Private foundations gave $2.6 billion in grants to donor-advised funds (DAFs) at national sponsors in 2021, Inequality.org, a project of the Institute for Policy Studies, reports.

Inequality.org analyzed the recently released tax returns of 127,330 private non-operating foundations that filed electronically in at least one year from 2017 to 2021. Of those grantmakers, 3,577 gave to a national DAF in at least one of the five years, and for 167 of those funders, the grants to DAFs represented the entirety of their qualifying charitable distributions—the amount used to evaluate whether the foundation has met its minimum payout requirement for the year. For another 477 foundations, gifts to national DAFs accounted for between 90 percent and 99 percent of their qualifying charitable distributions over those five years.

“This sort of transfer shouldn’t count as charity,” researcher Helen Flannery argued in a blog post. “Donors get tax deductions for putting money into private foundations so that money can go to real charities. And the 5 percent payout requirement is meant to ensure that that happens. But when foundations use grants to donor-advised funds to meet payout, it subverts the public purpose behind that requirement.”

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