New IPS Report: Warehousing Wealth

By Chuck Collins Helen Flannery and Josh Hoxie

"Warehousing Wealth: Donor-Advised Charity Funds Sequestering Billions in the Face of Growing Inequality” is a new Institute for Policy Studies report that takes a close look at donor-advised funds, or DAFs, and the risks they pose to the independent charitable sector, taxpayers, and the public interest. 

Co-authored by Chuck Collins, Josh Hoxie, and Helen Flannery, the report finds that wealthy individuals are using DAFs to claim substantial tax benefits, while often failing to move funds in a timely way to independent charities addressing urgent social needs.

Key findings include:

Explosive Growth

  • DAFs are now the fastest-growing recipients of charitable giving in the U.S. Donations to DAFs increased from just under $14 billion in 2012 to $23 billion in 2016—growth of 66% over five years. In contrast, charitable giving by individual donors nationwide grew by just 15% over the same five years.
  • DAFs appear to be shifting giving away from active charities. The share of total U.S. individual charitable giving that is going to DAFs, rather than to direct charities, has nearly doubled over the past seven years—from 4.4 percent in 2010 to 8.3 percent in 2016.
  •  In 2016, for the first time ever, a DAF—Fidelity Charitable—was the top single recipient of charitable giving in the U.S. In 2017, six of the top ten recipients of charitable giving were DAFs.
  • Fidelity Charitable grew from $1.7 billion in annual donations in 2011 to $6.8 billion in annual donations in 2017, for total growth of more than 400 percent over seven years. Fidelity Charitable held nearly $16 billion in assets in 2016— more than half the total assets of all community foundations in the United States combined.
  • The average DAF donor is a member of the wealthiest one tenth of one percent of Americans, with annual income over $1 million.6 The primary attractions for the use of DAFs among the super-wealthy are the advantages related to the relief of capital gains tax burdens, and the easy donation of non-cash appreciated assets— an area of charitable giving rife with potential abuses.

Potential Risks

  • There is no legal requirement for DAFs to pay out their funds to qualified charities—ever. According to one estimate, the average annual payout rate for DAFs in 2016 was 20 percent, although some DAFs give considerably less.
  • Even as the amount of funds flowing to DAFs has increased, payout rates have been steadily going down.
  • As currently structured, DAFs encourage a wealth preservation mentality in donors, rather than incentives to move donations to qualified charities. This delays the public benefit from those donations, which has an opportunity cost for society.
  • DAFs provide loopholes for both donors and private foundations to get around tax restrictions and significantly reduce transparency and accountability.
  • In many cases, financial advisors are rewarded for steering their clients towards DAFs affiliated with their corporation, and financial advisors and corporate fund managers are rewarded for keeping money in DAFs once they are established.

Recommendations and Policy Changes
This report offers several recommendations for mitigating the risks of DAFs, including:

  • Require distribution of DAF donations within three years.
  • Delay donor tax deduction until the funds are paid out to active charity.
  • Establish a specific pay out rate. 
  • Bar private foundation donations to DAFs and vice versa.
  • Increase scrutiny of rules around donations of non-cash appreciated assets to ensure public interest and taxpayers are protected. • Cap management fees for commercial advisors of DAFs.
  • Require that a donor’s DAF cannot be managed by the same organization that handles the donor’s personal assets.

Read the full report here.


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Posted In: Allied Approaches

Union Matters

Get to Know AFL-CIO's Affiliates: National Association of Letter Carriers

From the AFL-CIO

Next up in our series that takes a deeper look at each of our affiliates is the National Association of Letter Carriers.

Name of Union: National Association of Letter Carriers (NALC)

Mission: To unite fraternally all city letter carriers employed by the U.S. Postal Service for their mutual benefit; to obtain and secure rights as employees of the USPS and to strive at all times to promote the safety and the welfare of every member; to strive for the constant improvement of the Postal Service; and for other purposes. NALC is a single-craft union and is the sole collective-bargaining agent for city letter carriers.

Current Leadership of Union: Fredric V. Rolando serves as president of NALC, after being sworn in as the union's 18th president in 2009. Rolando began his career as a letter carrier in 1978 in South Miami before moving to Sarasota in 1984. He was elected president of Branch 2148 in 1988 and served in that role until 1999. In the ensuing years, he worked in various roles for NALC before winning his election as a national officer in 2002, when he was elected director of city delivery. In 2006, he won election as executive vice president. Rolando was re-elected as NALC president in 2010, 2014 and 2018.

Brian Renfroe serves as executive vice president, Lew Drass as vice president, Nicole Rhine as secretary-treasurer, Paul Barner as assistant secretary-treasurer, Christopher Jackson as director of city delivery, Manuel L. Peralta Jr. as director of safety and health, Dan Toth as director of retired members, Stephanie Stewart as director of the Health Benefit Plan and James W. “Jim” Yates as director of life insurance.

Number of Members: 291,000 active and retired letter carriers.

Members Work As: City letter carriers.

Industries Represented: The United States Postal Service.

History: In 1794, the first letter carriers were appointed by Congress as the implementation of the new U.S. Constitution was being put into effect. By the time of the Civil War, free delivery of city mail was established and letter carriers successfully concluded a campaign for the eight-hour workday in 1888. The next year, letter carriers came together in Milwaukee and the National Association of Letter Carriers was formed.

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There is Dignity in All Work