PANDEMIC PHILANTHROPY
Policy experts: Incrementalism is not the answer in an emergency
As advocates call for immediate relief, conservative critics argue for less urgent philanthropic reform
The Covid-19 pandemic threw millions into poverty while the world’s largest corporations and wealthiest individuals enjoyed soaring profits.
Philanthropic giving has increased as the coronavirus crisis has ravaged the world, but inequality watchdogs, including The Institute for Policy Studies (IPS) and Patriotic Millionaires, are lobbying congress to enact an Emergency Charity Stimulus to free up some private foundation funding and release it into the communities they serve.
New reporting from Axios indicates contributions to and from donor-advised funds (DAFs) have increased 4% since 2019. DAFs offer donors an immediate tax break but allow for delayed distribution of the funds. Currently federal law requires some but not all DAFs to release at least 5% of their holdings annually.
“We would hope that DAF owners would be stepping up and giving more during the pandemic,” Chuck Collins, director of the Charity Reform Initiative at IPS, told me in an email Monday.
“But this is not a substitute for fixing a basic design flaw in the social contract: DAFs have no mandated payout,” Collins continued. “Donors receive a tax deduction when they place funds in the DAF, but funds can be warehoused for decades.”
Collins and IPS, along with Patriotic Millionaires and the Wallace Global Fund first called for an Emergency Charity Stimulus in May, and their coalition has since led a steady effort pushing Congress to act.
“We are collectively facing the most dire moment that many of us have seen in our lifetimes, and it is likely the tip of the iceberg in terms of the challenges that await us as a society and a planet,” Aileen Getty, founder and president of the Aileen Getty Foundation and granddaughter of billionaire J. Paul Getty, said in a statement earlier this month.
The Emergency Charity Stimulus proposal would mandate DAFs pay out 10% instead of 5% for three years, “for those who haven’t figured out we’re in a national emergency and the nonprofit sector is getting hammered by state and local budget cuts,” Collins said. The move would unlock about $200 billion in charitable funds, according to IPS.
A separate coalition led by billionaire John Arnold and law professor Ray Madoff announced its own proposal, the Initiative to Accelerate Charitable Giving (IACG) this month. It calls on Congress to “create a new form of DAFs under which a donor would get upfront tax benefits (as under current law), but only if DAF funds are distributed (or advisory privileges are released) no later than 15 years from the year of the donation to the DAF” as well as prohibit private foundations from meeting their payout requirements by “paying salaries or travel expenses of foundation family members.”
Not all philanthropic organizations are keen on either proposal. The Philanthropy Roundtable, a conservative 501(c)3 whose mission, according to its website, is “to foster excellence in philanthropy, protect philanthropic freedom, and help donors advance liberty, opportunity, and personal responsibility,” proactively published an opinion denouncing the IACG when campaign was announced in October. The group came out against the proposal again this month when the campaign officially launched.
In October, Debi Ghate, vice president of strategy and innovation at Philanthropy Roundtable, sounded alarms.
“Until now, Congress has largely ignored activists’ calls to dictate to all types of philanthropists the who, what, when, where, and how of their giving,” Ghate wrote.
She continued:
I wish I could say they’ve been motivated by protecting the Constitutionally enshrined rights to property (which includes the right to acquire and dispose of wealth) and the right to free association (choosing who to partner with and the conditions of that partnership). The reality is the reward of weighing in legislatively hasn’t been worth the risk of alienating wealth creators.
But now change is possibly afoot.
When a billionaire philanthropist who isn’t regarded as an “out-there progressive” makes these calls and puts the weight of his lobbying, communications, and political influence behind it, it’s a different story. With the unknowns surrounding this year’s election thrown into the mix, it’s time to pay attention.
This month, Elise Westhoff, president and CEO of The Philanthropy Roundtable, wrote that the IACG “is a solution in search of a problem, calling for unnecessary regulations to private foundations and donor-advised funds.” Westhoff highlighted the proposed prohibition of foundations meeting payout requirements by paying salaries or travel expenses of foundation family members and the proposed enforcement of a timeline for DAF payouts in her opposition argument.
But relying on voluntary releasing of funds has resulted in a reserve of $1.2 trillion, money that nonprofits who rely on DAF funding could use to assist their target populations during the pandemic.
“Nonprofits need emergency help right now,” Scott Wallace, co-chair of the Wallace Global Fund, said in a statement earlier this month. “Millions of nonprofit jobs have been lost, one-third of them in health care. Up to 120,000 nonprofits are shutting down completely,.”
Additionally, Collins told me, while the Initiative to Accelerate Charitable Giving is a good start, is insufficient to address immediate needs.
“This initiative to accelerate philanthropy is a good long-term beginning to philanthropy reform,” he wrote. “It does little about the short-term emergency of mandating an increase in payout. This initiative has the support of some big foundations — in part because it asks very little of them. Some are focused on protecting the status of perpetual private foundations.”
As of Tuesday, Dec. 8, Congress has not agreed on a new relief package.
