Are Donor-Advised Funds Facilitating Opaque Giving to Politically Engaged Charities?

Abstract

Donor-advised funds are a prominent and rapidly growing charitable giving vehicle. There is substantial information about the money flowing into them, but we know relatively little about what they ultimately support, and anecdotal news stories have raised questions about the role they may be playing in high-profile policy-oriented giving. With this in mind, we examine whether donor-advised funds are disproportionately supporting politically engaged charities. We find that donor-advised fund sponsors distribute grants to politically engaged charities — those engaged in lobbying or affiliated with organizations supporting political campaigns — at a rate nearly 1.7 times that of other giving sources. We further show that this feature is more pronounced with giving to fringe political groups, as donor-advised fund sponsors give to anti-government and hate groups at a rate 3.5 times that of other giving sources; in fact, we find that donor-advised funds account for more than one-quarter of all contributions received by these organizations. To focus on whether one motivation for such giving is the layer of opacity donor-advised funds create, we also examine private foundation grants to donor-advised funds. Private foundations are required to publicly disclose the identities of both their major donors and beneficiaries. Donor-advised funds, on the other hand, must only disclose grant recipients, and those disclosures are aggregate and not at the fund or donor level. For this reason, when a private foundation distributes to a donor-advised fund rather than directly to a beneficiary charity, donor privacy is a principal consequence. We find that donor-advised fund sponsors give disproportionately more to politically engaged charities when more of the sponsor’s revenue comes from private foundations.

Keywords: charity, donor-advised funds, politics, private foundations, transparency

JEL Classification: D72, K34, L30, L31, L38