Advised Fund Contributions and the Pension Protection Act of 2006

General

As part of our service to the community, we want to be sure that donors and the nonprofit organizations they support understand the federal rules governing grants from donor advised funds and the penalties for violating them. These rules were expanded under the Pension Protection Act of 2006

  • OCF Advised Funds cannot pay a personal pledge through an advised fund grant, as the IRS views the payment as relieving the donor of a financial obligation. If a fund advisor is asked to make a pledge, they can let the organization know that they plan to recommend a grant from their advised fund instead. Donors can recommend a single grant or a multi-year grant from an advised fund, as long as it does not satisfy a personal pledge.
  • The Pension Protection Act prohibits any person related to an advised fund donor or advisor from receiving any benefits of monetary value as the result of a grant. Examples of prohibited benefits include, but are not limited to:  seating at ticketed fundraising events, parking privileges, and tickets to performances or public events.
  • Violations may result in a tax on the nonprofit organization who benefits from the prohibited distribution, the person who makes the grant recommendation and on the person receiving the prohibited benefit. The IRS can also impose a tax on OCF for making a distribution that confers a prohibited benefit.