Donor-Advised Funds: Preparing for Closer Scrutiny

How to advise your clients on the shifting landscape of donor-advised funds.

January 2008
by Nick Tarlson/Journal of Accountancy

The U.S. Congress has shown a great deal of interest in donor-advised funds (DAFs) in recent years. The Pension Protection Act of 2006 (PPA) introduced several significant restrictions on DAFs and directed the IRS to study their organization and operation further. In complying with that mandate, on Feb. 26 the Service issued Notice 2007-21, which raised some provocative and potentially wide-reaching issues concerning these funds. These issues may affect the ability of DAFs to continue to allow donors to defer some of the decisions relating to charitable contributions while obtaining immediate tax benefits.

Below, we’ll explore the basic structure and characteristics of DAFs, their historic use and changes to DAF’s imposed by the PPA. We’ll also explore issues raised by Notice 2007-21 and how future reforms may affect the planning opportunities DAFs offer.

Read the full article here.