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Fidelity Charitable and Schwab Charitable Fund recently announced that they are no longer approving grants to the NRA. Are DAFs finally putting politics before donor intent?

It’s a story that, were it not confirmed by a number of sources, would seem too perfectly contrived to set the intellectual corner of the philanthropic world ablaze. Last week it was reported that Schwab Charitable, a donor-advised fund (DAF) that disbursed $1.6 billion in grants in 2017 alone, would no longer give to the National Rifle Association. A few days later, Fidelity followed suit, meaning that the two largest donor-advised fund sponsors in the country have decided that donor intent has its limits.

DAFs have exploded in popularity in recent years, rising in this decade alone from 4.4% (in 2010) to 10.2% (in 2017) of all charitable giving. For proponents, DAFs provide a suite of useful services while safeguarding donor privacy. For detractors, they are a tax loophole and a donor accountability crisis. (Ironically, despite evidence that DAFs support progressive causes more than conservative ones, the proponent/detractor binary breakdown maps closely with a right-wing/left-wing binary.) I won’t be litigating the morality of DAFs here, but their divisiveness is essential context for any analysis of the decisions of Schwab Charitable and Fidelity.

To be clear, these DAFs are well within their rights to take this step. From the start, DAFs have been structured so that donors advise on giving but the fund itself controls their money. In practice, this legal structure has amounted to little more than a technicality, as a DAF would rarely do more than determine whether an organization qualified as a 501(c)(3) nonprofit before distributing funds. Indeed, this is the argument that Schwab Charitable has made in defense of its decision regarding the NRA: it is corporate policy to halt disbursal of funds to organizations that are under IRS investigation for their charitable status.

If we take them at their word, there’s not much left to the story—and it must be noted that, despite pressure from progressive, boutique grantmakers to protest SPLC-labeled “hate groups,” the major DAFs continued to make grants to those organizations when advised by donors. Nevertheless, as Hayden Ludwig detailed earlier this year, Schwab Charitable’s top recipients include Planned Parenthood and the ACLU, and it is hard to avoid the conclusion that something more politically motivated is afoot here. If we assume that is the case, it is doubtful that cutting grants to the NRA (and, eventually, other right-of-center groups) will actually move the needle in a progressive direction, for a few reasons.

First of all, as noted above, it is far from clear that the rise of DAFs has actually benefitted conservative organizations more than progressive ones. “Dark money” makes for convenient stump-speech fodder, but the reality is far less clear-cut. While the major DAFs didn’t cede to the pressure to completely cease granting to SPLC-labeled “hate groups,” it’s not as if much money was going there (or to more mainstream conservative groups). From 2014-17 Schwab and Fidelity—plus Vanguard Charitable and the explicitly-conservative Donors Trust—gave a meager $11 million to various SPLC hate groups. Measure that against Schwab’s $1.6 billion total in 2017 alone and clearly the right-wing impact of the major DAFs is limited.

Furthermore, this maneuver is far more likely to drive conservative and traditionally religious donors to boutique conservative DAFs—like Donors Trust, the Bradley Impact Fund, the National Christian Foundation, and others—than it is to push anything in a progressive direction or address any of the standard criticisms leveled against DAFs.

As Iain Bernhoft detailed, not all DAFs are equal. While systemic and intentional failure to respect donor intent was always a possibility, this move from Schwab and Fidelity signals that the days of respecting donor intent may be numbered. Boutique DAFs are organized around a shared donor interest or set of principles, which is why they are often more appealing to potential account holders. These moves by Schwab and Fidelity, I suspect, will only make boutique DAFs (on the left and the right) even more appealing to donors. In playing the PR game, these massive DAFs may be costing themselves a vital constituency. Only time will tell.

The waging of political wars on nonprofit battlegrounds is nothing new; however, decisions like this one by Schwab and Fidelity do seem like a new frontier. When ostensibly “neutral” institutions like social media, academia, and donor-advised funds are criticized for not taking action to quell speech and censor their platforms, it certainly seems as though we are entering a new era. It will be interesting to see if our political and social institutions can weather the storms the lie ahead.

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