One Shoe Dropping: IRS is Finally Stepping into the Donor Advised Fund Space

After 17 years of near silence, IRS has finally begun to issue proposed regulations interpreting and implementing legislation enacted in 2006 to "improve accountability" of donor advised funds.

They have announced four regulatory projects, three of which will deal with excise taxes on "taxable distributions" and on "prohibited benefits" and "excess benefits" to disqualified persons, and one which will deal with calculating public support for charities receiving distributions from DAFs.  Each of these projects has potential for controversy.

The first batch of proposed regs was released November 14, and already there are some unpleasant surprises.

The proposed definition of what even is a "donor advised fund" is considerably broader than one might have supposed, as is the proposed definition of who all is an "advisor."  And the proposed regs would implement an "anti-abuse" rule that would trace distributions from a DAF through the recipient charity to the ultimate distributee.

Donors serving on advisory committees for field of interest funds or fiscal sponsorships may find that they are limited in what grants they can recommend. Investment advisors may be cut out of managing individual funds altogether.  Fund sponsors may have to exercise expenditure responsibility even with respect to distributions to a public charity if a donor sits on the board of the recipient org.

In short, the donor advised fund landscape may be changing rather significantly.  And this is only the first of four regulatory projects on the near horizon.

The public comment period is scheduled to close January 16.

Our webinar will cover:

• A brief review of what the 2006 statute covers
• Previous informal guidance issued by IRS
• The scope of the four pending regulatory projects
• A dive into the particulars of the proposed regs issued in November
• Some of the public comments submitted
• A discussion of the implications if the proposed regs are finalized without significant changes
• What all of this implies for the donor advised fund landscape moving forward

At least two organizations have asked IRS to extend the public comment period another thirty days, into February.  This webinar may give you and your organization some tools for participating in that process, and in any event will enable you to brace for some significant changes to what we thought we knew about donor advised funds.

Please watch the recording of the webinar below featuring Bryan Clontz, Ph.D., CFP®, AEP®, CAP® and Russ Willis, J.D., LL.M.