More than $1 billion in grants awarded from donor-advised funds in 2019 went to other commercial DAF accounts, not charities, a report from the Institute for Policy Studies' Charity Reform Initiative finds.

Based on an analysis of the electronically filed tax returns of thirty-nine U.S.-based commercial DAF sponsors, the report, More Than One Billion Dollars in DAF Grants Went to Other Commercial DAFs in 2019 (9 pages, PDF), found that between 2015 and 2019, those DAFs awarded a total of $2 billion to other commercial DAFs and the growth of commercial DAF-to-DAF giving is accelerating. In 2015, $209 million was transferred between commercial DAFs; that figure grew 409 percent over the next five years, jumping 166 percent from 2018 to 2019.

According to the analysis, Fidelity Chartable DAFs transferred the most dollars to other DAFs over the five-year period ($651 million), despite reporting no such transfers in 2015 and 2016, followed by Schwab Charitable ($427 million), the National Philanthropic Trust ($374.4 million), and the Goldman Sachs Philanthropy Fund ($374.2 million). Fidelity Charitable DAFs also received the most dollars from other DAFs ($592.9 million), followed by NPT ($355.4 million), Schwab Charitable Fund ($336.6 million), and DonorsTrust ($157.6 million).

The report's authors note that DAF-to-DAF granting occurs for many reasons, including donors switching between commercial and community foundation-sponsored DAFs or between commercial DAFs when they change banks because having their personal portfolio and their DAF held in the same institution makes management easier. Some donors switch between commercial DAFs because doing so allows them to give in complete anonymity.

"Many of the wealthiest people in our country are able to greatly reduce or eliminate their tax liabilities by putting money into charitable giving vehicles such as DAFs," the report's authors conclude. "These personal charitable tax deductions are subsidized by the American public and, in return, DAF revenue is supposed to be granted out in a timely fashion, and used to support charities working for the public good. But DAF-to-DAF granting reinterprets the promise of these funds, creating an increasingly larger and distorted loop in which money intended for charity instead cycles indefinitely between financial institutions."

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