In April 2026, a federal grand jury in Alabama indicted the Southern Poverty Law Center (SPLC), a nonprofit civil rights organization founded in 1971. The indictment includes charges of wire fraud, false statements to a federally insured bank, and conspiracy to commit money laundering. Prosecutors allege that the SPLC improperly used donor funds to compensate confidential informants embedded within extremist groups without disclosing those payments to donors. The SPLC has denied the allegations and notes that the informant program is no longer active. Per a New York Times report, the investigation was prompted by activist groups close to the White House.
How DAF Sponsors Responded
Shortly after the indictment, Fidelity Charitable, Vanguard Charitable, DAFgiving360 (affiliated with Schwab) and several other sponsoring organizations froze all grants to the SPLC. However, donors were not informed of this decision until grants that they tried to transfer to the SPLC were denied.
Per Fidelity Charitable, “consistent with our grant-making standards and practices, the organization is not an eligible grant recipient during the ongoing investigation.” Fidelity’s granting due diligence guide notes that “by declining to approve a grant recommendation to a specific organization, Fidelity Charitable is not making any form of statement about that organization or its activities.”
DAFgiving360 does not include due diligence information in their grant guidelines.
Vanguard Charitable notes that a grant could be denied if they “become aware that a nonprofit organization has been charged by regulatory authorities for criminal activities that call into question its ability to carry out its charitable purpose.”
The sponsors’ decisions drew criticism from donors, philanthropic organizations, and elected officials. A coalition of 15 attorneys general urged the sponsors to reconsider their decisions.
Status of the SPLC Case
The Nonprofit Times highlighted a May 6th letter published on the Democracy Fund website in support of the SPLC. More than 125 philanthropic organizations and leaders signed the letter, arguing that donor advised fund sponsors declining grants to civil rights organizations could have a chilling effect on free speech and civil society.
The case remains pending and the SPLC has challenged the prosecution through several court filings, including a motion to dismiss the charges. In a May 26th press release, the organization argued that “the government can’t prosecute the SPLC as payback for its protected speech — it violates basic constitutional rights.”
On June 9th, Rep. Maxine Waters, Ranking Member of the House Financial Services Committee, and Rep. Jamie Raskin, Ranking Member of the House Judiciary Committee, sent a letter requesting documentation from Fidelity, Vanguard, and DAFgiving360 by July 3rd, and instructing the firms to preserve records and communications related to the matter.
On July 7th, the organization pleaded not guilty to a superseding indictment that added additional factual allegations but did not add new defendants. The trial is currently scheduled for October 2026.
What does this mean for DAF donors?
Although sponsors designate the terms of DAFs in the legal documentation established when a fund is opened, many may not fully understand the restrictions that can apply to a DAF account. It’s easy to assume a DAF functions like a charitable checking account, allowing donors to recommend grants to any qualified nonprofit. In reality, sponsoring organizations retain legal ownership and ultimate discretion over grant approvals.
To further this point, a Barron’s article reminded readers that DAF donors contribute assets to sponsoring organizations for management. Ultimately, sponsors – not donors – decide whether grant recommendations comply with their policies.
While reaching the headlines now, this is not new. In 1981, National Foundation, Inc. v. United States established that donors relinquish ownership and control over donated funds while sponsoring organizations retain discretion over distributions.
IRS 4966(d)(2) describes a DAF as, in part, “a fund or account owned or controlled by a sponsoring organization.”
Per the National Philanthropic Trust’s “Guide to Your Donor Advised Fund,” “[the donor] establish[es] your DAF account with an irrevocable contribution to NPT. You advise the DAF account by recommending investments and grants, and NPT manages administrative functions such as legal oversight and record keeping.”
Fidelity’s donor guide describes the process as follows: “we call it “recommending grants” because you’ve already made your tax-deductible donation to us.” In short, although donors can specify where they want their funds to go, the DAF sponsor legally owns those funds after they have been deposited into a DAF account.
What Options Do Donors Have?
The public attention on the SPLC case raises broader questions about the relationship between DAF donors and their sponsoring organizations. Regardless of where donors stand on the SPLC itself, the controversy may prompt many to reexamine how much discretion sponsors have, how clearly those policies are communicated, and what options are available if they disagree with a sponsor’s decisions.
Some DAF sponsors have seen this event as an opportunity. Brooklyn Org now offers a step-by-step guide for donors who want to move their DAF to a new sponsor and explains why they might be the better choice. It even offered a bonus grant to donors who switched before June 30.
Resources such as Free Your DAF have emerged in response to questions like these. Self-described as “a toolkit for DAF holders” with the overall goal to “[defend] civil society and the integrity of donor advised funds,” it was developed by a team of notable donor networks and organizations.
Free Your DAF provides current and potential DAF account holders with the information and links to research sponsors that align with their values, templates and links to contact their existing DAF sponsors with their concerns and email templates to organize others around the issue. The Free Your DAF site also directs those considering moving their funds to the Community Foundation Locator, a resource from the Council on Foundations, and provides its own recommended list of sponsoring organizations.
Looking Ahead
Whether or not donors agree with the sponsors’ decisions in this case, the controversy underscores the importance of understanding how DAFs work – and how individual sponsors approach grantmaking – before opening a donor advised fund.
The controversy also illustrates how much responsibility falls on potential and current DAF donors to educate themselves about sponsor policies and the options available to them.
Sponsors also have a responsibility to communicate those policies clearly and proactively. If donors first learn about restrictions only after a grant recommendation has been denied, that conversation is happening too late.
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Image Credit: “Fork in the road” by Wikideas1 is marked with CC0 1.0.
