NEW YORK — Fidelity Charitable, the nation’s largest grant maker, has distributed a record $11.8 billion to nonprofits in 2024, up more than 5% from the previous year, at a time when donations are generally declining.
The grant total shows how quickly use of the donor-advised fund — an investment account that allows donations to be distributed over time — is growing. Fidelity Charitable said distributions to nonprofits in 2023 would be four times what they were a decade ago.
“I think 2023 was a pretty great year,” Jacob Pruitt, president of Fidelity Charitable, told The Associated Press. “If you think about the volatility and the market inflation, we’ve still done a phenomenal job of providing subsidies. And that is our big metric: dollars are going into the sector.”
However, the increasing popularity of DAFs has many measuring the effectiveness of the funds in channeling money to charities. Although donors get an immediate tax deduction when they put money into a DAF, there is no deadline for them to then donate that money to a nonprofit.
Public comment on the new regulations proposed by the Internal Revenue Service for DAFs ends Thursday. If approved, the IRS will impose a 20% excise tax on donations that provide a significant benefit to the donor.
Congress is also examining whether the IRS should collect more information about donations to nonprofits that engage in political activity. Donors can use their DAFs to donate anonymously, as they have already received their tax deduction when they initially deposited the money into the DAF.
According to Fidelity Charitable, donors associated their name or the name of their DAF with 96% of donations made in 2023.
“We feel like we have a very solid platform,” Pruitt said. “We support regulations that focus on providing subsidies and ensuring that these dollars flow out of the platform.”
Fidelity Charitable said the average grant in 2023 was $4,625, with the average DAF giving out 11.8 grants that year.
Doctors Without Borders USA and St. Jude Children’s Research Hospital were again the most popular charities, as in 2022. Fidelity Charitable said nearly 80% of grants in 2023 went to nonprofits that donors had previously supported.
But Pruitt said that as donors become more comfortable using the DAF platform, they will donate to more non-traditional nonprofits that they find on their own. “Our list of beneficiaries is starting to look a little different year after year,” he said. “As we continue to educate and raise awareness, we hope to see more grants go to smaller organizations and a wider range of them.”
Lawyer Andrew Grumet, partner at Holland & Knight, who advises nonprofits, said the increased awareness is mainly responsible for the growth in donations to DAFs like Fidelity Charitable. The reason they’re growing at a time when fewer people are donating to charities, he says, is because many nonprofits struggle to build a personal connection with donors to convince them they should serve their specific group. to give.
“Charities need to do a better job there,” he said, adding that DAFs have also done better at attracting gifts from millennials and Gen Z than many nonprofits. “It’s a struggle to figure out how to get your message across.”
Another area of growth for Fidelity Charitable DAFs in 2023 was in corporates. More than 500 companies now use a Fidelity Charitable DAF, with an average of 65 grants coming from their accounts in 2023 and an average grant amount of almost $11,000.
Pruitt said companies view DAF programs as a benefit to employees and use the Fidelity Charitable platform as a way to match employee donations and as a replacement for corporate foundations.
“We think this is an area where demand is increasing,” he said.
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Associated Press coverage of philanthropy and nonprofits is supported by the AP’s partnership with The Conversation US, with funding from Lilly Endowment Inc. The AP is solely responsible for this content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.