LIFESTYLE

Fidelity Charitable distributes record-setting $11.8 billion to nonprofits in 2023

Feb 13, 2024, 4:01 AM

CORRECTS YEAR TO 2023 - FILE - Doctor Ivan Mozhaiev attends to a patient during morning rounds at P...

CORRECTS YEAR TO 2023 - FILE - Doctor Ivan Mozhaiev attends to a patient during morning rounds at Pokrovsk hospital in Pokrovsk, eastern Ukraine, on May 22, 2022. Fidelity Charitable, the nation’s largest grantmaker, distributed a record-setting $11.8 billion to nonprofits in 2023, up more than 5% from the previous year at a time when generally donations are dropping. Doctors Without Borders USA and St. Jude Children’s Research Hospital were the most popular charities again, as they were in 2022. (AP Photo/Francisco Seco, File)
Credit: ASSOCIATED PRESS

(AP Photo/Francisco Seco, File)

NEW YORK (AP) — Fidelity Charitable, the nation’s largest grantmaker, distributed a record-setting $11.8 billion to nonprofits in 2023, up more than 5% from the previous year at a time when generally donations are dropping.

The grant total shows how quickly use of the donor-advised fund — an investment account that allows donations to be distributed over time — is growing. Fidelity Charitable said distributions to nonprofits in 2023 were four times what they were 10 years ago.

“I think 2023 was a pretty amazing year,” Fidelity Charitable President Jacob Pruitt told The Associated Press. “When you think about the volatility, the market inflation, we still did a phenomenal job in regards to grantmaking. And that’s our big measure — dollars going into the sector.”

However, the increasing popularity of DAFs has many measuring the funds’ effectiveness at funneling money to charities. Though donors receive an immediate tax deduction when they put money in a DAF, there is no deadline for them to then contribute that money to a nonprofit.

Public comment on new regulations proposed by the Internal Revenue Service for DAFs will end on Thursday. If approved, the IRS will impose a 20% excise tax on donations that provide a significant benefit to the donor.

Congress is also looking into whether the IRS needs to give anonymously since they already received their tax deduction when they deposited the money in the DAF initially.

According to Fidelity Charitable, donors attached their names or the name of their DAF to 96% of the grants made in 2023.

“We feel we have a really solid platform,” Pruitt said. “We support regulations that focus on grantmaking and making sure that these dollars flow out of the platform.”

Fidelity Charitable said the average grant in 2023 was $4,625, with the average DAF handing out 11.8 grants in the year.

Doctors Without Borders USA and St. Jude Children’s Research Hospital were the most popular charities again, as they were in 2022. Fidelity Charitable said nearly 80% of grants in 2023 went to nonprofits donors had previously supported.

But Pruitt said that as donors become more comfortable using the DAF platform, they begin to give to more nontraditional nonprofits that they find on their own. “Our list of grantees is starting to look a little different year over year,” he said. “As we continue to educate and build awareness, we hope more grants go to smaller organizations and a broader range of them.”

Attorney Andrew Grumet, a partner at Holland & Knight who advises nonprofits, said increased awareness is mainly responsible for the growth of donations to DAFs like Fidelity Charitable. The reason they are growing at a time when fewer people are donating to charities, he says, is because many nonprofits are having a hard time making a personal connection with donors to convince them that they need to give to their specific group.

“Charities need to do a better job there,” he said, adding that DAFs have also done better at attracting gifts from millennials and Gen Z than many nonprofits. “It’s a struggle to figure out how to get your message out there.”

Another growth area for Fidelity Charitable DAFs in 2023 was with corporations. More than 500 companies now use a Fidelity Charitable DAF, with an average of 65 grants coming from their accounts in 2023 and an average grant amount of nearly $11,000.

Pruitt said corporations are looking at DAF programs as an employee benefit and using the Fidelity Charitable platform as a way to match employee donations as well as a replacement for corporate foundations.

“We think that is a space where there is a demand that’s rising,” he said.

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Associated Press coverage of philanthropy and nonprofits receives support through the AP’s collaboration with The Conversation US, with funding from Lilly Endowment Inc. The AP is solely responsible for this content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.

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Fidelity Charitable distributes record-setting $11.8 billion to nonprofits in 2023