IRS Scrutinizes Donor-Advised Funds
January 23, 2007 | Read Time: 1 minute
The Internal Revenue Service is scrutinizing the use and potential abuse of donor-advised funds, citing concerns that contributors have used them as private “slush funds,” reports The Wall Street Journal.
The Pension Protection Act, passed by Congress in August, includes provisions that punish those who use donor-advised funds, contributions to which are tax-deductible, for private gain—for example, donating money from a fund to a private school in exchange for having tuition waived for the donor’s child.
According the IRS, “well-run” funds will have to make few changes, but one financial adviser said he worries that “the advantages donor-advised funds have over private foundations are being eroded.”
Those advantages—larger tax breaks and more donor control over gift-giving—helped fuel the popularity of donor-advised funds, which gave more than $3-billion to charity in 2005.
Read The Chronicle of Philanthropy’s annual survey of donor-advised funds.
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