Events Season and Donor Advised Funds

Categories: Donors, Legal,

Fundraising events are as critical as ever to many local organizations to support their important missions.

We are grateful for the generosity and collaboration of many donors in supporting the nonprofit community via donor-advised funds (DAF) at the Community Foundation of Sarasota County. As event season intensifies, we want to take a moment to summarize IRS regulations on DAFs in order to ensure smooth grantmaking to your favorite charities, while protecting our donors, our nonprofits and the Community Foundation’s tax-exempt/501c3 status for years to come.

We encourage you to use your DAF to support nonprofit organizations if you do not receive more than an incidental benefit (i.e., name recognition) from your grant. Since donors receive a charitable tax deduction for assets as soon as they are contributed to a DAF, any subsequent DAF grants cannot legally have any benefit(s) to the donor. Even if a portion of a DAF grant is used to support an event or sponsorship that yields any benefit to the donor beyond name recognition (e.g., event tickets, special seating, membership, or a meal), the original IRS deduction may be invalidated.

In the past, some charities have been known to accept a distribution from a DAF for the charitable portion of an event sponsorship, and the donor would write a personal check for the "goods and services" portion. However, this type of "bifurcated grant" is also prohibited under IRS Notice 2017-73 Section 3 because it affords the donor rights and privileges beyond the tax deduction they’ve already received. As a donor, this would also jeopardize your original tax deduction and put you at risk for a penalty excise tax.

If you want to sponsor a table at an upcoming charity event using your DAF, you can legally do so by declining all benefits. If tickets are still desired for the event, you can then use your checking account or credit card to purchase tickets separately at standard event pricing.

We look forward to seeing you this season and thank you again for entrusting the Community Foundation as your partner in philanthropy. Please feel free to reach out to me with questions.

About Author

Jay Young

Vice President, Philanthropy