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Treasury Dept. Releases Long-Awaited Study of Donor-Advised Funds

Author National Philanthropic Trust

December 12, 2011

My last post on donor-advised fund payout rates turned out to be quite timely. During the week of December 5, 2011, the Treasury Department released its long-awaited study on donor-advised funds and supporting organizations.

The Treasury Department’s study used 2006 data, but found that payout rate from donor-advised funds is substantially higher than the 5 percent required of private foundations. According to the Treasury’s study (which, again, uses slightly dated figures) the payout rate for national donor-advised fund programs ranged from 14.2 to 28.7 percent. These findings closely mirror the data in NPT’s annual Donor-Advised Fund Report.

Those of us in the industry have been waiting for the Treasury Department’s study for years. We didn’t know what the study would say, but we knew it would address some of the more hotly-debated issues, like the role of donors as advisors for investments and grants; and distribution rates for donor-advised funds.

Interestingly, the study did not make any recommendations on a minimum distribution requirement. With this new data, I contend that decision-makers won’t have any justification for creating new payout requirements. As I outlined in my last post, the data supports the idea that creating a minimum distribution level for donor-advised funds may actually suggest a maximum to donors. The effects of which would actually lower the payout rates and reduce the amount granted to charity.

It remains to be seen what, if any, ultimate action the Treasury Department’s study will spur. Using the data from the study, especially when supported by NPT’s most recent Donor-Advised Fund Report, the real pressure may be on the private foundations to increase their minimum annual payout.

After years of waiting for the Treasury Department’s study, I look forward to reading my colleagues’ analysis of and response to it.