Why Fidelity and Vanguard Are Restricting Donations to the Southern Poverty Law Center

According to several media publications, including the New York Times, two of the largest sponsors of donor-advised funds (DAFs), Fidelity Investments (via Fidelity Charitable) and Vanguard (via Vanguard Charitable), have recently restricted grants to the Southern Poverty Law Center (SPLC). The decision has raised questions about how donor-advised funds work, who controls them, and what happens when a nonprofit comes under legal scrutiny.

What Is a Donor-Advised Fund?

A donor-advised fund is a charitable giving account administered by a public charity (like Fidelity Charitable or Vanguard Charitable, for example, though those aren't the only players in town).

Here’s how it works:

• A donor contributes cash, stocks, or other assets into the fund
• The donor receives an immediate tax deduction
• The assets can be invested and grow tax-free
• Over time, the donor recommends grants to specific nonprofits

However, the key detail is this: the sponsoring organization, not the donor, has final legal control over where the money goes.

Why Are Grants to SPLC Being Blocked?

The recent restrictions stem from legal and compliance concerns, not simply donor preference.

• The SPLC has reportedly been indicted or is under federal investigation related to alleged financial misconduct
• DAF sponsors have policies that may pause or deny grants to organizations facing criminal charges or serious legal allegations
• These policies are tied to IRS rules requiring funds to be used for legitimate charitable purposes

However, that being said, the SPLC has not lost its tax-exempt status and there has been no final ruling. Fidelity Charitable has said organizations under investigation may be deemed “not eligible” for grants during this process. Vanguard Charitable similarly pauses grants when charges raise questions about a nonprofit’s compliance with tax-exempt rules. In short, this is a risk management and regulatory compliance decision from the firms involved.

Why This Matters: Limits of Donor Control

This situation highlights a core tension in donor-advised funds. Donors expect flexibility and control over giving. But legally, they only make recommendations, not final decisions. When a sponsoring organization determines a grant could violate rules (internal or external), or create legal exposure, it can simply decline the donation, even if the donor strongly supports the cause.

Are There Alternatives?

YES. If donors want more control or fewer restrictions, there are several alternatives to consider:

1. Direct Giving

• Donate straight to a nonprofit
• No intermediary approval
• Downside: less flexibility in timing your tax deductions

2. Private Foundations

• Fully controlled by the donor or family
• Greater autonomy over grant making
• More complex, can be expensive, and heavily regulated

3. Other DAF Sponsors

• Different DAF providers may apply policies differently. However, large sponsors may follow similar compliance standards. 
• That said, you have options when it comes to where your money is held...and right now tens of BILLIONS of dollars are held in DAFs at Vanguard & Fidelity alone.

4. Fiscal Sponsorship or Intermediaries

• Donations routed through another qualified nonprofit
• This can sometimes provide flexibility, but is still subject to oversight

DAFs are powerful, tax-efficient giving tools, but ultimately controlled by the sponsoring charity, in this case, Vanguard Charitable & Fidelity Charitable. The restriction on grants to the Southern Poverty Law Center highlights how donor-advised funds ultimately operate and raises broader questions about what may be yet to come in an increasingly chaotic, politicized environment. It prompts debate over whether such actions are part of a wider, high pressure campaign targeting and disproportionately affecting education, history, and civil rights–oriented nonprofits.

For donors, the takeaway is simple: If absolute control over where your money goes is essential, a donor-advised fund may not always provide it, especially in moments of controversy or legal uncertainty.

Questions about your options for philanthropic giving? Let's Connect.

This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.