EA could benefit from a general-purpose nonprofit entity that offers donor-advised funds and fiscal sponsorship

Many EA Fo­rum posts have been writ­ten about com­mu­nity pro­pos­als like pro­vid­ing com­mu­nity mem­bers with the fi­nan­cial sta­bil­ity to make an im­pact (1, 2), im­prov­ing the state of early-stage pro­ject fund­ing in EA (1, 2, 3, 4), and in­creas­ing the adop­tion of donor-ad­vised funds within EA (1, 2). EA com­mu­nity mem­bers would be em­pow­ered to ex­per­i­ment with ap­proaches to ad­dress these bot­tle­necks and cre­ate value in other ways if the in­fras­truc­ture ex­ists for them to do so—namely a non­profit en­tity that ex­plic­itly fo­cuses on pro­vid­ing donor-ad­vised funds (DAFs) and fis­cal spon­sor­ship (FS) to the EA com­mu­nity.

Donor-ad­vised funds and fis­cal spon­sor­ship can be offered by any 501(c)(3) char­ity, ideally with the ap­pro­pri­ate sup­port­ing pa­per­work. Donor-ad­vised funds al­low peo­ple to donate money or as­sets to a char­ity that pro­vides donor-ad­vised funds, re­ceive an im­me­di­ate tax de­duc­tion, and con­trol how those funds are sub­se­quently dis­tributed to other char­i­ties and so­cial im­pact pro­jects with the op­tion of in­vest­ing the funds in­definitely prior to dis­tri­bu­tion. DAFs provide donors with con­sid­er­able tax benefits like de­duct­ing the full amount of donated as­sets in­stead of sel­l­ing ap­pre­ci­ated as­sets, pay­ing cap­i­tal gains tax, and donat­ing the af­ter-tax re­main­der. They also provide lo­gis­ti­cal benefits like only get­ting a sin­gle dona­tion re­ceipt from the DAF rather than re­ceiv­ing one from all of the char­i­ties funded through the DAF. Fis­cal spon­sor­ship is a re­lated con­cept to DAFs that en­ables any per­son or or­ga­ni­za­tion to ac­cept tax-de­ductible dona­tions at a char­ity that pro­vides fis­cal spon­sor­ship. This has the benefit of elimi­nat­ing the need to cre­ate a new char­ity and han­dle the as­so­ci­ated lo­gis­tics for ev­ery sin­gle new char­i­ta­ble pro­ject un­less it makes sense to start a sep­a­rate or­ga­ni­za­tion.

There are stan­dard benefits of donor-ad­vised funds and fis­cal spon­sor­ship seen in the char­i­ta­ble sec­tor, such as pro­vid­ing donors with con­sid­er­able tax ad­van­tages and re­duc­ing the time for peo­ple to launch/​test new so­cial im­pact pro­jects. There are also cre­ative ap­proaches that might be able to cre­ate value in new ways. This post cov­ers both stan­dard and cre­ative ways DAFs and fis­cal spon­sor­ship might be able to benefit the EA com­mu­nity, and all of them would be made pos­si­ble and be eas­ily testable by set­ting up a sin­gle or­ga­ni­za­tion.

Donor-Ad­vised Funds

  • En­abling EAs to ac­cess the stan­dard benefits of DAFs, namely in­creas­ing the amount that ends up be­ing donated by a con­sid­er­able multiplier

    • Donor-ad­vised funds from non-EA providers have ac­cessibil­ity prob­lems in­clud­ing high min­i­mums to cre­ate a DAF, high an­nual fees, high min­i­mum grant amounts, high min­i­mum main­te­nance amounts, and limited in­vest­ment options

    • DAFs also have prob­lems with re­gards to how funds can be dis­bursed; for ex­am­ple, fund­ing in­di­vi­d­u­als do­ing char­i­ta­ble work or so­cial im­pact star­tups is not pos­si­ble with most providers, al­though it is legally possible

  • Mak­ing it eas­ier to in­vest in­tended dona­tions for the short-term and the long-term, in­creas­ing the amount be­ing donated by a con­sid­er­able multiplier

    • It may be challeng­ing for donors to im­ple­ment in­vest­ment best prac­tices on their own, plus those in­vest­ments would be sub­ject to taxes out­side a DAF

    • An EA DAF would make it very easy to gain the benefits of in­vest­ing (or sim­ply keep­ing money in high-in­ter­est ac­counts) prior to donat­ing whether that time range is 3 months or 30 years

  • En­abling EAs to fund their own fu­ture char­i­ta­ble work or pro­jects (or those of oth­ers) in a man­ner that has the tax benefits of a re­tire­ment ac­count (in­clud­ing tax de­ductible con­tri­bu­tions and no cap­i­tal gains tax) while al­low­ing for dis­burse­ments at any time (rather than af­ter some­one re­tires or reaches a cer­tain age), and those dis­burse­ments can even be dis­tributed tax free if di­rectly spent on char­i­ta­ble ex­penses (rather than be­ing dis­tributed as salary)

  • Mak­ing it pos­si­ble to guaran­tee fund­ing for one or more non­prof­its or causes for an ex­tended pe­riod of time (say one or more decades), or even into per­pe­tu­ity, by donat­ing an X% safe with­drawal rate from a DAF ev­ery year

    • Guaran­tee­ing a stream of in­come for a char­ity ev­ery year rather than sim­ply pro­vid­ing a lump sum al­lows char­i­ties to hire ad­di­tional staff mem­bers or pur­sue pro­jects with­out fi­nan­cial un­cer­tainty about be­ing able to af­ford re­lated ex­penses in the future

  • Allow­ing peo­ple to ex­plore cre­at­ing funds to ad­dress a va­ri­ety of com­mu­nity needs like pro­vid­ing for­giv­able loans to ex­plore/​en­ter an EA ca­reer path (AI safety, for ex­am­ple) and cov­er­ing ba­sic liv­ing ex­penses for EA en­trepreneurs that other EA com­mu­nity mem­bers can fund

  • Allow­ing peo­ple to ex­plore cre­at­ing funds to fund differ­ent cause ar­eas and pro­jects, such as those men­tioned in Kerry Vaughan’s article

  • En­abling peo­ple to eas­ily get a tax de­duc­tion by donat­ing to char­i­ties in other coun­tries by set­ting up DAF en­tities in differ­ent coun­tries, pro­vid­ing a bet­ter al­ter­na­tive to dona­tion swapping

Fis­cal Sponsorship

  • Mak­ing it pos­si­ble for peo­ple to get a tax de­duc­tion for their per­sonal spend­ing on small, tem­po­rary, or early-stage pro­jects, like dis­tribut­ing EA books to people

  • Mak­ing it pos­si­ble for peo­ple to eas­ily fundraise for small, tem­po­rary, or early-stage pro­jects and offer tax de­duc­tions for funders

  • Allow­ing EA en­trepreneurs to eas­ily val­i­date and scale new ven­tures by elimi­nat­ing the need to set up a new or­ga­ni­za­tion and deal with op­er­a­tions (in­cor­po­rat­ing, cre­at­ing a bank ac­count, etc) for the new venture

  • De­creas­ing op­er­a­tion time and costs for early-start EA star­tups by hav­ing op­er­a­tions (ac­count­ing, pay­roll, pro­cess­ing tax de­duc­tions) in one place

  • Allow­ing ex­ist­ing EA pro­jects and com­pa­nies to set up a non­profit branch if they did not have one be­fore, or if they need one in a differ­ent coun­try than the one they are lo­cated in

  • En­abling crowd­fund­ing for EA pro­jects and ventures

I es­ti­mate the cost of set­ting up such an en­tity in the U.S. at $15,000–$25,000 based on a quote I re­ceived from a rep­utable le­gal firm. I be­lieve the tan­gible (ad­di­tional money to char­ity) and in­tan­gible EV (helping peo­ple launch their own EA funds) if just one of the many ideas I men­tioned above is im­ple­mented greatly ex­ceeds the costs of set­ting such an en­tity up. If any­one is in­ter­ested in fund­ing this pro­ject, con­tribut­ing to this pro­ject, or found­ing/​run­ning this pro­ject, please let me know!