The Tax Break That Pays Out to No One
The numbers are hard to ignore. More than $300 billion in philanthropic capital is currently parked in donor-advised fund (DAF) accounts across the United States, according to Nick Allardice, CEO of GiveDirectly, and David Goldberg, Founder and President of Founders Pledge — two advisers who work directly with high-net-worth donors in the tech sector.
Only around a quarter of DAF assets are paid out in any given year. A substantial portion of that payout simply moves from one DAF to another, reaching no beneficiary and serving no charitable purpose.
In 2024, the single most successful charitable fundraiser in the country was not a hospital, a food bank, or a disaster-relief organization. It was Fidelity Charitable, a DAF sponsor that took in nearly $16 billion in contributions. Eleven of America's top twenty fundraising 'charities' are DAF sponsors. The money flows in. It does not flow out.
How the Incentive Structure Works — Against Giving
The mechanics are straightforward. A donor transfers pre-IPO equity into a DAF before the tax window closes, takes the deduction immediately, and defers the decision on where to actually give. That deferral carries no legal deadline. It can last 12 months, 12 years, or indefinitely.
DAF providers collect fees tied to assets under management, not assets deployed. Fidelity has generated more than $1 billion in revenue from running its charitable arm over the last five years. The financial incentive is to hold, not to distribute.
Private foundations operate under a different set of rules. They are required to distribute at least 5 percent of their assets annually — a rule designed precisely to prevent charitable vehicles from functioning as indefinite tax shelters. DAFs face no equivalent requirement.
Congress created the DAF tax break on the assumption that the money would reach charities. The gap between that assumption and current practice is now measured in the hundreds of billions.
The AI Wealth Wave Is Coming
Allardice and Goldberg write that a significant portion of the people building today's AI industry are expected to become very wealthy in the near future. Many are already thinking about what to do with that wealth. The two authors advise some of the most philanthropically motivated people in tech — donors who, in their words, 'genuinely want, and have the means, to make a real difference.'
The problem is that the infrastructure waiting for them is the same one that has absorbed and immobilized prior waves of giving. Lawyers, financial advisers, and colleagues steer newly liquid donors toward DAFs as the responsible first move. The tax benefit is secured. The question of where the money actually goes slides to the bottom of the list.
Proposed reforms have focused on the long tail of dormant accounts — funds that claimed the deduction years ago and have never distributed a dollar. Addressing that tail alone, the authors argue, could unlock billions currently doing nothing.
The Outlet's Read
This is what happens when a tax incentive is designed without a corresponding obligation. Congress handed donors a deduction, handed intermediaries a fee structure, and handed charities nothing but a waiting list. The result is a $300 billion pool of capital that has, in effect, been laundered through the language of generosity without performing the function generosity is supposed to serve.
Free enterprise depends on clear rules and honest accounting. A system that lets institutions book $1 billion in revenue while the underlying charitable mission stalls is not philanthropy — it is asset management with better branding. The incoming generation of AI-wealth donors deserves an infrastructure built around deployment, not accumulation. So do the beneficiaries still waiting.
