On June 9, 2021, a rarity occurred in Congress: a new bill managed to reach across the aisle.

Senators Angus King (I-Maine) and Chuck Grassley (R-Iowa) introduced the Accelerating Charitable Efforts (ACE) Act in an attempt to rein in donor-advised funds (DAFs), a philanthropic mechanism favored by the ultra-rich.

DAFs are accounts designed to funnel money to charitable organizations while letting donors maintain autonomy over the assets. Donors receive tax breaks for using DAFs, but the mechanism doesn’t engage in charitable activities on its own.

They typically represent an account held by investment firms like Fidelity and Charles Schwab, or community foundations, which serve as the legal owners of the donations; the sponsor gets to dictate where the money goes on their own time.

Status of the ACE

The bill managed to gain bipartisan, bicameral support in a historically divided Congress. But by December 2022 it stalled out, throwing the future of DAF reform into question.

‍What Are Possible Paths for DAF Reform?

Proximate spoke with a number of advocates and leaders in the field to gauge a few possible paths forward and identified three possible paths for DAF Reform:

  1. Congress - Since the ACE Act failed to move forward, there's a lack of clarity about next steps for a bill in Congress. (Senator King’s and Senator Grassley’s offices did not respond to a request for comment.) But that hasn’t stopped advocates from moving the issue forward. Last month the Institute for Policy Studies released a report repeating calls for regulation around DAF payout and disclosure requirements. Organizations like the Patriotic Millionaires and Initiative to Accelerate Charitable Giving continue to echo those calls in DC and beyond.
  2. Executive Branch - The federal government isn’t totally overlooking DAFs, either. On November 14, the Department of Treasury and IRS released proposed regulations seeking to further define the parameters of a DAF and its distributions.
  3. State Level - On the state level, tweaks to federal tax law are off the table. But advocates are nevertheless working to push through reforms that could increase transparency requirements and bring greater attention to the national conversation. State legislators and nonprofits in states like California and Minnesota have tried to advance various efforts in the past few years.

Read the full article "What's Next for DAF Reform" by Kaila Philo.