News and analysis
December 07, 2011

Senator Criticizes Treasury Department Report on Giving

Sen. Charles Grassley, the Iowa Republican, is a key member of the Senate Finance Committee.

A leading Republican senator is angry about a new Treasury Department report that examines how much two types of organizations distribute to charity each year.

The report studied “supporting organizations,” a type of group that finances the activities of specific nonprofits, and donor-advised funds, which offer a way for people to give cash, stock, or other assets and recommend which charities receive the money and when.

Both groups allow donors to get tax breaks as soon as they put money into the accounts. Unlike foundations, which must give away at least 5 percent of their assets each year, neither of those types of funds faces any legal requirement for how much they give annually.

Donor-advised funds are growing fast. Last year, Fidelity Charitable, the biggest of the organizations that offer the funds, raised more than $1.8-billion, and its donors distributed $1.25-billion.

The Treasury Department study found that in general, groups distributed 9 to 12 percent of their assets in 2006. The report’s authors said that because giving was high compared with private foundations, it did not believe any federal requirements on annual giving should be imposed.

'Superficial’ Study

Sen. Charles E. Grassley of Iowa, a member of the Senate Finance Committee who sought the study in 2006, called the report “superficial” and said it did little to examine abuses he believes are widespread.

The report did not say how many supporting organizations or donor-advised funds give nothing annually or just move around money to other supporting organizations and donor-advised funds, he said. He also criticized the use of five-year-old data when newer data are available.

“There’s no information on how much money is getting to those who really could benefit from charitable work,” Mr. Grassley said. “The Treasury Department seems to be forgetting that for years, supporting organizations and donor-advised funds were on the IRS’s annual 'dirty dozen’ list of tax scams.”

Controversy Over Kaiser Fund

In October, Mr. Grassley challenged the Treasury Department to finish the report, which was due in August 2007 under a law passed in 2006.

Mr. Grassley pushed again for the report following news that the George Kaiser Family Foundation, in Tulsa, which converted from a foundation to a supporting organization 10 years ago, had invested in Solyndra, the energy company that declared bankruptcy after getting large federal-loan guarantees.

Mr. Grassley said examinations of Kaiser’s tax forms found that the foundation distributes less than 2 percent of its $4-billion in assets over three years.

The foundation said that is because it wants to be sure it gives money to the best ideas, and it has to be careful in examining what projects are worthy.