November 12, 2025 | Read Time: 9 minutes
This collection of essays is part of a special package of predictions from sector leaders and thinkers about what lies ahead in 2026 and how to respond to what will likely be another unprecedented year for the nonprofit world. Read more predictions about Major Donor Giving | Foundation Giving | Democracy and Threats to the Sector | Fundraising and AI | Equity Efforts | Nonprofit Operations | Policy Changes | Bridge Building, and Predictions for 2030.
Will New Laws Force More Payout? Not Likely
Bella DeVaan and Chuck Collins
Most taxpayers don’t appreciate subsidizing wealthy donors in the creation of multigenerational family foundations and donor-advised funds. But even as skepticism of elite philanthropy grows, it’s difficult to imagine passage anytime soon of legislation requiring higher payout rates.
The power of the charity lobby — representing legacy foundations, commercial DAF sponsors, and tech innovators — along with the partisan weaponization of the Internal Revenue Service, will prevent any constructive reform. That includes even commonsense rule changes, such as no longer allowing foundation-to-DAF transfers to count toward a funder’s 5 percent payout requirement.
Consider the blowback against the Biden administration’s proposed DAF rules: A congressional opposition letter and barrage of public comments vociferously opposed reform, particularly a provision to levy an excise tax on personal investment adviser fees. And at this year’s DAF Giving Summit, which Bella attended, Ken Kies, assistant secretary for tax policy in the Treasury Department, said DAFs should be spared from burdensome regulation.
Financial services and tech companies see philanthropy as fertile ground for new client revenue, so they aim to shield the sector from public scrutiny or tax obligations. This desire transcends partisanship.
When partisan politics do come into play, meaningful regulation seems even more far- fetched. The foundation excise taxes passed by the Republican-led House were motivated more by rancor for large liberal funders than an honest impulse to balance power. The Senate removed this provision, but Congress could end up supporting efforts to persecute perceived enemies by revoking their nonprofit tax exemption. In this environment, why would any nonprofit, regardless of ideology, want more IRS scrutiny — for their payout rates or otherwise?
Fearful of losing already-scarce funding or being politically targeted, charities need safer waters to swim in. Putting more money in the pockets of everyday donors can restore fairness and accountability to the nonprofit sector. In the absence of effective federal law, funders should unleash their charitable billions in service of this goal.
Bella DeVaan and Chuck Collins coordinate the Charity Reform Initiative at the Institute for Policy Studies. Collins is the author of the new book, “Burned by Billionaires: How Concentrated Wealth and Power are Ruining Our Lives and Planet.
Bipartisan Voices Will Demand Payout Policy Reform
Craig Kennedy
A resolution is unlikely in the continuing debate over raising the minimum foundation payout rate, but I expect Congress to move closer toward that goal in 2026. So far, foundations have been able to forestall a hike by convincing politicians that endowments wouldn’t be able to keep up with inflation if the payout rate increased even modestly from the current 5 percent to 6 percent.
The healthy growth of foundation assets belies this concern. Most well-managed funders easily keep up with inflation.
Just one barrier stands in the way of a payout increase: Conservatives’ fear that an increase in foundation giving would largely fund election-adjacent projects and groups promoting progressive causes, instead of just funding programs that provide services to communities in need. Progressives want more money to go to fundamental programs serving low-income communities and other marginalized groups but oppose any limitations on what foundations can fund.
There may be ways to surmount this obstacle. If an increase in the payout rate was linked to equally strong requirements for donor-advised funds, progressives might be willing to accept limitations on politically related nonprofit activities, recognizing that even a 1 percent rise would provide a huge amount of new money to charities.
Funding could be further increased if foundation program expenses were no longer used to meet the payout. A cap on expenses would produce millions more in charitable dollars.
The philanthropic trade groups hope this vision is a mirage that will disappear in partisan rancor. I think that’s wishful thinking. Voices on the right and left want change. A few smart senators, such as Republican Charles Grassley of Iowa and Democrat Elizabeth Warren of Massachusetts, who have both criticized foundations for not spending enough, could make the difference if they are willing to reach across political lines and work to pass a policy that will benefit the charitable community.
Craig Kennedy is a senior fellow at the Giving Review and the former president of the Joyce Foundation and the German Marshall Fund.
A DAF Explosion Is Coming, Thanks to the Tax Bill
Laura MacDonald
New tax policies will alter giving in two ways next year. First, affluent households and corporations will rush to give before tax changes take effect. Donations will likely surge in the final months of 2025, followed by a lull in 2026. This mirrors historical trends: Two large increases in giving occurred in 1986 and 2017, before significant tax policy changes took effect, followed by decreased or stagnant giving in 1987 and 2018.
The new tax law erects high hurdles for wealthy donors and corporations because giving must surpass a certain floor before they can take a deduction. Fundraisers report that donors are paying off multiyear pledges in 2025 and companies are seeking to accelerate distributions. After that, giving will drop.
Second, use of donor-advised funds will explode in response. Financial advisers will encourage more donors to establish DAFs, and current DAF holders to significantly increase their balances. Donors will then distribute these funds gradually in 2026 and beyond, before restoring DAF balances with new gifts to once again accommodate multiple years of donations.
While this is a natural response to new tax policies, it will result in some unintended consequences. Notably, DAFs will be hard-pressed to maintain the current payout rate, estimated at nearly 24 percent. As donors withhold more money in 2026 so they can deploy grants over multiple years, annual distribution rates will decline, and DAF critics will have even more ammunition to push for regulation.
The tax law effectively codifies DAFs as a tool for elite donors. The new universal tax deduction for non-itemizers excludes giving to DAFs, making it less likely everyday donors will use them. Recent years have seen a push to democratize donor-advised funds, including lowering the balance required to open a fund and introducing workplace giving DAFs. But now DAF users who take the universal deduction — and who tend to be less wealthy — won’t have the same advantages as wealthier households. This imbalance will further fan the flames of dissent.
Laura MacDonald is a principal and founder of the Benefactor Group and author of The Endowment Handbook.
Post Tax Bill, Watch for More ‘Bunched Giving’
Josh Birkholz
Many people believe taxes don’t motivate donor behavior, and donor surveys have largely backed that sentiment. But the 2017 Tax Cuts and Jobs Act, which dramatically increased the standard deduction and led to a drop in contributions from midlevel donors, proved the opposite: that taxation does matter.
With the passage of a new tax bill this summer, the nonprofit world got the change in the law it hoped for, at least when it comes to everyday donors: a charitable deduction for people who don’t itemize. This is a favorable step forward and should boost giving in 2026. The average non-itemizer, however, is typically not well-versed in tax changes, even those that could help them, presenting an opportunity for the sector to get the word out.
The situation may not be quite so rosy for wealthy individuals, who strongly drive giving in the United States and are disproportionately itemizers. Starting next year, donors will be able to deduct giving up to only 35 percent of their income, compared with 37 percent now, and gifts equal to the first 0.5 percent of their income will no longer be deductible. These changes could affect giving. To receive the highest possible tax benefits, donors are likely to shift from annual to more periodic contributions through entities such as donor-advised funds. Higher stock market years should see the biggest giving bumps from these periodic contributions.
Foundation giving may also benefit indirectly. As more wealthy donors turn to DAFs, community foundations that sponsor them will be able to increase their giving. Poor stock market performance, however, could wipe out any gains from this trend.
Finally, corporations have the biggest headwinds from a tax perspective. The average corporation gives 1 percent of its profits to charity. The tax benefit floor is now also set at 1 percent. Even more so than individuals, I expect corporations to bunch their deductions and shift their donations to every two or three years.
Josh Birkholz is the CEO of BWF and former chair of the Giving USA Foundation
Christie Herrera Sees a “Promising Time for Liberty-Minded Donors”
Christie Herrera
As Philanthropy Roundtable marks its 35th anniversary next year, we see great promise for the economic prosperity that empowers charitable organizations committed to advancing liberty, opportunity, and personal responsibility.
The tax package signed into law in July by President Trump will help lay the foundation and drive progress in two critical ways.
First, it will allow Americans to invest more in their communities by strengthening the economic engine that makes generosity possible.
Second, the removal of the proposed tax increase on private foundations showed what’s possible when those who care about promoting and protecting American values rally together. We made sure congressional leaders understood the importance of private philanthropy and its essential role in advancing freedom and opportunity.
While this is an especially promising time for liberty-minded donors, we recognize that hyper-politicization continues to threaten civil society. Donors want to feel safe when supporting the causes and communities they care about. The assassination of Charlie Kirk — and the disturbing reaction from those who condoned violence against conservative voices — underscore the importance of privacy.
That’s why in 2026, Philanthropy Roundtable will go all-in to protect donors’ freedom to give when, where, and how they choose — and with the privacy they deserve. Philanthropy is essential to promoting freedom, providing opportunities, and stepping in to serve communities when the government can’t or shouldn’t. To protect donors’ ability to support this work, we will pursue federal donor-privacy protections, including investments in donor-advised funds, and continue to stand up for the constitutional rights and freedoms of generous Americans.
Christie Herrera is the president and CEO of Philanthropy Roundtable.
Photos: Amira Nazer, Courtesy of Chuck Collins; Courtesy of Craig Kennedy; Rebecca Tien Photography; Courtesy of BWF; Philanthropy Roundtable
