In 2004, donor-advised funds grew rapidly for the second straight year, spurred by a rising stock market, but sharp market declines in recent weeks and proposed legislation could reduce the popularity of these funds, the Chronicle of Philanthropy reports.

Assets of donor-advised funds at the eighty-eight organizations that provided figures for the Chronicle's sixth annual survey of gift funds grew by a median of nearly 15 percent last year. The organizations that participated in the survey collectively held $13 billion in assets and distributed $2.6 billion to charities. More than two-thirds reported double- or triple-digit percentage increases in the money they accumulated during their fiscal 2004 year. Leading the way were the two largest, the Fidelity Charitable Gift Fund, in Boston, and the Vanguard Charitable Endowment Program, in Malvern, Pennsylvania, which together took in $500 million more in 2004 than in 2003.

Donor-advised funds allow people to donate cash, stock, real estate, artwork, and other assets to special accounts; claim a tax deduction for the gifts; and recommend how, when, and to which charities money in the accounts should be distributed. Lawmakers are concerned donors are deducting far more on their taxes for noncash gifts than the donations are worth, but charity officials claim that such abuses are not widespread and that new limits could lead many people to stop making big donations. On the other hand, others believe that any Congressional move to legally define donor-advised funds could only help legitimize their existence and encourage them to grow, said Benjamin R. Pierce, executive director of the Vanguard Charitable Endowment Program. "My hope is that, if, in fact, legislation does get enacted, it will be an incredible boon to donor-advised funds."

With no government rules for donor-advised funds, the groups that offer them can decide whether to require donors to distribute a minimum amount to charities every year, and many do. However, sometimes donors might choose to delay giving to accumulate enough money for a big contribution to a capital campaign, or they might believe their money will be needed by charities more in the future. That is part of the philosophy at the Saint Paul Foundation, the Central Indiana Community Foundation, in Indianapolis, and the Norfolk Foundation, in Virginia, which treat many of their donor-advised funds like endowments. "Our goal is to maintain the spending power of those endowments," said Norfolk Foundation president Angelica D. Light. "We're not reducing the payout number to sit on the money. We're trying to preserve the principal so future generations have it to use."