Grants from a donor advised fund can only be made exclusively in furtherance of charitable purposes. Per IRS regulations, related to donor advised funds, donors, donor advisors, and related persons may be subject to excise taxes and other penalties if they receive more than an incidental benefit from a donor advised fund (IRC 4967.)
What is an Incidental Benefit?
A benefit is considered more than incidental if, as a result of a distribution from a donor advised fund, such person receives a benefit that would have reduced or eliminated a charitable contribution deduction if the benefit was received as part of the transaction. Some examples the IRS may consider prohibited are:
Examples of Non-Incidental Benefits ( Not OK)
- Meals
- Certain dues or membership fees
- Goods bought at charitable auctions or tickets for charitable events that entitle the attendees to any material benefit
- Preferential access/seating not available to the general public
- Satisfying a legally binding pledge from a donor advised fund account
Examples of Incidental Benefits ( Generally OK)
- Coffee mugs
- Key chains
- Calendars
- Posters
- Intangible religious benefits
Other impermissible private benefits include grants for school tuition or scholarships sent directly to individuals. Also, grants may not be used for lobbying, political contributions, to support political campaign activities, or any other non-charitable purpose.