I think there are real benefits to having an entity which can provide fiscal sponsorship.
For the Donor Advised Fund (DAF) side of things, I’m less convinced.
I doubt that there are many people who would benefit from having a DAF who can’t already get the benefits that they need from existing DAF providers (i.e. I suspect it’s not worthwhile to invest the c $15k to set this up for such a small number of people)
If there’s more demand than I realise, then I think if we take evidence of that demand to an existing DAF provider, I believe they would be more than happy to provide those people with that service
Thanks for sharing your thoughts! Which of the applications of fiscal sponsorship seem most promising to you?
Regarding DAFs, I’d have to do the math, but I think that the benefit of the $15,000–$25,000 could be realized extremely quickly. For example:
If just $200,000 in intended donations for 2022 or later were counterfactually invested at a 7.5% ROI rather than held in cash, the initial investment would be recouped in a year ($200,000 * 0.075 = $15,000)
If someone in California was earning $250,000 a year and saved $50,000 in a DAF in both 2020 and 2021 to do direct work in 2022 and 2023 by $50,000 a year from their DAF, they would pay a tax rate of 19.46% in 2022 and 2023 on the $50,000 per year instead of paying a marginal tax rate of 46.65% if they saved $50,000 in 2020 and 2021 without depositing it into a DAF, leading to a $27,190 tax reduction ($100,000 * (0.4665-0.1946) = $27,190)
I think it’s highly unlikely an existing DAF provider will customize their offerings (for example by offering to pay individuals a salary directly to do charitable work instead of just regranting to 501(c)(3)s) because their expected benefit from doing so is simply too low to justify the time investment.
I think the benefits of fiscal sponsorship were fairly clear from your post.
For the example in your first bullet point, it may be that there are enough donors to warrant creating a DAF, but that still wouldn’t mean the option outperforms dealing with an existing DAF provider.
For your second bullet point, I hadn’t appreciated this element of your post on first reading. I expect an existing DAF provider probably would be nervous about providing this service. And I could imagine people in the EA community benefiting from this. However it would make me nervous too—it sounds like the sort of scheme that could be made to look really bad in the hands of the right (or wrong!) journalist. But maybe these risks are more surmountable than I realise.
I agree that the second bullet point is likely more novel/compelling. Regarding the first point, I think that barriers like “high minimums to create a DAF, high annual fees, high minimum grant amounts, high minimum maintenance amounts, and limited investment options” mentioned in my post may reduce the counterfactual amount that would otherwise go to DAFs from EA by a considerable degree exceeding the $200,000 figure mentioned. For example, the minimum to create a DAF at Vanguard Charitable is $25,000, which is a somewhat large amount of capital for some people just to invest their money in something safe like a 2% savings account or money market fund prior to donation.
I think that some DAF applications I mentioned are more novel/compelling than others, such as allowing people to easily invest intended donations, fund their own future charitable work in a tax-deductible manner, and create additional “EA funds” offering a wider range of cause areas and methodologies beyond what the existing EA Funds offer.
I think that the second bullet point is viable so long as all appropriate best practices are followed, such as giving fair compensation for the level of future work (e.g. not paying people $500,000 a year for work that charities normally pay $50,000 a year for) and ensuring that all future work is actually charitable and appropriately documented.
I find it unlikely this will cause any PR issues unless this is actually broadly advertised to the general public, and even if so, it’s important to note that this idea requires people to actually do charitable work in the future at a lower pay rate as opposed to simply saving for retirement in a 401(k) which offers similar tax and investing benefits. It only seems amazing to us because we would actually like to work full-time on charitable work in the future at a low pay rate—this is not an idea that seems popular in the mainstream.
I think there are real benefits to having an entity which can provide fiscal sponsorship.
For the Donor Advised Fund (DAF) side of things, I’m less convinced.
I doubt that there are many people who would benefit from having a DAF who can’t already get the benefits that they need from existing DAF providers (i.e. I suspect it’s not worthwhile to invest the c $15k to set this up for such a small number of people)
If there’s more demand than I realise, then I think if we take evidence of that demand to an existing DAF provider, I believe they would be more than happy to provide those people with that service
Thanks for sharing your thoughts! Which of the applications of fiscal sponsorship seem most promising to you?
Regarding DAFs, I’d have to do the math, but I think that the benefit of the $15,000–$25,000 could be realized extremely quickly. For example:
If just $200,000 in intended donations for 2022 or later were counterfactually invested at a 7.5% ROI rather than held in cash, the initial investment would be recouped in a year ($200,000 * 0.075 = $15,000)
If someone in California was earning $250,000 a year and saved $50,000 in a DAF in both 2020 and 2021 to do direct work in 2022 and 2023 by $50,000 a year from their DAF, they would pay a tax rate of 19.46% in 2022 and 2023 on the $50,000 per year instead of paying a marginal tax rate of 46.65% if they saved $50,000 in 2020 and 2021 without depositing it into a DAF, leading to a $27,190 tax reduction ($100,000 * (0.4665-0.1946) = $27,190)
I think it’s highly unlikely an existing DAF provider will customize their offerings (for example by offering to pay individuals a salary directly to do charitable work instead of just regranting to 501(c)(3)s) because their expected benefit from doing so is simply too low to justify the time investment.
I think the benefits of fiscal sponsorship were fairly clear from your post.
For the example in your first bullet point, it may be that there are enough donors to warrant creating a DAF, but that still wouldn’t mean the option outperforms dealing with an existing DAF provider.
For your second bullet point, I hadn’t appreciated this element of your post on first reading. I expect an existing DAF provider probably would be nervous about providing this service. And I could imagine people in the EA community benefiting from this. However it would make me nervous too—it sounds like the sort of scheme that could be made to look really bad in the hands of the right (or wrong!) journalist. But maybe these risks are more surmountable than I realise.
I agree that the second bullet point is likely more novel/compelling. Regarding the first point, I think that barriers like “high minimums to create a DAF, high annual fees, high minimum grant amounts, high minimum maintenance amounts, and limited investment options” mentioned in my post may reduce the counterfactual amount that would otherwise go to DAFs from EA by a considerable degree exceeding the $200,000 figure mentioned. For example, the minimum to create a DAF at Vanguard Charitable is $25,000, which is a somewhat large amount of capital for some people just to invest their money in something safe like a 2% savings account or money market fund prior to donation.
I think that some DAF applications I mentioned are more novel/compelling than others, such as allowing people to easily invest intended donations, fund their own future charitable work in a tax-deductible manner, and create additional “EA funds” offering a wider range of cause areas and methodologies beyond what the existing EA Funds offer.
I think that the second bullet point is viable so long as all appropriate best practices are followed, such as giving fair compensation for the level of future work (e.g. not paying people $500,000 a year for work that charities normally pay $50,000 a year for) and ensuring that all future work is actually charitable and appropriately documented.
I find it unlikely this will cause any PR issues unless this is actually broadly advertised to the general public, and even if so, it’s important to note that this idea requires people to actually do charitable work in the future at a lower pay rate as opposed to simply saving for retirement in a 401(k) which offers similar tax and investing benefits. It only seems amazing to us because we would actually like to work full-time on charitable work in the future at a low pay rate—this is not an idea that seems popular in the mainstream.