American Muslim Community Foundation helps families distribute their sadaqa and zakat through Donor Advised Funds and Giving Circles. As an administrator of zakat, does an individual or family that puts their funds with AMCF fulfill their zakat obligation when they give to AMCF? Legally, these funds are no longer the assets of a family as they get a tax deductible receipt. Are these funds in the future zakat eligible or considered AMCF's? The family can still direct AMCF as to where they would like the funds to go. Many families would still like the funds to go to a zakat eligible charity within one year of calculating their zakat. AMCF works with charities who have their zakat eligibility to pass on the funds.

We would welcome AMJA to be on our advisory council and help AMCF determine best practices for distributing zakat. At the moment we only give to organizations but in the future will also consider giving to individuals in need. AMCF currently works with 100 families who have DAFs across the country and hundreds of families who participate in Giving Circles. AMCF has distributed more than $3,000,000 to nonprofits since 2017.

What would be the best way to collect and distribute zakat on behalf of these families?

The primary function is that we manage and operate the Donor Advised Funds. When the family uses the DAF, they put their zakat and sadaqa in an account with us. We give them their consolidated tax receipt. They can invest funds, distribute to multiple nonprofits or pass funds on to family for them to donate. Very similar to a family foundation. Since AMCF is distributing the funds on behalf of the family, we inform the end charity if it is intended as zakat or not.

Secondly we also host grant cycles where nonprofits apply for funding from us. We use zakat from donors to pass on in these initiatives. And would also like to use zakat to support our operations.

Thirdly, AMCF also operated giving circles where many friends or families give together then identity which charities to collectively give to.  

Other services we provide are to help nonprofits with best practices in their management, marketing, fundraising, and operations.

All praise belongs to Allah and may prayers and peace be upon the Messenger of Allah, his family, Companions, and those that follow him.

The Fatwa Committee has investigated AMCF representatives’ request regarding those deserving of zakat.

After looking at the question, it appears the foundation helps donors send their zakat and sadaqa to relief and dawah organizations, and to zakat recipients of their choosing. It also offers several training seminars for the managers of these organizations to help improve their management skills.

Included in the above-mentioned services, the foundation manages the accounts of donors who invest their zakat money in the stock exchange, selects halal investments on their behalf, and then later distributes the money and its profits, or a portion thereof, to deserving zakat recipients based on the donor’s (in this case the investor’s) request.

The committee finds that the donors can distribute their zakat and sadaqa to deserving recipients directly, without the need of an intermediary. The relief organizations will consume a portion of this money to cover expenses. The addition of this intermediary organization causes an increase in administrative costs, which obviously undermines the zakat recipients’ interests, and the additional portion of money that it consumes to distribute the zakat funds is not sufficient to cover its expenses.

As for investing zakat money, the committee does not deem this permissible in the first place especially in the case when a private foundation is managing it because they are acting as a proxy for the zakat donor in its distribution and not as an investment advisor. The zakat donor’s obligation is not fulfilled if they invest the money themselves, or on their behalf by a proxy, until it is distributed to those who deserve it by either transferring ownership or spending it on them.

Accordingly, the fatwa committee does not deem this foundation fit to receive zakat funds. Allah knows best.