July 21, 2025

New giving incentives and accountability standards are reshaping the role of institutional philanthropy and DAFs. Here’s how to respond strategically

The Big Beautiful Bill (BBB), a sweeping federal package focused on strengthening the social safety net, includes a set of enhanced charitable incentives aimed at encouraging larger and faster giving. Much attention has been paid to the bill’s 1% corporate giving incentive, but another less-publicized set of likely reforms is poised to reshape how foundations and donor-advised funds (DAFs) operate. Meanwhile, the Accelerating Charitable Efforts (ACE) Act—first introduced in 2021 and recently reintroduced—continues to gain attention as a blueprint for future donor-advised fund (DAF) reform.

While DAF payout mandates are not yet law, the combined momentum of legislation, public scrutiny, and high-profile philanthropy is prompting many funders and nonprofits to rethink how capital flows from donor intent to community impact.

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Key Changes Affecting Foundations and DAFs

The Big Beautiful Bill introduces new accountability standards. These incentives are designed to encourage large, direct gifts to operating nonprofits—especially those working in housing, mental health, public health, and disaster recovery, though the deductions apply more broadly.. And if the Accelerating Charitable Efforts (ACE) Act—already introduced in both houses—passes, even deeper reforms will follow.

1. Minimum Payout Reforms

Private foundations continue to face enforcement of the 5% annual payout requirement. Additionally with ACE, DAFs would be required to distribute funds within 15 years of contribution—ending the practice of “perpetual parking.” Combined with higher excise taxes as penalty for non compliance.

Parking funds refers to the practice of placing charitable dollars—especially in donor-advised funds—without a clear timeline for distribution. For nonprofits, this means critical resources are tied up and inaccessible during times of urgent need.

2. Transparency and Reporting

The Big Beautiful Bill includes modest expansions to transparency requirements. While not yet law in general both foundations and DAF sponsors should gear up for a world with more detailed data about grantee demographics, community impact, and payout timelines. Nonprofits may see an increase in due diligence requests and outcome reporting. in the future.

3. Tax Incentive Adjustments

While contributions to DAFs still retain tax deductibility, proposed rules would disincentivize long-term warehousing of funds.

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What This Means for Nonprofits

These reforms set the stage for pressure to accelerate giving—and that’s good news. But they also raise the bar for transparency, readiness, and measurable outcomes. Here’s how nonprofits should adapt:

• Position Your Organization as “Payout Ready”: Emphasize your capacity to absorb and deploy large gifts with speed and accountability. The faster you can show impact, the more appealing you are to donors under payout pressure.

• Educate DAF Donors: Offer webinars or one-pagers that explain the proposed changes—and make the case for why now is the right time to recommend a grant to your organization. Prepare for the future now, while bolstering your funding strategy.

• Upgrade Your Reporting Infrastructure: With new donor scrutiny on impact and equity, nonprofits that can provide clean, mission-aligned data will stand out. Consider investing in CRM and analytics tools to stay competitive.

• Reassess Internal Investment in Grant Strategy and Infrastructure: With increased scrutiny and accelerated timelines for disbursement, nonprofits can no longer rely on generic grant proposals or under-resourced development teams. The Big Beautiful Bill’s reforms mean that foundations are evaluating grantseekers not only for alignment but also for readiness and capacity to deliver measurable results quickly.

Nonprofits should consider investing in dedicated grant writers, evaluation systems, and relationship cultivation strategies to remain competitive. This includes tailoring proposals to reflect equity metrics, scalability, and the ability to serve as a trusted partner under tighter payout requirements.

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What This Means for Donors and Fund Managers

For those managing or contributing to foundations and DAFs, the Big Beautiful Bill underscores the need for urgency, accountability, and strategic giving.

• Revisit Giving Strategies and Timelines: The days of indefinite holding are over. Foundations and DAF donors should re-align giving strategies to meet new deadlines while maximizing community impact.

• Work More Closely with Grantees: The increased reporting burden on nonprofits can be significant. Foundations and DAF sponsors should consider providing capacity-building grants or streamlining their processes to reduce friction.

• Shift Toward Trust-Based Philanthropy: The push toward transparency and racial equity means that donors must listen more closely to the communities they serve. Now is the time to adopt practices that center equity, trust, and long-term partnership.

For DAFs and foundations, the Big Beautiful Bill is a wake-up call: philanthropic intent must now be matched by timely action. Money sitting idle is no longer neutral—it’s a missed opportunity to drive impact.

A Chance to Rebuild Trust

For years, critics have pointed to the ballooning balances in DAFs and the slow payout rates of some foundations as symptoms of a philanthropic system disconnected from urgent needs. The Big Beautiful Bill represents a policy-level course correction—an effort to get capital off the sidelines and into communities.

But it’s not just about compliance. It’s about rebuilding trust between donors, nonprofits, and the public. Philanthropy’s social license depends on its ability to demonstrate timely, transparent, and transformative impact.

For nonprofits, this is an invitation to be bold and proactive. For donors, it’s a challenge to move from intent to action. And for all of us, it’s a chance to reimagine how wealth, purpose, and justice intersect in a new philanthropic era.

Disrupt the process so you can support the mission and focus your work. Let’s protect the industry with a strong NGO Strategy. Contact me directly, to explore your immediate options.

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