubo.org/-/media/Nacubo/Documents/EndowmentFiles/2019-Endowment-Market-Values—Final-Feb-10.ashx?la=en&hash=9E941CF13A17783282F46626C72FE7AFB63F9D82 [https://perma.cc/PH8T-QEUN] [hereinafter Endowment Market Value].

281. See About Us, Univ. of Tex. Found., https://www.utxf.org/about-us [https:// perma.cc/T93T-LTXA].

282. See Endowment Market Value, supra note 280 (stating a University of Texas System endowment market value of $30,958,239 in Fiscal Year 2019).

283. See id.

284. See Univ. of Tex. Found., Return of Organization Exempt From Income Tax: Supplemental Financial Statements (2018 Schedule D, Form 990), Internal Rev. Serv., https://apps.irs.gov/pub/epostcard/cor/741587488_201812_990_2019101816762092.pdf [https://perma.cc/PL35-QZ2X].

285. See id.

286. See Donor Advised Fund, supra note 241 (noting Yale University requires a $5 million initial gift).

287. See Stan. Univ., supra note 245, at 3 (noting Stanford University requires a minimum gift of $1 million).

288. See Endowment Market Value, supra note 280.

289. See Donor Advised Fund, UCLA Found., https://www.uclafoundation.org/docs/ Donor_Advised_Fund.pdf [https://perma.cc/EC6K-AHG6] [hereinafter UCLA Found.].

290. See id.

291. See id.

292. See id.

293. See Endowments Matter, N.C. State Univ., https://campaign.ncsu.edu/endow ments-matter/ [https://perma.cc/6HLB-GJ7C].

294. See NC State University Launches Donor-Advised Fund, N.C. State Univ. (Apr. 29, 2019), https://campaign.ncsu.edu/news/2019/04/nc-state-university-launches-donor-advis ed-fund/ [https://perma.cc/XF2F-MHHM].

295. See Donor Advised Fund, N.C. State Univ., http://ncsugift.org/?pageID=137 [https://perma.cc/8M4F-UEPD].

296. See Endowment Market Value, supra note 280.

297. Centralize Your Giving with Donor Advised Funds, Univ. of Mich. Off. of Planned Giving, https://plannedgiving.umich.edu/donor-advised-funds-guide [https:// perma.cc/5Q2M-UQVZ] [hereinafter Univ. of Mich. Off. of Planned Giving].

298. Donor Advised Funds, Univ. of Colo., https://giftplanning.cu.edu/donor-advised-funds [https://perma.cc/L5MS-CZPY].

299. See id.

300. See, e.g., Passion Boosting New Major Gifts, NonProfit Times (July 25, 2017), https://www.thenonprofittimes.com/npt_articles/passion-boosting-new-major-gifts/ [https://perma.cc/4JAT-TW6Z]. (“The classic 80-20 pyramid in which 80 percent of the fundraised dollars come from 20 percent of donors has grown steeper.”).

301. Rick Seltzer, The Elusive Young Donor, Inside Higher Ed (June 30, 2016), https://www.insidehighered.com/news/2016/06/30/universities-try-new-ways-reach-recent-graduates-especially-those-debt [https://perma.cc/8HEH-VY6H].

302. See Fid. Charitable, The Giving Gap 7 (2016).

303. Katheryn Masterson, Connecting to Young Alumni, Chron. Higher Educ. (Feb. 26, 2017), https://www.chronicle.com/article/Connecting-to-Young-Alumni/239323?cid=cp97 [https://perma.cc/5WVW-A3QC]. (“In 2006, the alumni participation rate was 11.6 percent. In 2016, it was 8.1 percent.”).

304. See id.

305. See Nick Hazelrigg, Larger Donations, Fewer Donors, Inside Higher Ed (June 20, 2019), https://www.insidehighered.com/news/2019/06/20/donations-colleges-are-number-donors-down [https://perma.cc/KYF5-JJ68].

306. See Masterson, supra note 303.

307. See id., supra note 303; Joslyn, supra note 82.

308. Gift Planning, Penn State Univ. Dev., https://pennstate.planmygift.org/ [https://perma.cc/63XC-YR88].

309. Id.

310. See Investing in the Future, Penn State Univ. Dev., https://pennstate.plan mygift.org/meet-our-donors/ken-kulju [https://perma.cc/TP7N-ZKRU].

311. See Drive for Donors, supra note 158.

312. See id.

313. Id.

314. See id.

315. See Joslyn, supra note 82.

316. Eugene R. Tempel, Creative Philanthropy: A Donor Advised Fund of Your Own, NonProfit Times, Dec. 1, 2001, at 26, 28.

317. Eileen Heisman, Deepening the Donor Pool, U. Bus., June 2012, at 82, 83.

318. Charitable Tax Reform, supra note 107, at 1871.

319. See id.

320. Roger Colinvaux & Ray D. Madoff, A Donor-Advised Fund Proposal That Would Work for Everyone, Chron. Phil. (Sept. 23, 2019), https://www.philanthropy.com/ article/A-Donor-Advised-Fund-Proposal/247204 [https://perma.cc/HU89-T3ZB].

321. See id.

322. Charitable Tax Reform, supra note 107, at 1871.

323. See Harris & Hemel, supra note 133.

324. See id.

325. See id.; see also Terry Mazany, Opinion, The Coronavirus Outbreak Could Prove Why Donor-Advised Funds Serve Society Well, Chron. Phil. (Mar. 16, 2020), https://www.philanthropy.com/article/The-Coronavirus-Outbreak-Could/248247 [https://perma.cc/L53V-USGQ] (asserting DAFs allow donors to better support charities during economic downturns).

326. Harris & Hemel, supra note 133.

327. Madoff, supra note 181.

328. See Tax Reform Act of 2014, H.R. 1, 113th Cong. § 4968(a) (2014).

329. See Press Release, U.S. Representative David Camp, Camp Releases Tax Reform Plan to Strengthen the Economy and Make the Tax Code Simpler, Fairer and Flatter (Feb. 26, 2014), https://gop-waysandmeans.house.gov/camp-releases-tax-reform-plan-to-streng then-the-economy-and-make-the-tax-code-simpler-fairer-and-flatter/ [https://perma.cc/W V7Z-AB3H].

330. See H.R. 1.

331. See id.

332. Id. § 4968(b)(2).

333. See H.R. 1 – Tax Reform Act of 2014, Cong. (2014), https://www.congress.gov/ bill/113th-congress/house-bill/1/actions?KWICView=false [https://perma.cc/6PBJ-UYLX].

334. Andreoni, supra note 90, at 39.

335. See Nat’l Philanthropic Tr., supra note 23, at 11.

336. See Philanthropic Boom, supra note 80.

337. See Stanley N. Katz, Beware Big Donors, Chron, Higher Educ. (Mar. 25, 2012), https://www.chronicle.com/article/beware-big-donors/ [https://perma.cc/W4J2-8QZ9].

338. See H.R. 1– Tax Reform Act of 2014, supra note 333.

339. See Rick Seltzer, Tax Law’s Effects on Colleges Unfolding, Inside Higher Ed (Jan. 9, 2019), https://www.insidehighered.com/news/2019/01/09/year-after-tax-law-changes-new-guidance-still-rolling-out-colleges [https://perma.cc/D5PR-7YDH].

340. See Act of Dec. 22, 2017, Pub. L. No. 115-97, § 4968(a), 131 Stat. 2167, 2167.

341. See Richard Rubin & Andrea Fuller, Which Colleges Will Have to Pay Taxes on Their Endowment? Your Guess Might Not Be Right, Wall St. J. (Jan. 19, 2018), https://www.wsj.com/articles/which-colleges-will-have-to-pay-taxes-on-their-endowment -your-guess-might-not-be-right-1516271400 [https://perma.cc/XXA3-UN2R].

342. See id.

343. § 4968(b)(1)(D), 131 Stat. at 2167.

344. See Joint Comm. on Tax’n, Estimated Budget Effects of the Conference Agreement for H.R. 1, The “Tax Cuts And Jobs Act,” 5 (2017).

345. See Rick Seltzer, $50 Million Tax Bill for Harvard, Inside Higher Ed (Oct. 25, 2019), https://www.insidehighered.com/quicktakes/2019/10/25/50-million-tax-bill-harvard [https://perma.cc/95AM-EWTQ].

346. See Janet Lorin, Stanford Faces $43 Million Tab in Trump Endowment Tax, Bloomberg (Feb. 11, 2020, 5:25 PM), https://www.bloomberg.com/news/articles/2018-12-12/got-5-million-yale-will-manage-it-but-you-won-t-get-it-back [https://perma.cc/R8JF-TC23].

347. See I.R.C. §§ 67(b), 170.

348. See Harris & Hemel, supra note 133.

349. See Univ. of Mich. Off. of Planned Giving, supra note 297; Donor Advised Funds, supra note 298.

350. See Wheaton Coll. DAF, supra note 254.

351. See Endowments Matter, supra note 293.

352. See Univ. of Tex. Found., supra note 259.

353. See UCLA Found., supra note 289.

Entity:

Victoria Nguyen

Victoria Nguyen, J.D. Candidate, 2021, University of Oregon School of Law. I would like to express my deep gratitude to Professor Susan N. Gary for her thoughtful guidance and support. I would also like to thank my first-year Legal Writing and Research professor, Elizabeth Frost, for her mentorship and encouragement. Special thanks to Kirsten Williams and Clint McNutt for sharing their expertise in higher education. Finally, I dedicate this Article to Anthony and Addison Button. Thank you for making every day special.