AICPA asks for delay in DAF regulations

February 5, 2024

By Michael Cohn, for Accounting Today

The American Institute of CPAs has sent a letter to the Treasury Department and the Internal Revenue Service asking them to postpone the effective date of their final regulations on donor-advised funds.

The Treasury issued proposed regulations last November on DAFs, which have become an increasingly prevalent form of charitable giving and a source for the wealthy of charitable deductions, with the money often being held for years in the funds. The Treasury regulations provide guidance on excise taxes on taxable distributions made by a sponsoring organization from a DAF, and on the agreement of fund managers to make such distributions. 

In its letter, the AICPA asked the Treasury and the IRS to postpone the effective date of the final regulations to give taxpayers more time to adapt and comply with the new rules. 


"The proposed regulations contain many complex provisions that will require additional time for taxpayers to implement in order to adjust their current operations to comply with the new rules," wrote Blake Vickers, chair of the AICPA Tax Executive Committee. 

The AICPA also requested the Treasury and the IRS to clarify the definitions of certain key terms and to ensure the final regulations, when issued, are fair and reasonable for donors and DAF sponsors.

The AICPA said certain advisory rights connected with a restricted gift should not create a DAF, and a fund established at a single charity (for the sole benefit of that organization) over which a donor has advisory privileges with respect to use and/or investment of funds should not be considered a DAF. The Institute contends that investment advisors (including personal investment advisors) should be explicitly excluded from the definition of donor-advisor. The definition of "significant contributor" should follow Section 507(d)(2)(A) and Section 507 (d)(2)(C) of the Tax Code. 

The AICPA recommended that the final regulations allow donors to make infrequent changes (no more than once every five years) to restricted gifts related to annual distribution amounts or allocations of distributions to recipient charities without causing the account to become a DAF.

The AICPA would also like to extend an exception from the definition of a DAF provided for scholarship funds of Section 501(c)(4) organizations to Section 501(c)(5) and Section 501(c)(6) organizations. The Institute also asked the Treasury and the IRS to modify the expenditure responsibility rules and provide additional guidance.

 "Sponsors of, and donors to, donor-advised funds need clear and consistent rules from the IRS to ensure that this multi-billion-dollar branch of philanthropy, which has received little IRS guidance in the past, remains viable and effective in the charitable sector," said Christopher Anderson, chair of the AICPA Exempt Organizations Tax Technical Resource Panel, in a statement. "Our recommendations would help donors, sponsors of donor-advised funds, charitable organizations that are recipients of donor-advised fund grants, and tax professionals who assist tax-exempt organizations."

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