• $326 billion in anonymous charitable accounts: Donor-advised funds now hold $326.45 billion across 3.56 million accounts, nearly doubling since 2020, with no mandatory payout deadlines or donor disclosure requirements.
  • Wall Street profits from warehoused charity: Fidelity, Schwab, and Vanguard earn management fees on DAF assets while channeling at least $171 million to Project 2025 nonprofits — with complete donor anonymity.
  • Both parties exploit the loophole: The left's Arabella Advisors network raised $6.5 billion through 2021; the right's DonorsTrust distributed $284 million in 2024 alone — neither discloses individual donors.
  • Congress has failed to act: The bipartisan ACE Act stalled, and the One Big Beautiful Bill's charitable provisions do nothing to address payout requirements or donor transparency.
  • IRS enforcement is nonexistent: The agency lacks resources and statutory authority to audit DAF sponsors, leaving a regulatory vacuum both sides exploit.

Americans who follow campaign finance know about super PACs. They know about 501(c)(4) "social welfare" organizations that spend millions on elections without disclosing donors. But the largest and fastest-growing dark money vehicle in the United States operates in plain sight — not through political committees, but through the charitable arms of Wall Street's biggest financial institutions. Donor-advised funds, or DAFs, now hold a staggering $326.45 billion in assets across 3.56 million accounts, nearly doubling since fiscal year 2020, according to the 2025 Annual DAF Report published by the DAF Research Collaborative using IRS Form 990 data. Unlike private foundations, they face no mandatory payout requirements, no meaningful disclosure obligations, and virtually no IRS enforcement. The result is a parallel financial system where the wealthiest Americans claim immediate tax deductions for "charitable" contributions that may never reach a working charity — while funding political infrastructure on both the left and right with complete anonymity.

What Are Donor-Advised Funds — And Why Should You Care?

A donor-advised fund operates on a simple but powerful premise: a donor contributes cash, securities, or other assets to a sponsoring organization — typically the charitable arm of a financial services firm like Fidelity, Schwab, or Vanguard. The donor receives an immediate tax deduction at the full fair market value of the contribution. The sponsoring organization then holds the assets in an investment account, where they grow tax-free. The donor "advises" the fund on where to distribute grants, but there is no legal deadline by which the money must actually reach a working charity.

This "deduct now, decide later" structure is the core of the problem. Private foundations — the traditional vehicle for large-scale philanthropy — are subject to a mandatory 5 percent annual payout requirement enforced by the IRS. Donor-advised funds face no such requirement. A donor can contribute $50 million in appreciated stock, claim the full deduction against that year's income, and let the money sit in the account indefinitely — growing tax-free while generating management fees for the sponsoring financial institution.

Seven of the top ten public charities in the United States by revenue are now DAF sponsors, according to the 2025 Annual DAF Report. Fidelity Charitable alone granted a record $18.3 billion to charities recommended by donors in 2025, a 23 percent increase over the prior year, according to the Fidelity Charitable 2025 Giving Report. The total DAF grantmaking across all sponsors reached $64.89 billion in fiscal year 2024 — a 19 percent increase, per the 2025 Annual DAF Report. But these headline numbers mask a structural problem: billions more flow into DAFs each year than flow out, and the gap continues to widen.

Wall Street's Role: The Big Three

The explosive growth of donor-advised funds has been driven primarily by three financial services giants: Fidelity, Charles Schwab, and Vanguard. Their charitable affiliates are now among the largest grant-making organizations in the country — but their primary business model is asset management, not philanthropy. They earn fees on the invested assets sitting in DAF accounts, creating a financial incentive to encourage contributions while placing no pressure on timely distribution.

Since fiscal year 2020, these three firms alone have channeled at least $171 million to the nonprofit organizations behind Project 2025, the Heritage Foundation-led policy blueprint for conservative governance, according to an October 2024 investigation by DeSmog based on IRS Form 990 filings. Fidelity Charitable Gift Fund directed over $82 million to 68 groups associated with the project. Schwab Charitable donated at least $54.1 million to 50 such groups. Vanguard Charitable contributed at least $28.8 million to 50 additional organizations, per the same analysis. Because DAFs do not disclose the identity of the individual donors behind these grants, it is impossible to determine who specifically funded these efforts — or whether foreign nationals, prohibited from direct political contributions, used DAFs as a pass-through mechanism.

This is not a partisan problem confined to one side of the political spectrum. The same structural anonymity benefits the left's political infrastructure on an even larger scale.

The Arabella Network: $6.5 Billion in Left-Wing Dark Money

Arabella Advisors, founded in 2005 by former Clinton administration appointee Eric Kessler, operates the largest known dark money network in American politics. Between its founding and 2021, the network raised $6.5 billion — the vast majority flowing to left-leaning policy and litigation organizations, according to Scott Walter's investigation published by the Capital Research Center. Each year, Arabella helps guide more than $5 billion in gifts and impact investments through its constellation of affiliated nonprofits, including the Sixteen Thirty Fund and the New Venture Fund.

The scale is staggering. In the 2020 election cycle, Arabella's nonprofits took in $2.4 billion — more than the fundraising of the Democratic and Republican National Committees combined, according to IRS Form 990 filings analyzed by the Capital Research Center. By the 2022 cycle, that figure rose to $3 billion. The Sixteen Thirty Fund alone spent $410 million toward defeating Donald Trump and winning Democratic control of the U.S. Senate in 2020, per its IRS filings reviewed by the Washington Free Beacon.

Because of its legal structure as a fiscal sponsor rather than a traditional PAC or party committee, Arabella and its affiliated groups are not required to disclose their donors. Foreign billionaires, including Swiss-born Hansjörg Wyss, have been identified by *The New York Times* as significant funders of the Arabella network. Wyss, as a Swiss national, is legally prohibited from making direct contributions to U.S. federal political campaigns under the Federal Election Campaign Act. There is no evidence that Wyss's contributions to Arabella-affiliated organizations violated campaign finance law. The Gates Foundation, once one of Arabella's largest backers with $450 million in funding over sixteen years, quietly ceased backing the network amid growing scrutiny, as first reported by *The New York Times* in 2025.

In March 2025, Capital Research Center president Scott Walter briefed senior White House officials on the Arabella network and its affiliated donors, as reported by the Capital Research Center, signaling that the current administration is at least aware of the left's dark money apparatus. But awareness has not translated into structural reform.

The Conservative Pipeline: DonorsTrust's $1.36 Billion War Chest

On the right, DonorsTrust — the preferred donor-advised fund of the Koch political network — has emerged as the primary conduit for anonymous conservative funding. In 2024, DonorsTrust distributed $284.1 million in grants, its second-biggest year since its 1999 founding, according to its IRS Form 990 filing. At fiscal year-end, the organization disclosed $1.36 billion in net assets, per the same filing.

The 2024 grant recipients reveal the fund's central role in the conservative policy ecosystem. America First Legal Foundation, led by former Trump advisor Stephen Miller, received nearly $21.3 million — up from just $3.2 million the prior year, a more than sixfold increase, according to DonorsTrust's 2024 IRS Form 990, as reported by NOTUS. America First Policy Institute received $4.4 million, an exponential increase from the $159,200 it received in 2023. The State Policy Network, which coordinates right-leaning think tanks across 49 states, received $9.8 million. The American Enterprise Institute received $1.9 million, the Cato Institute $1.3 million, and the Heritage Foundation approximately $735,000 — including $365,000 earmarked for its "Going On Offense On Gender Ideology" project, per the same filing.

During 2024 alone, eight unnamed individuals made seven- or eight-figure contributions to DonorsTrust totaling $162.4 million, according to DonorsTrust's IRS Form 990 disclosure. The public has no way of knowing who these donors are, what policy outcomes they seek, or whether their interests align with the organizations receiving the grants.

Congress's Failure to Act: The ACE Act and the One Big Beautiful Bill

Legislative efforts to impose transparency and payout requirements on DAFs have repeatedly stalled. The Accelerating Charitable Efforts Act — the ACE Act — proposed creating a two-tiered DAF system: a "fifteen-year DAF" requiring distribution within fifteen years to qualify for upfront tax benefits, and a "fifty-year DAF" that would defer income tax deductions until funds were actually distributed. The bill would also have prohibited private foundations from meeting their 5 percent payout obligation by distributing to DAFs with no payout requirements — closing a loophole that effectively allows foundations to launder their mandatory distributions through DAFs where the money can sit indefinitely.

The ACE Act attracted bipartisan support but was never brought to a floor vote. The financial services industry — which earns management fees on DAF assets — lobbied aggressively against mandatory payout requirements. Community foundations, which also sponsor DAFs, expressed concerns about compliance burdens.

The most recent legislative development, the One Big Beautiful Bill Act, actually made the problem worse for transparency advocates. Beginning January 1, 2026, the law introduces a 0.5 percent adjusted gross income floor for all itemized charitable deductions and caps the deduction value at 35 percent for top-bracket taxpayers. A new universal charitable deduction of $1,000 for individuals and $2,000 for joint filers was created — but DAF contributions are explicitly excluded from this benefit. The net effect is to slightly reduce the tax incentive for DAF contributions among the wealthy while doing nothing to address the core structural problems: no payout requirements, no donor disclosure, and no IRS enforcement mechanism.

The IRS Enforcement Gap

The Internal Revenue Service has acknowledged that some organizations "appeared to have abused the basic concepts underlying donor-advised funds, established for the purpose of generating questionable charitable deductions, and providing impermissible economic benefits to donors and their families." But meaningful enforcement has not followed. The IRS lacks the resources and statutory authority to audit DAF sponsors at the scale necessary to identify abuse. Current reporting requirements on IRS Form 990 do not require DAF sponsors to disclose individual donor identities or the specific advisory relationships between donors and grant recipients.

The result is a regulatory vacuum that both sides of the political spectrum have exploited. Private foundations increasingly route their mandatory distributions through DAFs, effectively circumventing the 5 percent payout requirement. Wealthy donors use DAFs to "warehouse" tax-deductible contributions that may never reach working charities. And political operatives on both the left and right use the anonymity of DAFs to fund policy organizations, litigation campaigns, and political infrastructure without public accountability.

Questions for Further Investigation

The VALOR Institute identifies the following questions that demand congressional attention and investigative scrutiny:

  • What is the average payout rate for DAF accounts at the five largest sponsors (Fidelity, Schwab, Vanguard, National Philanthropic Trust, and Silicon Valley Community Foundation), and what percentage of accounts have made zero distributions in the past five years?
  • How many private foundations have used DAF contributions to meet their 5 percent mandatory payout requirement, and what is the aggregate dollar value of these pass-through distributions?
  • Have foreign nationals — prohibited from contributing to U.S. political campaigns — used DAFs as a pass-through mechanism to fund organizations engaged in policy advocacy or election-related activity?
  • What is the total dollar value of management and advisory fees earned by financial services firms on DAF assets, and how do these fees compare to the firms' costs of administering the charitable programs?
  • Why has the IRS not exercised its existing authority under Section 4966 of the Internal Revenue Code to investigate taxable distributions from DAFs, and what additional statutory authority would be required to enforce meaningful payout requirements?

Toward Accountability

The donor-advised fund industry has grown from a modest charitable planning tool into a $326 billion parallel financial system that undermines the transparency and accountability Americans expect from both their tax code and their political system. Both parties have benefited from the anonymity DAFs provide, which is precisely why neither party has moved aggressively to reform them. The ACE Act's bipartisan framework — mandatory payout timelines, foundation pass-through restrictions, and enhanced IRS reporting — represents a reasonable starting point. But reform will require overcoming the financial services lobby, which profits directly from the warehousing of charitable assets, and the political establishments of both parties, which benefit from the cover of donor anonymity.

Americans deserve to know who is funding the policy organizations that shape their government. A tax deduction is a public subsidy — and public subsidies demand public accountability. Until Congress imposes meaningful payout requirements and donor disclosure obligations on donor-advised funds, the $326 billion loophole will continue to grow, enriching Wall Street, shielding billionaire donors, and corroding the transparency that a self-governing republic requires.