Prospects for Increased Foundation Payout in 2026
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.
