Political engagement is a big concept that could conceivably encompass most charitable activities: Think nonpartisan voter registration, issue advocacy, and policy education. Charities have a rich history of fostering civic engagement, promoting democratic principles, and championing groups and causes. But until now, we had little broad-based information about how donor-advised funds, or DAFs, fit into this picture.

A recent study I co-authored found that when donors give to politically engaged charities, they are disproportionately likely to use donor-advised funds to do it. DAFs support politically engaged groups at a 70 percent higher rate than other funders.

Our study also suggests that the anonymity DAFs offer may be driving this. The more funding DAFs get from private foundations, the more politically engaged grants they give out — indicating that foundation donors may be using DAFs to get around foundation disclosure rules. And DAF donors are 3.5 times more likely to give to hate groups — a controversial type of giving that donors may particularly want kept private.

What are DAFs?

Donor-advised funds, or DAFs, have burst onto the charitable scene with gusto over the past decade. DAFs now make up half of the top 20 charities in the U.S. and take in 27 percent of all individual giving.

DAFs are financial accounts that are managed by nonprofit organizations, which are called sponsors. Donors can give money to a personal DAF account and take a tax deduction right away, since they are giving the money to a charitable organization. The sponsor then gives the donor broad authority to recommend where and when the DAF assets will get granted out to other charities.

The interconnection of DAFs, anonymity, and politics

My IPS colleagues and I have written before about how DAFs raise a number of concerns. They have no payout requirement whatsoever, so there is no guarantee that the money sitting in them will ever make its way out to working charities. There is a significant amount of money just cycling between DAFs each year. And some private foundations appear to be using grants to DAFs as a way of meeting their payout requirements when they would otherwise fall short.

But another major issue with DAFs is that they are almost entirely opaque. DAF sponsors only have to disclose grant recipients in aggregate, so there is no way for grantees, the IRS, or the public to know which accounts grants come from unless the donor........

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