Deductibility of gifts from Donor Advised Funds

Cathi Ianno · February 2018

How do you talk with your donors about the fact that we can't accept gifts from Donor Advised Funds for Gala sponsorships or ticket purchases? we have a donor who has been giving large gifts to the organization for a long time through her Charles Schwab DAF and doing this for the Gala as well. In the past no one has flagged this, and I am trying to figure this out for her without discouraging the sponsorship. Also, our lead donor for the Gala gives from his personal family foundation - which doesn't have the strict instructions "no goods or services received" mailed with the check. So how do folks handle this? Thanks.

Susan Walters · February 2018

Cathi Ianno:

How do you talk with your donors about the fact that we can't accept gifts from Donor Advised Funds for Gala sponsorships or ticket purchases?

I feel like you should offer a guarantee of anonymity and immunity before we discuss this. ;-) Speaking hypothetically, of course, there are many, many organizations that will accept what the IRS regulations calls bifurcation--the donor pays the non-deductible portion to absorb all the benefits, then the Schwab gift is fully tax deductible and treated as a donation to the event. For the donors, it's not a difficult thing to explain the IRS regulations and their potential liability. I'd be far more interested in hearing how you convinced your senior staff to go along with the paradigm shift. According to the regulations from 2006, there didn't used to be much liability for the orgnization that receives the funds. The biggest danger seemed to be to the donor and the fund-holding financial institution. The fact that so many organizations have done it for so long (and continue to do it) has made it impossible for someone like me to convince someone like my boss to stop the practice.

Cathi Ianno · February 2018

Thanks so much, Susan!

We are a small shop, so I am the decision maker on this. But I
have to talk to donors who have been used to the rule being ignored
for years and I wanted to get a sense of what others do for
work-arounds. Thanks for the validation!

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