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Can Donor Advised Funds Give to a Private Foundation?

by Crewe Foundation
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One of the most exciting benefits of having a donor advised fund (DAF)  is making grants to your favorite charities.  You can make grants from your DAF to many different charitable organizations.  One of the questions that may come up in the process is, “Can donor advised funds make grants to a private foundation?”

Generally speaking, donor advised funds can make grants to any active and qualified 501(c)(3) charitable organization.  Unfortunately, the IRS does not allow DAF’s to make grants to most private foundations.  However, there are circumstances when it is allowed to make a grant from your DAF to a private foundation to a certain type of private foundation. 

Types of Private Foundations

There are multiple types of private foundations as qualified by the IRS.  The most common type of private foundation is called a private non-operating foundation.  They are grantmaking organizations that exist primarily to make grants to other qualified charities and charitable programs.  Gifts from DAFs to these types of private foundations are not allowed.  

There is another type of private foundation that the IRS defines as a private operating foundation that can receive grants from DAFs.  A private operating foundation is a special type of private foundation that spends at least 85 percent of its adjusted net income or its minimum investment return, whichever is less, directly for the active conduct of its exempt activities.   

These organizations are called private operating foundations because they are established with a closely held board of directors, such as family members, and only focus their charitable activities on their own charitable programs and activities.  Some examples of different types of private operating foundations could include libraries, museums, research facilities, zoos or other charitable endeavors.  Notice these are all types of organizations with a specific purpose.  They typically use the majority of their funds to further their charitable missions.

Making sure that your DAF or foundation can grant to a certain organization can be tricky.  When you are in the process of determining if the organization qualifies for a grant from your organization, the easiest way is to ask the organization directly.  It’s always a good practice to verify.  You can request their tax returns which should be available upon request or you can look them up on the IRS’ Search for an Exempt Organization page.  There is a section of the return that a private foundation completes to qualify as a private operating foundation.  This will be the key to making sure your grant is sent to the right type of qualifying organization.

Working with Crewe Foundation

It all sounds like a lot of work and that’s why at Crewe Foundation we handle the complete verification and grants process for you.  When you make a grant request from your DAF with Crewe Foundation, it’s really simple.  All you have to do is login to your account on our secure site and enter the name of the organization and we’ll handle everything from there.  If the organization is not already listed in our search you can still submit the charity for approval.  We’ll do the due diligence needed to verify the foundation is qualified to receive a donation from your DAF.

Please feel free to contact us if you have any questions.

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