Three quarters of DAFgiving360 gifts were non-cash assets. Private-company stock donations surged as AI giants stay private longer, letting donors avoid capital gains tax.
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The IPO wave and rising private-company valuations are driving a surge in donations of shares to donor-advised funds, or DAFs, according to a new study by DAFgiving360, the charitable arm of Charles Schwab.
Three quarters of the gifts to DAFgiving360 over the past 12 months were non-cash assets like shares in public and private companies, real estate, art, crypto and other holdings.
Julie Sunwoo, president of DAFgiving360, said gifts of private-company stock have been especially strong. AI giants like Anthropic and OpenAI have skyrocketed in value, and more companies are staying private for longer.
"This year we had more inquiries about private-business interests and pre-IPO shares than ever before in any other year," Sunwoo said.
DAFs let donors make a charitable gift, take an immediate tax deduction and decide later where to send the assets to a specific charity. Donors who own shares of a private or public company that have gained value can gift the shares to the DAF without paying capital gains tax on their sale. The deduction on the gift can also offset capital gains taxes on other shares they sell.
The funds appeal to younger tech workers who can make donations now and wait until later years to choose the individual grant recipients.
Large DAFs affiliated with Schwab, Fidelity and Vanguard have expertise valuing private shares and other assets. They run large market-making operations and maintain relationships with private companies that make it easier to sell the private shares.
Sunwoo said DAFs generally try to sell non-cash assets within six months.
"We have the infrastructure and the expertise to help people liquidate those assets in time and redeploy them to charity," Sunwoo said. "It is often an individual plan with the company that we are working with to figure out the best time frame and the best solution."
The SpaceX IPO earlier this year, and potential IPOs of Anthropic and OpenAI, could unlock even more value. Many employees of tech firms hold large gains in their employee stock. Some private companies restrict or ban the donation of their shares to charities or trusts. With public stock, many employees can donate to a DAF without paying the capital gains tax.
Sunwoo summed it up: "The IPO activity that we've seen is creating wealth moments for people often in their peak earning years, so they're looking for ways to make an impact with the money that they suddenly come upon."
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