Donor-advised funds are continuing to grow while enjoying substantial tax deductions for charitable giving even as many contributions go to other DAFs and private foundations instead of actual charities, according to a new report.

The report, released Monday by the Charity Reform Initiative of the Institute for Policy Studies, found that total DAF assets have grown 67% over the past four years, from $152 billion in 2020 to $254 billion in 2023, despite fluctuations in contributions. 

National sponsor assets have grown at by far the fastest pace, increasing 92% from 2020 to 2023. (National sponsors are those with no specific geographic or cause-based mission, such as Fidelity Charitable, the National Philanthropic Trust and the American Endowment Foundation.) While they represent only 3% of DAF sponsors, national sponsors held 70% of all DAF assets, took in 73% of all DAF contributions, and gave out 61% of all DAF grant dollars in 2023.

The median DAF account size across all sponsors was $135,086 in 2023. National sponsors had the largest accounts, at $390,910. Donation processor accounts were by far the smallest, at $305. (Donation sponsors administer mass-scale contributions, such as workplace giving, payroll deduction or crowdfunding programs. Some examples include PayPal Charitable Giving Fund, Network for Good and American Online Giving Foundation.)

The median DAF payout rate across all sponsors was 9.7% in 2023. This payout has stayed around 9 to 10 percent for the past four years. Donation processors have by far the highest payout rates of any sponsor type, granting out around 82% in any given year. Community foundation sponsors have the lowest rates, granting out around 8 to 9%. (Community sponsors mainly support charities in a specific geographic region such as a state, county or city. Examples include the Silicon Valley Community Foundation, the Chicago Community Trust and the Community Foundation of the Ozarks).

DAF-to-DAF grants accounted for an estimated $4.4 billion in 2023. Some of these go-between gifts are the commercial sponsors’ largest. In 2023, for example, Schwab Charitable’s third-largest grant was to Fidelity Charitable, for $122 million. That same year, Fidelity Charitable’s largest grant was to National Philanthropic Trust, at $195 million, with Schwab Charitable in second place at $183 million.

Private foundations gave at least an estimated $3.2 billion dollars in grants to national donor-advised funds in 2022. Private foundations’ 5% annual payout requirement is supposed to ensure their grants go to operating charities in a timely way, but because DAFs have no payout or account-level disclosure requirements, foundation-to-DAF grants can undermine the foundation payout rules and transparency rules as well.

The report argues for more transparency. “The public only has access to aggregate sponsor-level information about DAF grants and payout rates,” said the report. “This means that individual DAF accounts that pay out at high rates may be providing statistical cover for DAF accounts that pay out very little, or nothing at all. And there is no way for regulators or the public to trace significant donations back to major donors, as is possible for private foundations.”

The report noted that every year, more charitable dollars are diverted to donor-advised funds while nonprofits on the ground struggle harder to get funding. “Donors reap significant tax savings from DAF giving, and those savings are subsidized by other American taxpayers with no guarantee of commensurate public benefit,” said the report. “In the absence of adequate transparency, DAFs are ripe for mistreatment by donors and for-profit actors. Congress could ensure that DAFs are more accountable to the public and move funds in a timely manner to charities on the ground.”

It’s an exciting time for business owners when they take their small businesses to the next level, expanding to other locations. 

While there are many moving parts when opening a new office or store in the same state, business clients have additional tasks to tackle when branching out into other states. As a trusted accounting and tax resource, you will likely be their go-to for answers when they have questions about what’s involved in those efforts.

In this post, I will cover three important compliance components of setting up shop in another state.

Foreign qualification

Foreign qualification is the process of registering an existing entity in one state as a foreign entity in another state to legally allow it to conduct business there.  Different states have different nexus criteria for determining what’s considered “conducting business,” but the one universal rule for when a business must foreign qualify is if it opens a physical location in a state. 

After a company has foreign qualified, it must fulfill the state’s business compliance requirements — e.g., obtain licenses, file annual reports, comply with employment laws, and pay applicable state (and possibly local) taxes. 

State income tax

State income tax is a state-mandated tax that most states collect on business income and employees’ pay. Any business with employees in the state is responsible for withholding SIT from employees’ gross wages or salaries and remitting that money to the correct state tax agency. Typically, state tax rates vary by state and differ for business entities and individuals. 

Currently, nine states do not levy an individual income tax, and a few also do not have a corporate income tax: 

• Alaska (no individual income tax, but has a graduated corporate income tax);
• Florida (no individual income tax, but has a corporate income tax);
• Nevada (no individual income tax; no corporate income tax, but levies a gross receipts tax on business entities with gross revenue exceeding $4 million in a fiscal year);
• New Hampshire (doesn’t tax individual’s wage income and is eliminating the tax on dividends and interest income for the 2025 tax year; has a Business Profits Tax and entities with gross receipts over $298,000 are subject to a Business Enterprise Tax);
• South Dakota (no individual or corporate income tax);
• Tennessee (no individual income tax; no corporate income tax, but has a business tax, a privilege tax for doing business by making sales of tangible personal property and services, which usually consists of two taxes: a state business tax and a city business tax);
• Texas (no individual income tax; no corporate income tax, but has a franchise tax, a privilege tax on business entities formed in or doing business in the state);
• Washington (no individual income tax; no corporate income tax, but imposes a business and occupation or public utility tax on gross receipts);
• Wyoming (no individual income tax or corporate income tax, but has a Business Entity License Tax).

Note that cities and counties in some states charge their own income tax as well, even if the state does not levy income tax. 

Before withholding SIT and local income tax from employees’ pay in a state, an employer must register for a state-issued employer identification number and follow the local government’s rules for registering to withhold and remit its income tax. Businesses must pay close attention to meeting the state and local payroll reporting and payment deadlines to avoid fines and penalties. 

State unemployment insurance

Businesses with employees in a state with its own unemployment insurance program must also register to contribute to that program. Like the federal unemployment program, SUI (also known as SUTA) provides temporary payments to workers who become unemployed due to no fault of their own. A few states — Alaska, New Jersey and Pennsylvania — require employees to pay a portion of the SUI. The laws of the state establish the taxable wage threshold and the unemployment tax rate.

Employers must pay federal and state unemployment insurance for each employee based on the employee’s wages or salary. The 6% FUTA tax applies to the first $7,000 paid (after subtracting any FUTA-exempt payment amounts) to each employee during a calendar year. Please note most states have a credit reduction amount that reduces the 6% FUTA tax; the credit reduction rates can change each year for each state. States’ SUI rates vary, with each state determining the wage base, or threshold, for when SUI kicks in. Businesses can anticipate that SUI tax rates might change from year to year in response to economic conditions.

To register for SUI, businesses must register with the state department (e.g., Department of Revenue or Department of Employment Security) responsible for unemployment taxes. Businesses need an Employer Identification Number from the IRS to set up an account with the state for filing and remitting SUI taxes. Generally, states require businesses to report and pay their SUI quarterly.

There’s more

Also, inform business clients that some states require employers to pay or withhold additional payroll taxes. For example, employers in California must pay an Employment Training Tax, which provides money to train employees in specific industries and withhold or pay State Disability Insurance from employees’ paychecks, which temporarily pays workers when they’re ill or injured due to non-work activities or for pregnancy, and Paid Family Leave benefits. In Kentucky, many counties and cities impose an Occupational License Fee on individuals’ payroll and the net profits of a business.

Also, businesses with workers on payroll in a state must pay for workers’ compensation insurance; no portion of that cost may be deducted from employees’ pay.

The bottom line

As your clients’ trusted tax advisor, I encourage you to provide the most clear and comprehensive expertise that your licensing allows so your clients understand their tax and payroll obligations when they expand their operations to other states and localities. Also, make them aware that states’ rules and regulations vary for companies registering as foreign entities within their jurisdictions. It’s critical that your business clients research the requirements that apply to them and get the professional legal guidance they need to fully understand and comply with their responsibilities.

Michael Saylor’s Strategy said it will register an unrealized $5.9 billion loss in the first quarter after adopting an accounting change that requires valuing digital assets at market prices. 

Shares of the dot-com-era software maker turned leveraged Bitcoin proxy formerly known as MicroStrategy fell as much as 14% on Monday. Earlier, Bitcoin wiped out almost all of its gains since Donald Trump’s U.S. presidential election win in early November.

Strategy and fellow corporate buyers of Bitcoin are being made to recognize the unrealized changes that often produce big swings in earnings or, in the case of Strategy last quarter, losses. Strategy waited until the first quarter to adopt the accounting change that was approved last year. 

Prior to the accounting change, the Tysons Corner, Virginia-based company has been classifying its Bitcoin holdings as intangible assets — similar to brand recognition or trademarks. That designation forced Strategy to permanently mark down the value of its holdings when the price of Bitcoin dropped. Gains could only be recognized when tokens are sold, which Saylor has vowed not to do, even saying his digital wallet keys should be burned when he dies.   

Part of the first-quarter loss will actually result from Saylor’s recent spending binge, which has produced roughly $1 billion of paper losses on the $7.79 billion the company spent on Bitcoin in 2025, according to Bloomberg calculations. The company owned $41.8 billion of Bitcoin coming into the year, an amount that fell by nearly $5 billion in the first quarter with the 12% drop in the price of the tokens. That equates to about $6 billion of “mark-to-market” losses, according to Bloomberg calculations as of March 31, before taxes.

At the same time, the company’s retained earnings will whipsaw into positive territory, courtesy of a nearly $13 billion boost from the new accounting, according to Bloomberg calculations. 

Strategy became the first public company to buy Bitcoin as a capital allocation strategy in 2020, with co-founder and chairman Saylor saying the enterprise software firm needed to embrace the policy to survive. It grabbed the attention of Wall Street as the shares took off with speculators using it as a proxy for the digital currency. 

Saylor took advantage of the surging demand to sell more shares to purchase additional Bitcoin, eventually expanding to convertible debt and preferred shares offerings to fuel the buying spree. The stock is up more than 2,200% since the start of August 2020. 

Hedge funds have been driving some of the demand for the convertible debt, as they seek out Strategy for trades that incorporate buying the bonds and selling the shares short, essentially betting on the underlying stock’s volatility.   

With the price of Bitcoin faltering along with other risky assets this year, the meteoric appreciation in the value of Strategy’s shares has also slowed. And last week, Strategy’s shares got their only sell rating after boutique equity research firm Monness, Crespi, Hardt & Co. cut its view on the firm, saying the market for the securities used to fund the Bitcoin purchases is increasingly saturated.