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  • 1.  DAF Bifurcation - is IRS Notice 2017-23 optional?

    Posted 05-21-2025 10:36 AM

    Hi All,

    We work with a reputable community DAF who contacted us with a grant verification for a membership fee. The verification question from grant administrators is usually worded as "are there any more than incidental benefits associated with this membership?" then they have the donor waive the benefits or use a personal payment for the membership. In this case, the the grant administrator asked us for the FMV of a membership, which I thought was odd. I responded with the FMV of the membership ($90), but added "Doesn't the donor need to waive all 'more than incidental benefits' to use their DAF for membership fees?"

    Here's their response: 

    "Our policy is to continue to offer the option to pay the charitable portion of a grant, and for the donor to separately cover the costs of any benefits they may receive until an official regulation is issued from the IRS. We contact the donor to confirm whether they are, or plan to, accept the benefits and if so, we deduct the non-charitable portion from the grant amount."

    We looked at their website and they don't have any forward-facing mention of their policies regarding the use of DAFs, like most other DAF companies do. Is IRS Notice 2017-73 optional? Has anyone else encountered this? Does anyone have any advice?



    ------------------------------
    Ashley Ojeda
    University of Texas at Austin
    ashley.ojeda@austin.utexas.edu
    ------------------------------


  • 2.  RE: DAF Bifurcation - is IRS Notice 2017-23 optional?

    Posted 05-21-2025 11:02 AM
    That notice is not related to the issue of bifurcation. Regardless, bifurcation is not allowed by the IRS. If an entity refuses to follow IRS rules that's on them.

    John

    John H. Taylor, Principal
    John H. Taylor Consulting, LLC
    2604 Sevier Street
    Durham, NC     27705

    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 3.  RE: DAF Bifurcation - is IRS Notice 2017-23 optional?

    Posted 05-21-2025 12:08 PM
    Ashley, the guidance in 2017-73 about bifurcation in Section 1 is a proposed rule. Per the notice " The Treasury Department and the IRS currently agree that the relief of the Donor/Advisor's obligation to pay the full price of a ticket to a charity-sponsored event can be considered a direct benefit to the Donor/Advisor that is more than incidental. Therefore, proposed regulations under § 4967 would, if finalized, provide, that a distribution from a DAF pursuant to the advice of a Donor/Advisor that subsidizes the Donor/Advisor's attendance or participation in a charity-sponsored event confers on the Donor/Advisor a more than incidental benefit under § 4967. " 

    These notices are technically Notices of Proposed Rulemaking (NPRM). There are some specific and technical rules about relying on them, but the short version is that IRS examiners follow the proposed regulation, unless it is in conflict with an existing regulation. In this case, there is no conflicting regulation, this notice is simply a clarification that getting tickets or whatever is a more than incidental benefit. There was no rule that existed that said otherwise. 

    In my opinion (not anyone's lawyer) this clarification is not optional, and an IRS examiner would have issues with the position the DAF sponsor has taken. 


    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now:






  • 4.  RE: DAF Bifurcation - is IRS Notice 2017-23 optional?

    Posted 05-21-2025 12:38 PM
    You rock, Isaac. I was thinking only about the pledge payment provision of this notice. I had forgotten this mention! You additional observation that this notice does not change the IRS stance on bifurcation is key, too.

    John H. Taylor, Principal
    John H. Taylor Consulting, LLC
    2604 Sevier Street
    Durham, NC     27705

    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


  • 5.  RE: DAF Bifurcation - is IRS Notice 2017-23 optional?

    Posted 05-21-2025 01:11 PM

    This is great, thank you John and Isaac for the sanity check!



    ------------------------------
    Ashley Ojeda
    University of Texas at Austin
    ashley.ojeda@austin.utexas.edu
    ------------------------------

    Original Message


  • 6.  RE: DAF Bifurcation - is IRS Notice 2017-23 optional?

    Posted 05-22-2025 10:26 AM

    One follow up question. What are the repercussions to my institution if we accept grants from a DAF sponsor who doesn't adhere to the proposed IRS regulation? I'm sure the CSU benefitting from these grants will be taking issue with my "no bifurcation" stance when there's a DAF who is okay with bifurcation.



    ------------------------------
    Ashley Ojeda
    University of Texas at Austin
    ashley.ojeda@austin.utexas.edu
    ------------------------------

    Original Message


  • 7.  RE: DAF Bifurcation - is IRS Notice 2017-23 optional?

    Posted 05-22-2025 10:39 AM
    As previously pointed out, the bifurcation issue is not a proposed regulation. It is a reinforcement of existing rules.

    You will need to ask Counsel what the implications are to your organization. Clearly, the DAF has the most to lose. If Counsel tells you it is their problem and not yours I would clearly describe in a letter or receipt the entire nature of the transaction and its possible IRS implications.

    John

    John Taylor Principal, John H. Taylor Consulting, LLC 919.816.5903 Big ideas; small keyboard





    Original Message


  • 8.  RE: DAF Bifurcation - is IRS Notice 2017-23 optional?

    Posted 05-22-2025 12:41 PM
    There is not a non-criminal statutory penalty for the charity like the penalties described for the DAF advisor and DAF sponsor. But the IRS generally has the power to hold you liable for aiding and abetting another person's evasion of tax liability, and can fine you, revoke your tax exemption, and pursue criminal prosecution for those things. In this case, you would have to knowingly accept the $90 from the donor, and the remainder from the DAF, and nevertheless provide benefits. I see this as extremely shaky ground from which to mount a defense. 



    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now:





    Original Message


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