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October 14, 2022 at 02:55 PM
Under current law, donor-advised funds (DAFs) allow taxpayers to make gifts to the fund, which are allowed to grow and are eventually distributed to charities. Unlike private foundations, DAFs are not generally required to distribute a certain percentage of their assets to charities each year.
Proposed regulations would create two separate types of DAF. Qualified DAFs would require the DAF to distribute the donations to charity within 15 years of receiving the donation (and the donor would receive an upfront charitable donation deduction). Non-qualified DAFs would have 50 years to distribute contributions. Donors would not receive an upfront deduction but instead would only receive a deduction once funds are distributed to qualified charitable organizations.
We asked professors Robert Bloink and William Byrnes, authors of ALM’s Tax Facts with opposing political viewpoints, to share their opinions about reforming the deduction for charitable donations.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Bloink
Byrnes
Their Reasons:
Bloink: The deduction for charitable giving is an extremely valuable tool that encourages Americans to support charitable causes. Unfortunately, the deduction is also one that is extremely easy to manipulate if the taxpayer has sufficient funds.
Entities like donor-advised funds today are typically only yet another tool for wealthy taxpayers to reap the benefits of the charitable donation income tax deduction without actually giving the funds to a charity within any reasonable time frame. We need to modify the system so that taxpayers only become entitled to a deduction once the qualified charitable organization receives the funds in question.
