When utilizing DAFpay for your nonprofit's transactions, it's important to be aware of specific legal boundaries. DAF grants cannot confer any benefits considered “more than incidental” to the donor.
Key Legal Limitations Include:
Personal Benefit: DAF funds cannot be used for anything that provides a personal benefit to the donor. This includes purchasing tickets for galas, goods at charity auctions, or any other items or services that offer a personal benefit.
Lobbying or Political Activities: DAF funds cannot be used for lobbying, political campaigns, or supporting political candidates, as this could jeopardize the tax-exempt status of the DAF sponsor and the recipient organization.
Pledges:
DAF funds CAN be used to fulfill personal pledges. Section 4 of IRS Notice 2017-73 addresses personal pledges, which effectively allows DAFs to make grants that satisfy pledges *so long as* the DAF sponsor does not reference the pledge in the grant letter or check.
All DAFpay gifts are technically unrestricted gifts when initiated. DAFpay relies on donor notes or DAFpay tool placement (ie specific campaign page or email) for the nonprofit to know the intended use of the gift whether restricted or otherwise. DAFpay's user interface is also designed to encourage donors to provide their name and contact information (which the vast majority do) so that nonprofits can follow up with donors as needed to confirm any expected gifts and their desired use.
Ensuring Compliance:
It's essential for your nonprofit to have a clear understanding of these limitations. We at Chariot stay on top of developments in the DAF space and keep our partners and community up to date on any legislation that may affect your DAF fundraising. Still, we recommend consulting with legal and tax professionals to ensure full compliance with the complexities of any DAF law or regulation.