Fidelity Charitable, the nation’s largest grantmaker, distributed a record $11.8 billion to nonprofits in 2023, up more than 5% from the previous year at a time when organizations generally donations are decreasing.
The grant total shows how quickly use of the donor-assisted fund, an investment account that allows donations to be spread out over time, is growing. Fidelity Charitable said distributions to nonprofits in 2023 were four times what they were 10 years ago.
“I think 2023 has been a really extraordinary year,” Fidelity Charitable President Jacob Pruitt told The Associated Press. “When you think about the volatility and inflation of the market, we’ve still done a phenomenal job on grantmaking. And that’s our big measure: dollars coming into the industry.”
However, the growing popularity of DAFs has led many to measure the effectiveness of the funds in channeling money to charities. Although donors receive an immediate tax deduction when they invest money in a DAF, there is no deadline for them to contribute that money to a nonprofit.
Public comment on the Internal Revenue Service’s proposed new rules for DAFs will conclude 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 needs to collect more information about donations made to nonprofit organizations engaged in political activity. Donors can use their DAFs to donate anonymously as they have already received the tax deduction when they initially deposited the money into the DAF.
According to Fidelity Charitable, donors attached their name or the name of their DAF to 96% of grants awarded in 2023.
“We feel like we have a really solid platform,” Pruitt said. “We support regulations that focus on grantmaking and ensuring these dollars flow out of the platform.”
Fidelity Charitable said the average grant in 2023 was $4,625, with the average DAF distributing 11.8 grants during the year.
Doctors Without Borders USA and St. Jude Children’s Research Hospital were once again the most popular charities, as they were 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 begin donating to nontraditional nonprofits they find on their own. “Our list of beneficiaries is starting to look a little different from year to year,” she said. “As we continue to educate and create awareness, we hope that more grants will go to smaller organizations and a broader range of them.”
Attorney Andrew Grumet, a partner at Holland & Knight who advises nonprofits, said greater awareness is primarily responsible for the growth in donations to DAFs such as Fidelity Charitable. The reason they’re growing at a time when fewer and fewer people are donating to charities, he says, is because many nonprofits have trouble making a personal connection with donors to convince them they should donate to their specific group .
“Charities need to do a better job there,” he said, adding that DAFs have also done better at attracting gifts from millennials and Generation Z than many nonprofits. “It’s hard to figure out how to get your message out.”
Another area of growth for Fidelity Charitable DAFs in 2023 was corporates. More than 500 businesses now use a Fidelity Charitable DAF, with an average of 65 grants coming from their accounts in 2023 and an average grant amount of nearly $11,000.
Pruitt said companies are viewing DAF programs as an employee benefit and using the Fidelity Charitable platform as a way to match employee donations and as a substitute for corporate foundations.
“We think this is a space where there is increasing demand,” he said.