As we approach the end of the year, nonprofits across Chicagoland will receive more donations this month than any other time of the year. Inspired by the holiday spirit, donors are choosing to give to charities that serve those most affected by the ongoing economic downturn, including the Northern Illinois Food Bank, where I am president and CEO. My organization provides nutritious food to families as they deal with increased expenses for groceries, fuel, utilities and other needs.
Charitable organizations rely on end-of-year giving as a crucial opportunity to connect with supporters and secure vital fundraising dollars for their mission. However, unlike the holiday season, hunger knows no season. Working families and others who were most affected by the pandemic struggle year-round to recover from the economic hardship of the past two years.
Inflation and rising costs are driving neighbors to seek assistance from the Northern Illinois Food Bank’s food pantries and programs at historically high rates. In fact, the food bank served a monthly average of 450,000 neighbors in the last three months in its 13-county service area, a 55% increase from pre-pandemic levels and 40% more than the same quarter last year.
The ongoing changes to Internal Revenue Service rules governing charitable contributions, deductions and itemization have left many prospective donors in a quandary and often unaware of giving vehicles that will help meet their philanthropic needs as well as those of the charitable organizations they wish to support.
Each year, nonprofit organizations, including the Northern Illinois Food Bank, receive generous contributions from donor-advised funds, or DAFs. DAFs are donor investment accounts for charities, administered by charitable sponsors such as Fidelity, Charles Schwab, community foundations or other financial investment institutions, allowing donors to receive a tax deduction when they fund the account, while directing grants in future years from those funds to the charities of their choice. The Northern Illinois Food Bank was the beneficiary of more than $2.4 million from DAFs last year.
According to the 2022 National Philanthropic Trust, assets in DAFs rose from $167 billion in 2020 to $234 billion in 2021. There are 1.3 million DAF accounts in the U.S., and the average size of these accounts increased to $183,000 in 2021. Even with the recent downturn in the markets, this is an extraordinary amount of potential gifts for charitable organizations.
Unlike traditional private foundations, DAFs have no annual distribution requirements. Too often, the funds that have accumulated in DAFs sit indefinitely without being put into action by a charity to help those most in need.
Earlier this year, proposed federal legislation known as the Accelerating Charitable Efforts (ACE) Act was introduced in House following its introduction in the Senate last year. The ACE Act included reforms to tax laws that would require DAFs to disburse charitable dollars to working charities more quickly. However, in today’s politically divisive environment, the ACE Act, and other legislation designed to expedite granting funds from DAFs to charitable organizations, has been languishing on Capitol Hill.
Many individuals who contribute to charities through DAFs may be holding onto assets for a time when they can “do the most good” or make a big impact with their gift. Many contend that now is the time we need to infuse these gifts into our community. The billions of dollars in DAFs could be used immediately by charities serving our Illinois communities, including those of us addressing the growing number of our neighbors who are facing food insecurity.
We encourage all those with DAFs to think beyond the holidays and consult now with their financial advisers and family members to extend their generosity by planning regular DAF grants to the charities in their communities whom they trust will maximize their gifts to make a positive impact on our neighbors.
