Congress should pass a three-year “Emergency Charity Stimulus” to move $200 billion to frontline working nonprofit groups by increasing payout requirements for private foundations and donor-advised funds.
These billions have already been paid for by tax breaks taken by wealthy donors. This is $200 billion that won’t add a penny to what taxpayers will pay.
America’s millionaires and billionaires have taken substantial tax breaks to create over 86,000 private foundations. Wealthy and affluent families have received even greater tax breaks in setting up 728,000 donor-advised funds (DAFs). As wealth has concentrated in the hands of a few, so have charitable dollars, according to IPS research on “top heavy philanthropy.”
Enormous resources are now stashed away in these privately-controlled charity organizations, according to our policy brief, The Case for an Emergency Charity Stimulus. Over $1 trillion is parked in private foundations and another $120 billion in donor-advised funds. And as communities struggle, the lion’s share of these dollars are sitting idle.
Private foundations are required to pay out a mere 5 percent of their assets each year, with most foundations treating this as a ceiling and not a floor. That 5 percent payout can include unlimited overhead and contributions to donor-advised funds. Meanwhile, donor-advised funds (DAFs) have no mandated payout at all. DAFs are now the largest recipient of charitable funds and are used by wealthy donors pledging non-cash assets, according to our IPS report, Warehousing Wealth: Donor Advised Charity Funds Sequestering Billions in the Face of Extreme Inequality.
During the COVID-19 crisis, many foundations and donor-advised funds have voluntarily increased their payout. But we need to ensure that charitable giving doesn’t fall off a cliff in 2021 and 2022. Congress should mandate an increased payout to move charitable funds off the sidelines and to the front lines. It must ensure that payout funds flow to directly to working charities, not remain warehoused.
The emergency charity stimulus proposal would double the payout for private foundations from 5 percent to 10 percent for three years. Similarly, DAFs would be required to have a 10 percent payout. And donations to donor-advised funds, excessive overhead, and investments in for-profit ventures would not qualify toward the payout.
According to a new Ipsos poll, 72 percent of Americans support an emergency charity stimulus. See a full summary of poll results HERE. According to this poll, most Americans have a limited understanding of how charitable foundations and donor-advised funds work. Once explained, however, the poll found many characteristics of foundations and DAFs are not very acceptable to Americans. For example, 93 percent of Americans found it unacceptable that donor-advised funds (DAFs) are under no obligation to disburse any funds to active charities.
Over 450 foundation leaders, including trustees of private foundations and individuals with donor-advised funds have signed a letter to Congress urging passage of an emergency charity stimulus, sponsored by the Patriotic Millionaires, the Wallace Global Fund, and the Institute for Policy Studies Program on Inequality and its Charity Reform Initiative.
Growing numbers of grassroots leaders and nonprofit activists are speaking out. Please join this growing movement at charitystimulusnow.org.
Chuck Collins | Radio Free (2020-06-17T08:05:37+00:00) Move Charity Dollars to the Front Lines. Retrieved from https://www.radiofree.org/2020/06/17/move-charity-dollars-to-the-front-lines/
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