Donor-Advised Funds FAQ
No. The IRS rules are the same for both community foundation DAFs and commercial DAFs.
By going to FundWeb online with your fundholder login, via our Grant Recommendation Form, or by emailing our Community Investment team. Recommendations must be in writing, so we are unable to process recommendations made over the phone.
No. In general, only qualified public charities and private operating foundations may receive grants from your fund. Qualified charities generally include those described in Internal Revenue Code Sections 501(c)(3) and 170(b)(1)(A). Qualified charities include charitable, religious and educational organizations, school districts, public libraries and other government-affiliated organizations. The law also restricts donor advised funds from making scholarship grants to specific individuals even if the grants are made directly to the qualified charity. Because of the arduous policing required to comply with the law, the Community Foundation does not approve scholarships from donor advised funds.
No. The law prohibits reimbursement for expenses as well as any type of compensation from your fund to an individual or to any entity related to the donor. In addition, we cannot reimburse expenses related to fundraising events organized by the donor to benefit the donor advised fund. Expenses must be paid by the donor from the proceeds of the event.
No. Federal law prohibits grants from your fund that provide anything more than an incidental benefit to the donor or related parties. Common examples of grants that provide a donor with personal benefits include gifts composed of charitable and non-charitable portions, such as payment for membership to a museum or other organization; donations that include purchasing rights to athletic events; purchases of tickets or tables for charitable events; payment for items purchased at a charitable auction; or sponsorship of a charitable event where you receive something of value, such as tickets, table seats or the right to have a foursome entered in a golf outing. In such instances, we cannot make grants from your fund towards either the charitable or non-charitable portion of these gifts. However, should you request a grant to sponsor a nonprofit fundraising event but do not wish to attend or accept any tickets or benefits (or you pay for your tickets or benefits separately), we can make a grant to the organization from your fund (as there will be no “benefit” to you in this instance). The grant check will be sent to the charity with a letter advising the organization that no benefits can be offered in return for your sponsorship.
Examples of permissible incidental or “token” benefits are items such as calendars, mugs, posters or key chains.
It depends. You may not fulfill legally binding personal pledges of financial support with your grants. The IRS considers a legally binding pledge to be a personal debt and payment of this debt by a foundation fund to be a personal benefit to the donor. This prohibition does not apply to non-binding “pledges,” such as a statement that merely indicates an intent to give.
In particular situations, no. The law prohibits grants from a donor’s fund that pay a donor's house of worship membership dues, where a donor’s payment of such dues is required for the donor to retain membership status and the rights and privileges of such status, including the right to attend services during certain holidays.
We cannot approve any donor-recommended grant that:
- Provides anything more than an incidental benefit to the donor or an individual
- Supports lobbying, political campaigns or other political activities, or other non-charitable activities
- Supports a charitable event that would constitute a quid pro quo arrangement (e.g., tickets for a fundraiser dinner)
No, but it is recommended that grants be made from your fund every year for the good of the community. If there is not grant activity for a two-year period, the fund will be deemed inactive. Absent an agreed upon reason for deferring grantmaking from the fund, the foundation will take steps to bring it to active status. Such steps will begin with contacting you to encourage grantmaking activity. However, if necessary, the foundation may ultimately initiate distributions from the fund to ensure they are being utilized for a charitable purpose.
We ask that you make grant recommendations of at least $1,000 each to make an impact on the organizations you care about. While we will process grants as low as $500, donor advisors should consider that due to inflation, smaller grants do not really make a difference for most organizations unless they have a very small budget. A gift of $500 in 1990 is equal to $1,000 today.
If you have additional questions about your donor-advised fund, please contact the Community Foundation’s staff at (517) 272-2870.